2019 (12) TMI 624 - HC - Income Tax

Reopening of assessment u/s 147 - disallowance of depreciation and other expenses in respect of running of a boiler and turbine while computing the income under the head 'other sources' on the ground that there were strong indication that neither the boiler nor the turbine were ready for the use up to 31.03.1992. - HELD THAT - The proviso declares that where the original assessment was made under Section 143(3) of the Act, after scrutiny of the records, no action shall be taken after the expiry of 4 years from the end of relevant assessment year, unless the case attracts the exceptions provided by proviso to Section 147 of the Act. It is not the case of the Assessing Officer that material facts were either not disclosed or even after the same were sought for, were not furnished, and no new facts have been brought on record by the Assessing Officer. Respondent has disclosed fully and truly all the material facts necessary for the assessment by way of disclosing the hire income for the boiler and turbine and the interest cum income on deposits on share application money as well as claiming depreciation in respect of hired out boiler and turbine and by way of furnishing necessary documents before the Assessing Officer. CIT and the Appellate Tribunal, after considering the material on record have rightly held that notice under Section 148 of the Act issued on 03.04.1997, is bad in law as the same is not in accordance with the provisions of Section 147 of the Act.

Summary

Issues:
Appeal against order confirming assessment under Income Tax Act, 1961.

Analysis:
1. The appeal was filed by the Revenue against the order passed by the Income Tax Appellate Tribunal, confirming the order of the Appellate Authority and the Joint Commissioner of Income Tax. The original assessment was completed under Section 143(3) of the Income Tax Act, 1961, and notice was issued for re-opening the assessment. The Assessing Officer disallowed depreciation and other expenses related to a boiler and turbine, determining the total income of the assessee under the head 'income from other sources.'

2. The respondent appealed against the order, and the Appellate Authority annulled the re-assessment done by the Assessing Officer. The appellant then filed an appeal before the Income Tax Tribunal, which was dismissed. Subsequently, the appellant filed an appeal against the Tribunal's decision.

3. The High Court admitted the appeal based on substantial questions of law related to the correctness of re-opening assessments and the consideration of limitations under Section 149 of the Act. The court observed that the original assessment was completed after seeking clarifications and details, and the notice for re-opening was issued after the expiry of four years from the end of the relevant assessment year.

4. The court noted that unless income has escaped assessment due to the assessee's failure to disclose material facts, re-opening of assessment is not permissible. It was found that the assessee had disclosed all primary materials for the assessment year, and the Assessing Officer had not brought any new facts on record. Therefore, the notice for re-opening was held to be bad in law.

5. The court also considered submissions made before the Tribunal, where it was stated that the reasons for re-opening were not available for verification. The court found that the appellant failed to provide grounds to interfere with the impugned order and ruled in favor of the assessee, disposing of the appeal accordingly.