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2019 (7) TMI 1997 - AT - Income TaxReopening of assessment u/s 147 - Correct Assessment Year - assessee alleging that the A.O. has recorded the reasons to believe that the income of the assessee has escaped assessment for assessment year 2014-15, whereas on the basis of said reasons recorded, the assessment for the year under consideration i.e. assessment year 2010-11 has been reopened - HELD THAT - We find that in the Performa, which was sent by the A.O. to the Principal Chief Commissioner of Income Tax, Panchkula seeking permission to issue notice u/s 148 of the Act to the assessee, assessment year has been mentioned assessment year 2010-11 . A.O. recorded the reasons second time on 28.10.2015 wherein though in the title the assessment year has been mentioned as assessment year 2014-15 , however, from the reading of the entire document it is apparent that the A.O. has mentioned the assessment year 2010-11. The mention of the assessment year 2014-15 in the title, in our view, is a clerical mistake. Moreover, the Ld. DR has also invited our attention to the copy of the order sheet entry dated 15.12.2015 to show that the copy of the reasons recorded was duly supplied to the assessee. Even the assessee has also placed on record the copy of the application dated 11.12.2015 moved by the Chartered Accountant of the assessee to supply the copy of reasons recorded, which were duly supplied to the assessee. Whether assessment reopened after the expiry of four years from the end of the relevant assessment year and that there was no failure on the part of the assessee to disclose fully and truly all material facts? - A perusal of the reasons recorded by the A.O. reveals that the A.O. has disputed eligibility of the assessee to claim deduction u/s 35AD of the Act. During the assessment proceedings for assessment year 2012-13, the A.O. noticed that the assessee had claimed deduction u/s 35AD of the Act while the assessee had been running its business for so many years. A.O. was of the view that the deduction u/s 35AD of the Act could be allowed only for prior period of commencement of the specified business. There is no allegation that the assessee had not fully and truly disclosed all the material facts for making the assessment. The assessee had claimed deduction u/s 35AD of the Act disclosing all the particulars. It is only of the interpretation of the relevant provisions of section, on the basis of which, A.O. formed the opinion during assessment proceedings for assessment year 2012-13 that the deduction to the assessee u/s 35AD of the Act was wrongly allowed for the assessment year under consideration. However so far as the assessee is concerned, the assessee on its part had disclosed fully and truly all the material facts necessary for its assessment. The case is squarely hit by the 1st proviso to section 147 of the Act since the reopening in this case since has been made after the expiry of four years from the end of the relevant assessment year. In view of our above observations, this ground of appeal of the assessee is allowed and reopening of assessment is set aside and the consequential assessment made is quashed. Deduction u/s 35AD - as per AO as assessee had existing business of warehousing and hence, it could not be said that the assessee had commenced the business of warehousing during the year under consideration, therefore, disallowed the deduction - As decided in assessee own case 2019 (3) TMI 2037 - ITAT CHANDIGARH an assessee is eligible to claim deduction of the capital expenditure if such an expenditure has been incurred wholly and exclusively in a specified business. There is no condition of any date or year of commencement of specified business. In the second part, it has been provided that if such an expenditure has been incurred prior to the commencement of business and has been duly capitalized in the books of account, the claim will be allowed in the year in which the assessee commences operations of his specified business. There is neither any overlapping nor any contradiction in the aforesaid provision. The assessee is covered in the first part i.e. the assessee has incurred the expenditure on the specified business during the year in which operations of his business of warehousing were already going on. We do not find any justification on the part of the lower authorities in denying the deduction to the assessee u/s 35AD - Decided in favour of assessee.
Issues involved:
1. Validity of reopening of assessment under Section 147/148 of the Income Tax Act, 1961. 2. Compliance with the proviso to Section 147. 3. Allegation of change of opinion under Section 147. 4. Requirement of fresh tangible material for reopening assessment. 5. Failure to dispose of preliminary objections. 6. Addition of Rs. 20,98,92,952/- under Section 35AD. Issue-wise Detailed Analysis: Ground No. 1: Validity of Reopening of Assessment under Section 147/148 4. The assessee contested the validity of the reopening of the assessment by the Assessing Officer (A.O.) under Section 147 read with Section 148, alleging that the reasons to believe were recorded for the assessment year 2014-15, not for 2010-11. The assessee also claimed that the reasons were not supplied. 5. The Tribunal found that the A.O. had indeed recorded the reasons for the assessment year 2010-11, and the mention of 2014-15 was a clerical error. The reasons were duly supplied to the assessee, as evidenced by the documents and order sheet entries. 6. Consequently, Ground No. 1 was dismissed. Ground No. 2: Compliance with the Proviso to Section 147 7. The assessee argued that the reopening was invalid as it occurred after four years from the end of the relevant assessment year, and there was no failure on the part of the assessee to disclose all material facts fully and truly. 8. The Tribunal noted that the assessment year in question was 2010-11, initially assessed under Section 143(3), and the notice under Section 148 was issued on 28.10.2015, beyond the four-year limit. 9. The A.O. had reopened the assessment based on a reappraisal of existing material, without any new information, and there was no allegation of the assessee failing to disclose material facts. Thus, the reopening was deemed invalid under the first proviso to Section 147. 10. Ground No. 2 was allowed, and the reopening and consequential assessment were quashed. Ground Nos. 3 & 4: Allegation of Change of Opinion and Requirement of Fresh Tangible Material 9. The assessee contended that the reopening was based on a change of opinion and lacked fresh tangible material. 10. The Tribunal referred to its earlier decision in the assessee's case for subsequent assessment years, where it was held that the A.O. had new information during subsequent assessments, justifying the reopening. 11. Therefore, Ground Nos. 3 & 4 were dismissed, following the precedent. Ground No. 5: Failure to Dispose of Preliminary Objections 11. The assessee claimed that the A.O. failed to dispose of one of the preliminary objections before making the assessment. 12. The Tribunal found that the A.O. had duly considered and addressed the preliminary objection No. 6 in the order dated 17.2.2016. 13. Consequently, Ground No. 5 was dismissed. Ground No. 6: Addition of Rs. 20,98,92,952/- under Section 35AD 14. The A.O. disallowed the deduction claimed under Section 35AD, stating that the assessee had an existing business of warehousing and did not commence the business during the year under consideration. 15. Both parties agreed that the issue was covered in favor of the assessee by an earlier ITAT decision, which interpreted Section 35AD as allowing deduction for capital expenditure incurred wholly and exclusively for specified business, irrespective of the commencement date. 16. The Tribunal reiterated its earlier decision, allowing the deduction under Section 35AD. Conclusion: 16. The appeal was treated as allowed, with the legal grounds relating to reopening decided against the assessee but the grounds on merits regarding the allowability of the deduction under Section 35AD decided in favor of the assessee. Order Pronounced: The order was pronounced in the Open Court on 01.07.2019.
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