2018 (4) TMI 560 - AT - Income Tax

Reopening of assessment - depreciation claim - validity of reason to believe - Held that - Once the original assessment were completed after considering all details filed by the assessee, unless there is tangible material which is outside of what was filed by the assessee which can justify a reopening there cannot be a valid reopening. As for Explanation 1 to Sec.147 of the Act, assessee having produced profit and loss account, in which it had claimed depreciation, we cannot say that any specific diligence was required in verifying the correctness of the claim of depreciation or correctness of the receipts shown by the assessee in such profit and loss account vis- -vis its TDS certificates. We are of the opinion that in such cases, Explanation 1 to Section 147 of the Act will not help the Revenue. We thus find that reopening for all the years were invalid. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reopening the assessment.
2. Merits of the additions made during reassessment.

Detailed Analysis:

1. Validity of Reopening the Assessment:

The assessee contested the reopening of assessments for the years 2008-09, 2009-10, and 2010-11. The original assessments were completed under Section 143(3) read with Section 147 of the Income Tax Act, 1961, after verifying the books of accounts, bank statements, and other details. The reopening notices were issued on 30.03.2015 for the years 2008-09 and 2009-10, and on 26.03.2015 for the year 2010-11. The reasons for reopening included discrepancies in gross hire charges, higher depreciation claims, and unreported rental receipts. The assessee argued that all necessary details were provided during the original assessments, and the reopening was based on a mere change of opinion, which is not permissible.

The Tribunal noted that the original assessments involved detailed verification of books and records. The reasons cited for reopening were issues that any prudent Assessing Officer would consider during the original assessment. The Tribunal emphasized that reopening based on a change of opinion is not allowed, as established by the Hon'ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd (2010) 320 ITR 561. The Tribunal concluded that there was no new tangible material to justify the reopening, making it invalid.

2. Merits of the Additions Made During Reassessment:

Since the Tribunal found the reopening to be invalid, it did not delve into the merits of the additions made during reassessment. The Tribunal set aside the reassessment orders on the grounds of invalid reopening.

Conclusion:

The Tribunal allowed the appeals of the assessee, ruling that the reopening of assessments for the years 2008-09, 2009-10, and 2010-11 was invalid due to the absence of new tangible material and the presence of a mere change of opinion. Consequently, the reassessment orders were set aside, and the merits of the additions were not addressed.

Order Pronounced:

The order was pronounced on Thursday, the 5th day of April, 2018, at Chennai.