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2018 (7) TMI 583 - AT - Income TaxValidity of reopening of assessment - proof of escapement of income - possession of tangible material - Held that - Reopening was merely on a change of opinion, it is noticed that the case of the assessee was also that there was no fresh tangible material in the possession of AO at the time of recording of reasons for initiating proceedings u/s.147 of the Act. A perusal of the Reasons recorded by the AO in this case reveals that at the time of recording of these Reasons the AO had examined original assessment records only and report of the auditor filed in those proceedings and no fresh material had come in the possession of the AO. In response to our specific query also, Ld DR could not point out any fresh material available with the AO at the time of reopening of the case of the assessee. Thus, assertion of the assessee that there was no fresh material with AO for reopening of this case, remained uncontroverted. - Decided in favour of assessee
Issues Involved:
1. Validity of reassessment proceedings under Section 147 of the Income-Tax Act, 1961. 2. Alleged excessive claim of depreciation by the assessee. Issue-wise Detailed Analysis: 1. Validity of Reassessment Proceedings under Section 147: The primary issue revolves around the validity of reassessment proceedings initiated by the Assessing Officer (AO) under Section 147 of the Income-Tax Act, 1961. The assessee contended that the reassessment was initiated beyond the statutory period of four years from the end of the relevant assessment year, without any failure on their part to fully and truly disclose all material facts necessary for the assessment. The assessee argued that the AO did not specify any failure on the part of the assessee to disclose material facts in the reasons recorded for reopening the assessment. The assessee cited judicial precedents, including the decision of the Karnataka High Court in CIT v. Hewlett Packard Digital Global Soft Ltd. and the Gujarat High Court in General Motors India Pvt. Ltd. v. DCIT, which held that reassessment proceedings initiated beyond four years require a clear indication of the assessee's failure to disclose material facts. The Tribunal observed that the proviso to Section 147 applies in this case, and the AO did not bring out any facts showing the assessee's failure to disclose material facts in the original assessment. The Tribunal noted that the AO had access to the audit report during the original assessment proceedings, indicating no new material had emerged to justify the reassessment. The Tribunal concluded that the reassessment proceedings were based on a change of opinion, which is not permissible under Section 147. The Tribunal cited the Supreme Court's decision in CIT vs. Kelvinator India Ltd., which emphasized the need for "tangible material" to justify reopening an assessment. The Tribunal also referred to the decision in Indian and Eastern Newspaper Society Vs. CIT, which clarified that an error discovered on reconsideration of the same material does not warrant reassessment. 2. Alleged Excessive Claim of Depreciation: The AO initiated reassessment proceedings on the grounds that the assessee had claimed excessive depreciation for the assessment year 2009-10. The AO alleged that the assessee claimed 100% depreciation on certain assets, whereas only 50% was eligible. The assessee countered this by explaining that the delay in capitalization of certain assets in the books of account was due to the shifting of its registered office. The assessee maintained that the assets were acquired and put to use for business purposes, and the depreciation was claimed based on the 'date of put to use' as per Section 32 of the Act and Rule 5 of the Income-tax Rules, 1962. The Tribunal did not delve into the merits of the excessive depreciation claim, as it annulled the reassessment proceedings on the grounds of invalid initiation under Section 147. Consequently, the Tribunal did not adjudicate on the other grounds raised by the assessee regarding the merits of the depreciation claim. Conclusion: The Tribunal allowed the appeal by the assessee, holding that the reassessment proceedings under Section 147 were not validly initiated. The Tribunal annulled the reassessment order, rendering the other grounds raised by the assessee on merits moot. The decision emphasized the necessity for the AO to clearly specify the failure of the assessee to disclose material facts when initiating reassessment proceedings beyond the statutory period.
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