2018 (8) TMI 1619 - AT - Income Tax

Reopening of assessment u/s 147 - Held that - CIT(A) instead of agreeing with assessee on the grounds and allowing the grounds, in our view has wrongly confirmed the order and dismissed the ground. It is true that this issue has been examined in earlier years and also in the impugned assessment year at the time of original assessment. Not only that, Ld.CIT(A) herself has allowed the grounds of assessee on merits which the Revenue is contesting. Since the very basis for reopening the assessment is based on the information already on record and since this was already examined by the AO in the regular proceedings u/s. 143(3), we are of the opinion that the reopening of assessment is not based on any tangible material but only on the change of opinion on the existing material, for which the AO has no power to do so. The principles laid down by the Hon ble Supreme Court 2010 (1) TMI 11 - SUPREME COURT OF INDIA clearly applies to the facts of the case. Therefore, we modify the order of the CIT(A) and allow the grounds of assessee. In a way this issue is also academic since Ld. CIT(A) allowed the assessee contentions on merit. Depreciation on technical know-how and DMFs - Held that - Assessee s claim of depreciation becomes eligible as it is an intangible asset on which assessee has claimed depreciation on WDV. In view of this, we direct the AO to allow the depreciation as claimed as it is only a consequential claim to the claims in earlier years

Summary

Issues:
Reopening of assessment u/s 147 based on disallowance of depreciation on intangible assets acquired from another company.

Analysis:
1. Reopening of Assessment: The case involved cross-appeals by the Assessee and Revenue for the AY 2008-09 against the order of the Commissioner of Income Tax (Appeals)-4, Hyderabad, on the reopened assessment u/s 147. The Assessee, engaged in manufacturing pharmaceutical ingredients, filed a return of income admitting an income under normal provisions and book profit u/s. 115JB of the Act. The Transfer Pricing Officer (TPO) made adjustments, and the AO issued a notice for reassessment disallowing depreciation on intangible assets acquired from another company. The Assessee contended that the reassessment was impermissible as it amounted to a change of opinion, not a valid reason to believe under the statute. The ITAT held that the reopening of assessment was based on a change of opinion, not tangible material, and allowed the Assessee's appeal.

2. Disallowance of Depreciation: The AO disallowed depreciation claimed by the Assessee on intangible assets based on a previous assessment order. The CIT(A) allowed the depreciation, citing the Tribunal's decisions in earlier years. The ITAT upheld the CIT(A)'s decision, stating that the issue was covered in favor of the Assessee by previous Tribunal decisions. The ITAT rejected the Revenue's grounds and allowed the Assessee's appeal, directing the AO to delete the disallowance on intangible assets.

In conclusion, the ITAT Hyderabad ruled in favor of the Assessee, holding that the reassessment based on disallowance of depreciation on intangible assets was impermissible as it amounted to a change of opinion. The ITAT also upheld the CIT(A)'s decision to allow depreciation on intangible assets, citing previous Tribunal decisions in favor of the Assessee. The Assessee's appeal was allowed, and the Revenue's appeal was dismissed.