2024 (6) TMI 1370 - HC - Income Tax

Reopening of assessment - Disallowance of depreciation and reduced returned loss - notice issued after 4 years period - ITAT holding that reopening of assessment under section 147 is only change of opinion and hence bad in law - HELD THAT - In the facts of the case reveals that the assessing officer reopened the assessment only on the basis of the details derived from the profit and loss account which is filed by the assessee and in absence of any tangible materials available on record and in absence of any failure on the part of assessee to disclose fully and truly all the material facts necessary for the purpose of assessment the Tribunal has rightly relied upon the decision of Kelvinator of India 2010 (1) TMI 11 - SUPREME COURT - Decided in favour of assessee.

Summary

Issues:
1. Validity of reopening assessment under section 147 of the Income Tax Act, 1961.
2. Justification for disallowing additional depreciation on machinery spares.
3. Assessment based on failure to disclose material facts.

Analysis:

Issue 1: The appeal challenged the validity of reopening the assessment under section 147 of the Income Tax Act. The Assessing Officer reopened the assessment based on the belief that income had escaped assessment due to additional depreciation claimed on machinery spares. The Appellant argued that the reassessment was not valid as it was a mere change of opinion without any new tangible material. The CIT (Appeals) held that the reassessment was not tenable as the reasons for reopening were based on information already on record. The Tribunal upheld this decision, citing the Supreme Court's judgment in the case of CIT Vs. Kelvinator of India Ltd., emphasizing the need for tangible material to justify reassessment.

Issue 2: The Assessing Officer disallowed additional depreciation claimed on machinery spares, leading to a reduction in the returned loss. The CIT (Appeals) found the reasons for disallowance were not valid as the information was already available during the original assessment. The Tribunal concurred, stating that the reassessment lacked new tangible material and was based on the profit and loss account filed by the assessee, which did not constitute a valid reason for disallowance.

Issue 3: The CIT (Appeals) emphasized that the onus was on the Assessing Officer to demonstrate that the income had escaped assessment due to the assessee's failure to disclose all material facts. However, as the information for disallowance was already on record, the reassessment was deemed invalid. The Tribunal, following legal precedents, concluded that the reassessment after four years without new tangible material amounted to a change of opinion and was therefore invalid in law. The appeal challenging the reassessment was dismissed based on the settled legal position and lack of merit in the grounds raised by the Revenue.

In summary, the judgment focused on the validity of reopening the assessment under section 147, the justification for disallowing additional depreciation, and the assessment based on the failure to disclose material facts. The decision highlighted the importance of tangible material and the need to avoid reassessment based solely on a change of opinion without new evidence.