2015 (10) TMI 2809 - AT - Income Tax

Reopening of assessment u/s 147 - AO sought to reopen the assessment after the period of limitation prescribed u/s 147 - HELD THAT - As per the first proviso to section 147, the AO can reopen the assessment after expiry of four years from the end of the relevant AY where the assessee is in default in filing of its return of income u/s 139 or failed to respond to notices u/s 142(1), 148 or failed to fully and truly disclose all information necessary to complete the assessment of its income. In the present case, AO could have reopened the assessment by the end of AY 2009-10 - AO has issued notice u/s 148 of the Act on 25/02/2011. Therefore, the AO has sought to reopen the assessment after the period of limitation prescribed u/s 147 of the Act, even though there was no failure of the assessee to disclose fully and truly all material facts necessary for the assessment of its income. The AO has not recorded any finding to such a default committed by the assessee and also assessee was not at fault. Hence, we dismiss the revenue appeal as not sustainable. For AY 2006-07 depreciation was claimed on goodwill which is not as per section 32(ii) of the Act - From the Fixed Assets Schedule filed by the ld. AR, he has clearly demonstrated that the goodwill was wrongly capitalized instead of clubbing the sales tax liability with the cost of plant machinery. We do not find any escapement of income to the revenue as the depreciation will be same when calculated on the revised plant machinery cost. AO has completed original assessment after making due enquiry and proper application of mind on the issues on which assessment was reopened. Even otherwise, the AO relied on the assessee s explanation on the issue vide letter No. TCPL/15/08, dtd. Nil, which was very much available on record before AO while completing the assessment u/s 143(3) on 19/12/2008. Hence, no new evidence has come to the notice of the AO. Hence, in our view, reopening in the present case was on change of opinion after passing of the assessment order. We dismiss the revenue appeal for this year also. - Decided in favour of assessee.

Summary

Issues involved:
Reopening of assessment u/s 147 of the Income-tax Act, 1961 after the expiry of the limitation period, validity of depreciation claimed on Goodwill, application of the concept of 'change of opinion' in reassessment proceedings.

Analysis:
1. Reopening of Assessment for AY 2005-06:
The AO reopened the assessment for AY 2005-06 after the expiry of four years from the end of the relevant AY. The assessee had filed the return of income on time, and there was no failure to disclose material facts. As per the proviso to section 147, the AO can reopen the assessment only if there is a failure on the part of the assessee. Since there was no such failure, the reopening was held to be invalid. The appeal of the revenue was dismissed as unsustainable.

2. Validity of Depreciation Claimed on Goodwill:
The AO made an addition on account of depreciation claimed on Goodwill. The assessee contended that the reopening of assessment was bad in law. The ld. CIT(A) allowed the appeal of the assessee, citing various judgments to support the decision. The tribunal observed that the AO had completed the assessment after proper enquiry and application of mind. No new evidence had come to light during the reassessment proceedings. Therefore, the reopening was considered to be based on a change of opinion, which is not sustainable. The tribunal dismissed the revenue's appeal for AY 2006-07 as well.

3. Application of 'Change of Opinion' Concept:
In the case of AY 2006-07, the tribunal emphasized the concept of 'change of opinion' in reassessment proceedings. Relying on the judgments of the Hon'ble Supreme Court and the Hon'ble Delhi High Court, the tribunal held that the AO cannot reopen an assessment merely on a change of opinion. There must be tangible material to support the belief that income has escaped assessment. Since the AO had already examined the relevant records and applied his mind during the original assessment, the reassessment based on the same material was considered unsustainable. The tribunal dismissed the revenue's appeal for both AYs.

In conclusion, the tribunal upheld the decisions of the ld. CIT(A) and dismissed the revenue's appeals for both AYs, emphasizing the importance of following legal provisions and established principles in reassessment proceedings.