2016 (7) TMI 1671 - AT - Income Tax

Reopening of assessment u/s 147 - depreciation on computer based editing equipments at 25% as against @ 60% claimed by the assessee treating the same as computer - reassessment in the instant case is clearly beyond a period of four years from the end of the relevant assessment year - HELD THAT - No lapse on the part of the assessee to disclose fully and truly all the material facts necessary for the computation of its income, and neither has any been pointed to us, the claim has been subject to verification by the A.O. in the original proceedings. Further, though there is no discussion by him in the assessment order, he can only be considered as conscious and alive to this claim as the assessee had clearly bifurcated the editing equipments into two components, i.e., recorder based/others and computer based, claiming depreciation at the general and the enhanced rate (of 60%) thereon respectively, filing details in their respect, called for separately. This then is a case of review, impermissible under the Act. CIT(A) has allowed the reopening on the basis that there is no evidence to show that the assessee has furnished all the necessary details, including bills and vouchers for purchase of the equipments or their specification or technical expert reports, etc. during the course of the original assessment proceedings, so that the A.O. forming a view that the assets under reference may not qualify to be computers, cannot be entirely faulted. We cannot agree. No sound reason with the A.O., but merely a reason to suspect that the assessee s claim may not be correct. Two, the assessee had furnished all the details as were called for during the original proceedings, including details of computer based equipments. There is nothing to show that these details were not true or correct in any respect, much less material. Thirdly, the assessing authority forming a view on the basis of the material not found incorrect or untrue, is nevertheless a view, so that it becomes a case of review. Rather, as it appears, the A.O. s action is guided by the consideration of being consistent in-as-much as like claim was not accepted by the Revenue for the immediately preceding year, i.e., A.Y. 2004-05. That by itself cannot be a ground for reopening. Decided in favour of assessee.

Issues Involved:
1. Jurisdictional issue regarding the reopening of assessment beyond the period of four years under section 148 r/w s. 147 of the Income Tax Act, 1961.
2. Claim of excess depreciation on computer-based editing equipment.

Issue-Wise Detailed Analysis:

1. Jurisdictional Issue Regarding Reopening of Assessment:
The primary issue raised by the assessee in the cross-objection was the jurisdictional validity of the reopening of assessment beyond the period of four years under section 148 read with section 147 of the Income Tax Act, 1961. The assessee contended that the Commissioner of Income Tax (Appeals) [CIT(A)] erred in upholding the reopening of assessment despite the fact that all primary conditions in terms of the proviso to section 147 were satisfied. The assessee argued that it had disclosed full and true particulars relating to its claim of depreciation on computer-based assets at the time of the original assessment.

The facts of the case reveal that the assessee, a registered company providing digital post-production facilities, filed its return of income for the assessment year 2005-06 on 27.11.2005. The assessment was completed under section 143(3) on 20.12.2007. The Assessing Officer (A.O.) issued a notice under section 154 in September 2008 regarding alleged excess depreciation claimed by the assessee on computer-based editing equipment. Despite submitting relevant details and explanations, no order under section 154 was passed. Subsequently, a notice under section 148 was issued on 03.5.2011, leading to the reassessment.

The reassessment was based on the belief that the assessee had claimed excess depreciation on editing equipment, which the A.O. considered as a machine eligible for depreciation at 25% instead of 60%. The CIT(A) upheld the reopening, stating that the A.O. was under the bona fide impression that the assessee was not entitled to claim depreciation at the rate of 60% for editing equipment, and there was no evidence that the assessee had furnished all necessary details during the original assessment proceedings.

2. Claim of Excess Depreciation on Computer-Based Editing Equipment:
The assessee argued that the reopening was beyond four years from the end of the relevant assessment year and that it had disclosed all material facts necessary for its assessment. The details of the editing equipment, categorized as "computer-based," "recorder-based," and "others," were provided during the original assessment proceedings. The assessee maintained that there was no failure to disclose fully and truly any material facts necessary for the assessment.

The tribunal noted that the reasons recorded for reopening stated that the computer is a part of the editing equipment and not the whole of it, making it a debatable issue whether a computer-based equipment could be regarded as a computer system eligible for higher depreciation. The tribunal observed that the assessee had filed complete particulars relating to the editing equipment, supporting its claim for depreciation at 60%. The issue was thus covered by the first proviso to section 147, which gets attracted when the original assessment is under section 143(3) and there is no failure to disclose fully and truly all material facts necessary for the assessment.

The tribunal concluded that there was no lapse on the part of the assessee in disclosing all material facts, and the claim had been subject to verification during the original proceedings. The tribunal disagreed with the CIT(A)'s reasoning that the A.O. had a bona fide impression and that there was no evidence that the assessee furnished all necessary details. The tribunal found that the A.O.'s action was guided by consistency, as a similar claim was not accepted for the previous year, which by itself cannot be a ground for reopening.

Conclusion:
The tribunal accepted the assessee's cross-objection, quashing the reassessment proceedings. Consequently, the Revenue's appeal on the merits of the disallowance of the assessee's claim for additional depreciation was dismissed, as the reassessment order did not survive. The order was pronounced in the open court on July 18, 2016.

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