2015 (9) TMI 1689 - AT - Income Tax

Reopening of assessment - change of opinion - rate of depreciation on water supply drainage and some part of the block of asset viz., the value of non-productive assets - claim of excess rate of depreciation on the on-productive assets is being restricted @ 10% instead of 15% - HELD THAT - There is a change of opinion by the AO for the purpose of reopening the assessment u/s.147. As held by the Supreme Court in the case of Kelvinator India Ltd. 2002 (4) TMI 37 - DELHI HIGH COURT mere change in opinion would not confer jurisdiction upon the AO to initiate a proceeding u/s.147 of the Act. Therefore, we uphold the order of the CIT(Appeals) on this issue and quash the assessment order passed u/s.147 - Decided against revenue.

Summary

Issues involved:
1. Validity of reopening assessment under section 147.
2. Change of opinion regarding depreciation rate on "water supply and drainage."
3. Merits of issues not decided due to invalidity of proceedings under section 147.

Issue 1: Validity of reopening assessment under section 147:
The Revenue appealed against the order of the Commissioner of Income-tax(Appeals) dated 14.11.2014, challenging the validity of reopening the assessment under section 147. The Revenue contended that the CIT(A) erred in holding the order passed under section 143(3) was invalid and that the assessment was reopened based on a change of opinion. The CIT(A) found the reopening to be a change of opinion, citing the decision of the Supreme Court in the case of Kelvinator India Ltd. The CIT(A) emphasized that under the amended provisions of section 147, the Assessing Officer must have a reason to believe that income chargeable to tax has escaped assessment. The CIT(A) concluded that the reopening was invalid in the eyes of the law and quashed the order, leading to the Revenue's appeal.

Issue 2: Change of opinion regarding depreciation rate on "water supply and drainage":
The case involved the assessee claiming excess depreciation on water supply and drainage, which the Assessing Officer restricted to 10% instead of 15% during the original assessment. The CIT(A) noted that the AO, in the reopened assessment, sought to apply the 10% depreciation rate to the entire asset instead of a portion, considering it a change of opinion. The CIT(A) referenced the Supreme Court's decision in Kelvinator India Ltd., emphasizing that a mere change in opinion does not confer jurisdiction to initiate proceedings under section 147. The Tribunal upheld the CIT(A)'s decision, stating that the AO's change of opinion did not warrant reopening the assessment under section 147, thereby dismissing the Revenue's appeal.

Issue 3: Merits of issues not decided due to invalidity of proceedings under section 147:
The CIT(A) did not address certain issues on merits due to the invalidity of the proceedings under section 147. These issues included disallowance of higher depreciation on "water supply and drainage," royalty allocation, exclusion of other income, and interest-related matters. The CIT(A) should have discussed these issues on merit, considering the detailed examination in the original assessment order under section 143(3) read with section 147 of the Income Tax Act, 1961. However, since the assessment under section 147 was quashed, the Tribunal refrained from delving into these grounds, ultimately dismissing the Revenue's appeal.

In conclusion, the Appellate Tribunal upheld the decision of the Commissioner of Income-tax(Appeals) regarding the invalidity of reopening the assessment under section 147, emphasizing the concept of change of opinion and the jurisdictional requirements for initiating proceedings. The Tribunal's detailed analysis and adherence to legal principles, particularly referencing the Supreme Court's ruling in Kelvinator India Ltd., resulted in the dismissal of the Revenue's appeal.