2016 (5) TMI 1261 - AT - Income Tax

Reopening of assessment - Held that - We find that the assessee is having a sugar mill factory and for which it purchased new machinery. It has also leased out its plant & machinery to M/s. Eastern Sugar & Industries Ltd. During the re-assessment proceedings the AO did not find any new material, which could suggest to make any addition u/s. 147 of the Act. The AO did not bring any new material for reopening the assessment u/s. 147 of the Act. In the present case, the material evidence relating to additions said to have been during Section 147 of the Act proceedings were very much available with AO as reflected in the schedules attached to the balance sheet of the assessee, in our opinion, the AO relied only on the existing facts to reopen the assessement, since there was no new material brought on record by the AO to re-open the assessment u/s. 147 of the Act, therefore, the reassessment, is not justified.- Decided in favour of assessee.

Issues Involved:
1. Validity of the reassessment proceedings under Section 147 of the Income Tax Act, 1961.
2. Justification of disallowance of depreciation claim.
3. Addition of sundry creditors to the total income.

Issue-wise Detailed Analysis:

1. Validity of the reassessment proceedings under Section 147 of the Income Tax Act, 1961:
The primary issue in this appeal is whether the reassessment proceedings initiated under Section 147 of the Income Tax Act, 1961, were valid. The revenue argued that the CIT(A) erred in annulling the assessment order under Section 147/143(3), stating that the precondition for invoking the proviso to Section 147 was not satisfied. The assessee contended that the reassessment was initiated based on a mere change of opinion without any new material, beyond the prescribed time limit. The tribunal found that the Assessing Officer (AO) did not have any fresh information or material to justify the reopening of the assessment. The facts and materials were already available during the original assessment under Section 143(3). The tribunal upheld the CIT(A)'s decision, emphasizing that reopening on mere change of opinion is not permissible under the law, as established by the Supreme Court in the case of Kelvinator of India (2010) 320 ITR 561 (SC).

2. Justification of disallowance of depreciation claim:
During the reassessment proceedings, the AO disallowed the depreciation claim of ?34,41,221 on the grounds that it was wrongly allowed as a deduction. The assessee argued that the depreciation was claimed on plant and machinery leased to M/s. Eastern Sugar & Industries Ltd. The tribunal noted that the AO did not bring any new material to justify the disallowance of the depreciation claim. The tribunal referred to the judgment of the Delhi High Court in the case of Pr. CIT Vs. Tupperware India (P) Ltd, which held that reopening of assessment without any new material is not justified. Consequently, the tribunal found that the disallowance of depreciation was not justified.

3. Addition of sundry creditors to the total income:
The AO added ?3,29,11,589 to the total income of the assessee, citing discrepancies in the sundry creditors' account, particularly with M/s. Eastern Sugar & Industries Ltd. The assessee explained that the net balance due after adjustments was ?4,73,96,268. The tribunal observed that the AO did not find any new material during the reassessment proceedings to justify this addition. The tribunal reiterated that reopening of assessment based on existing facts without new material is not permissible. Therefore, the addition of sundry creditors was not justified.

Conclusion:
The tribunal concluded that the reassessment proceedings under Section 147 were not justified as they were based on a mere change of opinion without any new material. Consequently, the tribunal upheld the CIT(A)'s decision to annul the reassessment order. The disallowance of depreciation and the addition of sundry creditors were also found to be unjustified. The cross objection of the assessee for A.Y. 2003-04 was allowed, and the appeal of the revenue for the same year was dismissed. The cross objection for A.Y. 2004-05 was dismissed as infructuous due to the dismissal of the corresponding revenue appeal on the grounds of low tax effect.

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