2014 (10) TMI 530 - HC - Income Tax

Notice for reopening of assessment u/s 148 Failure to disclose material facts or not Additional depreciation on windmill Held that - Assessee had clearly shown that it had claimed additional depreciation on the windmill - there does not appear to be any failure on the part of the petitioner to disclose fully and truly all material facts - a mere wrong claim cannot be said to amount to failure to disclose fully and truly all material facts, more so, when all relevant facts were disclosed in the return of income and the documents accompanying the same - by no stretch of imagination can it be said that the assessee had failed to disclose fully and truly all material facts necessary for its assessment so as to vest in the AO the jurisdiction to reopen its assessment after the expiry of a period of four years from the end of the AY by invoking the proviso to section 147 of the Act - the reopening of assessment u/s 147 of the Act is without any authority of law - The assumption of jurisdiction on the part of the AO is without authority of law and it is not necessary to enter into the larger question as to whether or not the petitioner could have validly made such claim u/s 32(1)(iia) of the Act thus, the notice issued u/s 148 is to be set aside Decided in favour of assessee.

Issues Involved:
1. Validity of reopening assessment under section 148 of the Income Tax Act, 1961 beyond the prescribed period.
2. Failure on the part of the petitioner to disclose fully and truly all material facts relevant for assessment.
3. Claim of additional depreciation under section 32(1)(iia) of the Act in relation to windmill.
4. Jurisdiction of the Assessing Officer to reopen assessment based on the claimed additional depreciation.

Issue 1: Validity of Reopening Assessment:
The petitioner challenged the notice dated 27th March, 2014, seeking to reopen the assessment for the year 2008-09 under section 148 of the Income Tax Act, beyond the four-year limitation. The petitioner argued that without a failure to disclose all material facts, the reopening beyond the stipulated period is without jurisdiction. Citing a previous case, the petitioner contended that a similar notice was set aside under similar circumstances.

Issue 2: Failure to Disclose Material Facts:
The respondent argued that there was a failure on the part of the petitioner to fully and truly disclose all material facts, justifying the reopening of assessment. Specifically, it was contended that claiming additional depreciation on the windmill, which was used for electricity generation and not manufacturing, was not valid. The respondent maintained that the petitioner did not disclose relevant facts during the scrutiny assessment, justifying the reassessment.

Issue 3: Claim of Additional Depreciation:
The petitioner claimed additional depreciation under section 32(1)(iia) of the Act for the windmill. The respondent argued that the windmill was not eligible for additional depreciation as it was used for electricity generation, not manufacturing. The respondent contended that the petitioner's failure to disclose this claim during scrutiny assessment justified the reassessment.

Issue 4: Jurisdiction to Reopen Based on Additional Depreciation Claim:
The Assessing Officer sought to reopen the assessment based on the alleged wrongful claim of additional depreciation on the windmill. The court noted that the petitioner had indeed disclosed the claim for additional depreciation in the return of income and accompanying documents. The court held that a mere wrong claim does not constitute a failure to disclose all material facts. As the relevant facts were disclosed, the reassessment was deemed without authority of law.

In conclusion, the High Court held that the notice issued under section 148 of the Income Tax Act in 2014 to reopen the assessment for the year 2008-09 was quashed and set aside. The court found that the petitioner had not failed to disclose all material facts, and the reassessment based on the claimed additional depreciation was without legal basis. The petition was allowed, and no costs were awarded.

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