2017 (9) TMI 1860 - HC - Income Tax

Reopening of assessment u/s 147 - disallowance of additional depreciation u/s. 32(1)(iia) - Tribunal in upholding the decision of CIT(A) in quashing the reassessment proceedings - HELD THAT - In this case the assessment year involved is A.Y. 2008-09 where the assessment under section 143(3) was originally completed on 31.12.2010 and notice has been issued u/s 148 on 17.08.2012. Therefore, the proviso to section 147 is not relevant and therefore not been considered by us. Whether the issue of claim of additional depreciation has been examined by the Assessing Officer in the course of original assessment proceedings or not? - Briefly the facts of the case are that the assessee is engaged in the business of manufacturing of cement. For uninterrupted supply of power, assessee during the year, acquired and installed new P M i.e. power plant at Morak and a windmill at Jaisalmer for production of electricity for captive consumption in manufacturing of cement. The electricity produced from power plant at Morak was directly utilized in manufacturing of cement whereas the electricity produced from windmill at Jaisalmer was supplied to Jaipur Vidhyut Vitran Nigam Ltd. who in turn reduce that quantity of electricity from the power bill raised on the assessee. On these P M, assessee claimed additional depreciation u/s 32(1)(iia) of the Act. Firstly, in the reason recorded before issue of notice u/s 148, the AO has stated as under As the additional depreciation was allowable only on such plan and machinery which came under the clause (ii) of section 32(i) of Income Tax Act, while the assets of power generating units have been covered under the clause (i) of the ibid section, therefore no amount of additional depreciation was allowance on the assets of Mangalam Power Plant, Morak unit and Mangalam Wind Power plant in Jaisalmer. - Decided against revenue

Summary

Issues:
1. Validity of reassessment proceedings under section 147
2. Disallowance of additional depreciation

Analysis:

Issue 1: Validity of reassessment proceedings under section 147
The appeals questioned the correctness of the Tribunal's decision upholding the CIT(A)'s ruling that quashed the reassessment proceedings initiated under section 147. The contention was whether the Tribunal erred in endorsing the CIT(A)'s decision regarding the legality of the reassessment proceedings. The AO's order was challenged on the grounds that the reassessment was deemed a change of opinion, rendering it void ab-initio. The argument was that the issues of additional depreciation and deduction under section 43B were already addressed during the original assessment under section 143(3). The Tribunal concurred with the CIT(A) and emphasized that the AO's notice under section 148 was based on a change of opinion, making the reassessment illegal. The Tribunal clarified that for section 147, a change of opinion necessitates a prior opinion followed by a subsequent different view, which was not the case here. The issue revolved around whether the AO had examined the additional depreciation claim during the original assessment.

Issue 2: Disallowance of additional depreciation
The case involved a cement manufacturing business that acquired a power plant and windmill for electricity production. The assessee claimed additional depreciation under section 32(1)(iia) for these assets. The AO's reason for issuing the notice under section 148 highlighted discrepancies in the additional depreciation claim, stating that the assets did not qualify for the specific clause allowing additional depreciation. The Tribunal supported the AO's stance, leading to the dismissal of the appeals. The Tribunal found no substantial question of law, affirming the correctness of the decision.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing that the reassessment proceedings were invalid due to being a mere change of opinion and that the additional depreciation claim was rightly disallowed. The appeals were consequently dismissed.