2023 (1) TMI 431 - HC - Income Tax

Reopening of assessment u/s 147 - income exigible to tax for the said assessment year has escaped assessment - Reopening beyond the period of four years from the end of relevant assessment years - depreciation claim of the licence fee paid by the assessee - HELD THAT - From a reading of the reasons for reopening, it can be stated that the petitioner was entitled to claim deduction u/s 35ABB of the Act but it has not been specifically stated in the reasons that the petitioner was not entitled to claim depreciation @ 25% in terms of section 32 on the amount capitalized as intangible assets . Even otherwise, it does appear to us that the issue with regard to claim of depreciation had been gone into by the AO and notwithstanding the fact that in the order of assessment, there was no specific discussion as regards this particular claim, yet, considering the ratio of the judgments referred it must be presumed that the claim was considered and only then allowed. In the backdrop of the facts and the law stated in Jindal Photo Films Ltd. 1998 (5) TMI 20 - DELHI HIGH COURT even in the present case, between the date of the order of assessment sought to be reopened and the date of forming of opinion by the Assessing Officer, nothing new has happened. Neither is there any new information received nor is a reference made to any new material on record. The Assessing Officer simply has accorded a fresh consideration and come to a conclusion that the assessee ought to have claimed benefit of deduction under section 35ABB which would have resulted in reducing the allowance under section 32 - In the absence of any tangible material, the present case is nothing but a case of change of opinion and thus does not satisfy the jurisdictional foundation under section 147 of the Act. We have no hesitation in holding that the impugned notice under section 148 of the Act and the consequent order disposing off the objections raised for reopening of the assessment, are unsustainable and accordingly set aside the same.

Issues Involved:
1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Validity of the order disposing of objections to the reopening of the assessment.
3. Concept of "change of opinion" in reassessment proceedings.
4. Application of Sections 32 and 35ABB of the Income Tax Act regarding depreciation and deduction on intangible assets.

Issue-wise Detailed Analysis:

1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice dated 30th March 2021 issued by the respondent under Section 148 of the Income Tax Act, proposing to reopen the assessment for the assessment year 2016-17 on the grounds that income chargeable to tax had escaped assessment. The petitioner argued that the reopening was based on a mere change of opinion without any new tangible material. The court noted that the initial assessment had included scrutiny of the intangible assets and depreciation claims, and the reopening was not based on new information or material but rather a fresh consideration of the same facts.

2. Validity of the order disposing of objections to the reopening of the assessment:
The order dated 25th February 2022, which disposed of the objections raised by the petitioner, was also challenged. The court observed that the objections highlighted the consistent allowance of the depreciation claim in previous scrutiny assessments and argued that the reopening was a change of opinion. The court found that the reopening notice lacked new tangible material and was thus unsustainable.

3. Concept of "change of opinion" in reassessment proceedings:
The court discussed the legal principle that a reassessment cannot be based on a mere change of opinion. Citing the Supreme Court's decision in Commissioner of Income-tax, Delhi Vs. Kelvinator of India Ltd. [2010] 320 ITR 561, the court emphasized that the Assessing Officer (AO) has no power to review an assessment under the guise of reassessment. The court held that the concept of "change of opinion" acts as a safeguard against arbitrary reassessment and that the AO must have tangible material to justify reopening an assessment.

4. Application of Sections 32 and 35ABB of the Income Tax Act regarding depreciation and deduction on intangible assets:
The court examined the provisions of Sections 32 and 35ABB of the Income Tax Act. The AO's reason for reopening was that the petitioner was eligible for deduction under Section 35ABB but had instead claimed depreciation under Section 32 on intangible assets, leading to an alleged excess depreciation claim. The court found that the AO had previously scrutinized and accepted the depreciation claim during the original assessment. The court concluded that the reopening was not justified as it was based on a change of opinion rather than new material.

Conclusion:
The court held that the impugned notice dated 30th March 2021 under Section 148 and the consequent order dated 25th February 2022 were unsustainable. The court set aside both the notice and the order, allowing the petition with no costs. The judgment reinforced that reassessment must be based on new tangible material and not merely a change of opinion.

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