2019 (3) TMI 993 - HC - Income Tax

Reopening of assessment u/s 147 - original assessment u/s 143(3) - change of opinion - validity of reason to believe - allegation of suppression - proof of non-disclosure - Additional depreciation allowabilty as manufacturer of carbun black or as power generating company - Amendment of section 32 allowing power companies to claim depreciation - HELD THAT - Facts recorded in last preceding paragraph make contention of assessee regarding reasons to believe based on availing a benefit subsequently made available by amendment, acceptable as against revenue. AO had found as a fact, that which has been extracted above in the assessment made u/s 143(3). Subsequently, revenue cannot have reason to believe, on those facts, that petitioner is engaged in generation or generation and distribution of power and has claimed additional depreciation on plant and machinery for use of it in a period prior to said insertion by amendment. Once there is finding that reasons to believe are not good reasons, jurisdiction is not derived to compel assessee to submit to reassessment. Submissions made on behalf of revenue regarding non-disclosure also cannot be accepted in the facts and circumstances, Court having noticed there is no such statement to that effect in the reasons to believe. - Decided in favour of assessee.

Summary

Issues:
Impugned notice under section 148 of Income Tax Act, 1961 for reassessment relating to assessment year 2010-11 based on change of opinion without allegation of suppression. Whether there was failure to disclose fully and truly all material facts necessary for assessment. Whether the reasons to believe for reopening the assessment are valid. Whether the assessee availed a benefit subsequently made available by an amendment. Whether the notice under section 148 is justified and should be interfered with.

Analysis:
The petitioner, an assessee, challenged a notice issued under section 148 of the Income Tax Act, 1961, for reassessment for the assessment year 2010-11, alleging it was based on a change of opinion without any suppression of facts. The petitioner argued that the reassessment was initiated solely on the basis of a change of opinion, citing various legal precedents to support this claim. The respondent contended that the reassessment was necessary as the assessee had not fully disclosed all material facts required for assessment in the relevant year, invoking the first proviso to section 147.

The reasons for reopening the assessment included the claim of additional depreciation on plant and machinery used for power generation, which was only made available post an amendment effective from the assessment year 2013-14. The respondent argued that the assessee's claim for additional depreciation in the assessment year 2010-11, before the amendment, amounted to an escapement of income chargeable to tax, justifying the reassessment.

The respondent relied on a Supreme Court order to support the requirement of reassessment, emphasizing that the statutory appeal remedy would be available to the petitioner post reassessment. The petitioner, however, cited legal precedents to argue that both conditions of under-assessment and non-disclosure of material facts must co-exist for the initiation of proceedings after the expiry of four years.

The Court found in favor of the petitioner, stating that the reassessment notice was based on a change of opinion and lacked valid reasons to believe, as the petitioner had disclosed all relevant information during the assessment process. The Court also noted that the petitioner was engaged in the manufacture of carbon black, not power generation, and had provided satisfactory explanations to the revenue's queries before the original assessment was made. Consequently, the Court set aside and quashed the impugned notice under section 148, ruling in favor of the petitioner.