2015 (4) TMI 226 - HC - Income Tax

Reopening of assessment - Dolphin Drilling PTE Limited is not the owner of Belford Dolphin, in view of the document dated 04.05.2003, thus depreciation wrongly claimed - Held that - Assessee has claimed depreciation of ₹ 3,05,73,40,212/- and declared loss of ₹ 99,30,56,370/-, during the course of the assessment proceedings of Assessment Year 2004-05, which was accepted by the Appellate Authority. Order further reveals that A.O. has estimated the cost of drillship at 130 million dollars instead of 260 million dollars, as on 09.10.2003, that is the day, when drillship was sold in India and depreciation has been computed as per Annexure No. A of the assessment order. Appellate Authority has further held that the actual cost of the drillship to the assessee is what has been claimed by it before A.O. The assessee has duly furnished form 3CEB which is a report under Section 92E of the Income Tax Act, alongwith its return of income before the A.O. Accordingly, we do not find any infirmity in the order of C.I.T. (A) for allowing the claim of depreciation. Respectfully, following the above decision of Hon ble I.T.A.T for earlier Assessment Year 2004-2005, I also hold that appellant has rightly declared the cost of acquisition of the drillship at U.S. 270 million as on 09.10.1993 and accordingly the depreciation should be allowed for the instant year. Since, question of ownership and depreciation thereon was accepted twice by the C.I.T (A) in Assessment Year 2004-05 and 2005-06, therefore, same cannot be allowed to be reopened in the garb of reassessment. Assessee has claimed credit of T.D.S without offering the income for taxation - Held that - Order passed by the appellate authority would further reveal that AO has not drawn any adverse inference about the declaration of such revenues in P&L Account vis- -vis the TDS certificates claimed in the return of income. Judgment further reveals that both these points were assailed before the Appellate Authority i.e. Commissioner of Income Tax (Appeal)-1 by the Revenue. Further contention of Revenue was repealed and was not accepted by the Appellate Authority.Impugned notices for re-assessment are hereby quashed - Decided in favour of assessee.

Summary

Issues:
1. Challenge to re-assessment order under Section 147 read with Section 148 of the Income Tax Act, 1961.
2. Grounds for reassessment: ownership of an asset and non-inclusion of income in the P&L Account.
3. Interpretation of Section 147 of the Income Tax Act, 1961.
4. Assessment finalization and appeal history.
5. Acceptance of depreciation claim and revenue declaration by the Appellate Authority.
6. Dismissal of Revenue's contentions by the Appellate Authority.
7. Reopening of ownership and depreciation issues in reassessment.
8. Quashing of re-assessment notices in the writ petition.

Analysis:
1. The petitioner, an assessee, challenged a re-assessment order under Section 147 read with Section 148 of the Income Tax Act, 1961, dated 31.03.2010, based on the grounds that the ownership of an asset, Belford Dolphin, and the non-inclusion of a substantial sum in the P&L Account were questioned by the Revenue. The petitioner was accused of claiming T.D.S credit without offering the income for taxation, violating Section 199 of the Income Tax Act.

2. Section 147 of the Income Tax Act allows for the reassessment of income that has escaped assessment. The Assessing Officer may reassess such income if it has not been the subject of any appeal, reference, or revision. The provision outlines various scenarios where income is deemed to have escaped assessment, including understated income, excessive loss claims, or failure to disclose material facts necessary for assessment.

3. The assessment for the relevant year was finalized, and an appeal was made to the Commissioner of Income Tax (Appeal), who upheld the depreciation claim and revenue declaration by the assessee. The Appellate Authority rejected the Revenue's contentions regarding the revenue declaration and TDS credit claimed by the assessee.

4. The Appellate Authority's decisions in previous assessment years were upheld by the Income Tax Appellate Tribunal (I.T.A.T). The court held that issues regarding ownership and depreciation, which were accepted in earlier assessments, could not be reopened through reassessment. Similarly, grounds that were subject to appeal before the Appellate Authority could not be revisited in the name of reassessment.

5. Consequently, the writ petition was allowed, and the impugned re-assessment notices were quashed, ruling in favor of the petitioner. The judgment emphasized the finality of assessments and the limitations on reopening settled issues in the guise of reassessment.