2015 (12) TMI 1285 - AT - Income Tax

Reopening of assessment - higher rate of depreciation claimed - Held that - We are of the view that the AO reopened the assessment after having accepted the contention of the assessee that higher rate of depreciation is allowable. Again reopening the assessment on same set of facts is not justified. The assessee also filed the statement claiming depreciation along with the return and basing on which the depreciation was allowed in the original assessment. It could not be said that the AO did not apply his mind and there was nondisclosure of facts by the assessee. The AO completed the assessment proceedings in the year 2008 and again a notice under section 148 was issued in the year 2011, wherein he did not find anything new material against the assessee to reopen the assessment but he only basing on the facts of the original assessment, he issued the said notice for reassessment and passed the reassessment changing only the rates of depreciation available to the said claims. Therefore, we are of the view that in this present case the AO on mere change of opinion only issued the said notice much less for any tangible material found during these three years. By respectfully following the ratio or principle laid down by the Hon ble Supreme Court in the case of CIT vs. Kelvinator of India India, 320 ITR 561 2010 (1) TMI 11 - SUPREME COURT OF INDIA we are of the view that no tangible materials are found by the AO to reopen the assessment for A.Y. 2006-07, which was originally concluded in the year 2008 and we find no justification in reopening the assessment. Accordingly, the revised additional ground raised by the assessee is allowed. - Decided against revenue.

Summary

Issues:
Reopening of assessment based on change of opinion and excess claim of depreciation.

Analysis:
The appeal was against the order passed by the CIT(Appeals)-XIX, Kolkata for the assessment year 2006-07 under section 143(3)/147 of the I.T. Act. The assessee initially raised two grounds challenging the disallowance made by the AO and the depreciation rates applied. Subsequently, an additional ground was raised questioning the validity of the reassessment. The main contention was whether the AO's decision to reopen the assessment was justified. The AO had issued a notice under section 148 based on discrepancies in depreciation rates claimed by the assessee for a mobile hoarding van and hoardings. The AO added the excess depreciation claimed to the assessee's income, leading to the appeal.

The assessee, engaged in providing advertisement and publicity services, argued that the reopening of assessment was erroneous and not in line with legal principles. The assessee contended that all relevant facts were disclosed during the original assessment, and the AO's decision to reassess was merely a change of opinion without any new material. The dispute primarily revolved around the depreciation rates applied by the assessee and the subsequent adjustments made by the AO. The assessee cited legal precedents, including the case of CIT vs. Kelvinator of India, to support their argument against the reassessment.

The Tribunal held that the AO's decision to reopen the assessment, based on the same facts available during the original assessment, amounted to a change of opinion. The Tribunal emphasized that for a valid reassessment, there must be tangible material indicating income escapement. In this case, the AO did not present any new evidence or material to justify the reassessment. The Tribunal concluded that the reassessment was unwarranted and quashed it, allowing the revised additional ground raised by the assessee. As a result, the appeal filed by the assessee was allowed, and the reassessment was deemed invalid. The Tribunal refrained from delving into the merits of the depreciation issue due to the quashing of the reassessment.

In summary, the judgment focused on the legality of the reassessment based on a change of opinion without substantial new material. The Tribunal ruled in favor of the assessee, highlighting the importance of tangible evidence to reopen assessments and emphasizing the need to adhere to established legal principles in such cases.