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2020 (2) TMI 68 - AT - Income TaxReopening of assessment u/s 147 - addition on account of additional depreciation - objections raised by the assessee were not disposed-off by Ld. AO - HELD THAT - No infirmity in the order of Ld. CIT(A) in setting aside the reassessment order passed by Ld. AO since the objections raised by the assessee were not disposed-off by Ld. AO either in assessment order or by way of separate speaking order. There was no fresh tangible material in the possession of Ld.AO to trigger reassessment proceedings against the assessee - reassessment proceedings were triggered merely by making certain observations during the course of assessment proceedings of the parent entity without establishing that certain income escaped in the hands of the assessee. It is also to be borne in mind that the original assessment was framed u/s 143(3) on 26/02/2014 and there was complete disclosure of claim of additional depreciation in the financial statements. Perusal of assessee s financial statements, as place on record, would establish that there was clear disclosure of addition in Plant Machinery and the claim of additional depreciation was separately shown in the depreciation schedule. After considering the same, Ld. AO chose not to make any additions in this respect. Therefore, revisiting the same issue in reassessment proceedings would tantamount to review of the order, which is impermissible under law. As per assessee s submissions, it acquired new plant machinery from the parent entity and in support of the same, it filed copies of invoices clearly mentioning the description of machinery bought by the assessee. The excise duty was charged in the invoices which would make it a case of manufacturing since no excise duty would be applicable in case of old machinery. No investigation, whatsoever, was done by Ld. AO during reassessment proceedings, to rebut the assessee s claim and no further verification was done. No contrary material was brought on record to fortify the stated additions except making an allegation that the assessee claimed additional depreciation on old machinery. - Decided in favour of assessee.
Issues Involved:
1. Validity of reassessment proceedings under Section 147 of the Income Tax Act. 2. Compliance with statutory notices under Sections 143(2) and 142(1). 3. Claim of additional depreciation on plant and machinery. 4. Disposal of objections raised by the assessee against reopening of assessment. Detailed Analysis: 1. Validity of Reassessment Proceedings: The primary issue was whether the reassessment proceedings initiated under Section 147 were valid. The Tribunal found that the Assessing Officer (AO) lacked fresh tangible material to justify the reassessment. The AO's belief that the income had escaped assessment was based on existing records rather than new information. The Tribunal noted that the reopening was aimed at making roving inquiries, which is impermissible under the law. The Tribunal cited several cases, including the Supreme Court's decision in CIT vs. Kelvinator of India Ltd., to support the conclusion that reassessment based on a mere change of opinion is not allowed. 2. Compliance with Statutory Notices: The AO issued notices under Sections 143(2) and 142(1) on 04/10/2016, which the assessee did not comply with by the stipulated date. Instead, the assessee filed an objection on 02/11/2016. The Tribunal noted that the AO failed to dispose of these objections through a speaking order, as required by the Supreme Court's decision in GKN Driveshafts India Ltd. vs. DCIT. This procedural lapse rendered the reassessment proceedings invalid. 3. Claim of Additional Depreciation: The assessee claimed additional depreciation of ?338.34 Lacs on new plant and machinery acquired from its holding company. The AO disallowed this claim, suspecting that the machinery was previously used. The assessee provided purchase invoices and argued that the machinery was new, supported by the fact that excise duty was charged on the invoices. The Tribunal found that the AO did not conduct any further verification or bring any contrary material on record to substantiate the claim that the machinery was old. The Tribunal upheld the assessee's claim, noting that the AO's disallowance was based on mere conjecture. 4. Disposal of Objections: The Tribunal emphasized the importance of disposing of objections raised by the assessee against the reopening of assessment. The AO's failure to pass a speaking order on the objections violated the procedural requirements established by the Supreme Court. The Tribunal cited multiple cases, including the Bombay High Court's decision in Asian Paints Ltd. vs. DCIT, to highlight that the AO must dispose of objections before proceeding with reassessment. Conclusion: The Tribunal concluded that the reassessment proceedings were invalid due to the lack of fresh tangible material and the AO's failure to dispose of the assessee's objections. Consequently, the Tribunal quashed the reassessment order and allowed the assessee's appeal. The Tribunal also noted that the claim of additional depreciation was valid, as the AO did not provide sufficient evidence to the contrary. The appeal by the revenue was dismissed, and the order pronounced in the open court on 07th January 2020.
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