2000 (6) TMI 150 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the reopening of assessment under Section 147(b).
2. Disallowance of depreciation on assets purchased with grants from NDDB.
3. Charging of interest under Section 139(8).
4. Charging of interest under Section 215.

Issue-wise Detailed Analysis:

1. Validity of the Reopening of Assessment under Section 147(b):

The appellant argued that the reopening of the assessment was based on a mere change of opinion and not on new information. The Assessing Officer (AO) reopened the assessment based on information from the Audit Party, which indicated that the capital grants received from NDDB were not deducted from the cost/written down value of the assets for depreciation purposes as required by Section 43(1) of the Income-tax Act. The Tribunal held that the AO had valid reasons to believe that income had escaped assessment, fulfilling the conditions under Section 147(b). The Tribunal emphasized that information received from the Audit Party constituted valid information for reopening the assessment, as it pointed out the legal provisions overlooked by the AO during the original assessment. Consequently, the reopening of the assessment was deemed valid.

2. Disallowance of Depreciation on Assets Purchased with Grants from NDDB:

The appellant contended that the grants received from NDDB were for restructuring production and marketing, not for acquiring specific assets. However, the AO and CIT (Appeals) concluded that the grants were indeed for purchasing capital assets. The Tribunal referred to various agreements and correspondence between the appellant and NDDB, which indicated that the grants were specifically for acquiring plant, machinery, and other capital assets. The Tribunal upheld the disallowance of depreciation, confirming that the grants should be deducted from the cost of the assets as per Section 43(1) of the Act.

3. Charging of Interest under Section 139(8):

The appellant argued that the return was filed within the extended time limit, and thus, no interest under Section 139(8) was payable. The Tribunal directed the AO to verify whether the return was filed within the extended period. If so, the interest charged under Section 139(8) should be deleted.

4. Charging of Interest under Section 215:

The appellant contended that there was no default in the payment of advance tax, and the interest under Section 215 was due to unexpected additions/disallowances. The Tribunal referred to the Supreme Court decision in Modi Industries Ltd. v. CIT, which held that interest under Section 215 should be paid only up to the date of the regular assessment. Consequently, the Tribunal allowed this ground of appeal.

Additional Ground:

The appellant sought to reduce the disallowance from Rs. 15,81,139 to Rs. 9,79,945. However, this ground was not raised before the AO or CIT (Appeals), and the Tribunal did not admit this additional ground.

Conclusion:

The appeal was partly allowed. The reopening of the assessment under Section 147(b) and the disallowance of depreciation were upheld. The charging of interest under Section 139(8) was subject to verification, and the charging of interest under Section 215 was limited to the date of the regular assessment. The additional ground for reducing the disallowance was not admitted.