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2012 (12) TMI 12 - AT - Income TaxValidity of reopening of assessment u/s 147/148, earlier framed u/s 143(3), after expiry of four years from end of relevant AY inadmissible depreciation on goodwill - Held that - In the instant case, AO reopened the assessment completed u/s 143(3) merely on the basis of facts already available before him at the time of original assessment proceedings. Not even a whisper is evident from the reasons recorded or the facts narrated in the impugned order as to whether or not there was any failure on the part of the assessee in disclosing fully and truly all material facts necessary for his assessment. The reasons do not indicate why and how the assessee failed to make full and true disclosure of material facts in relation to depreciation on goodwill. Any such failure as is envisaged in the proviso to sec. 147, is a matter of fact alone and there can be no deemed failure. In these circumstances, in absence of any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the assessment year under consideration, the notice u/s 148 having been issued after the expiry of a period of four years from the end of the relevant assessment year, the very initiation of proceedings u/s 147 stands vitiated and as such cannot be sustained - Decided against Revenue
Issues Involved:
1. Validity of jurisdiction assumed under Section 147. 2. Legality of notice issued under Section 148. 3. Disallowance of depreciation on goodwill. Issue-wise Detailed Analysis: 1. Validity of jurisdiction assumed under Section 147: The primary issue was whether the Assessing Officer (AO) had valid jurisdiction to reopen the assessment under Section 147 of the Income-tax Act, 1961. The AO had initially completed the assessment under Section 143(3) and later reopened it on the grounds that the assessee had claimed depreciation on goodwill, which according to the AO, was not allowable as goodwill is not a tangible asset under Section 32. The reassessment was initiated after four years from the end of the relevant assessment year. The CIT(A) and subsequently the ITAT found that the reopening was based on the same set of facts that were available during the original assessment and there was no new material or information. The ITAT emphasized that for reopening after four years, there must be a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment, which was not evident in this case. The ITAT upheld the CIT(A)'s decision that the AO could not assume valid jurisdiction under Section 147 as it was a mere change of opinion. 2. Legality of notice issued under Section 148: The legality of the notice issued under Section 148 was questioned as it was issued after the expiry of four years from the end of the relevant assessment year. The ITAT referred to several judicial precedents, including the Supreme Court's decision in CIT vs. Kelvinator of India Ltd., which established that a mere change of opinion does not justify reopening an assessment. The ITAT concluded that since there was no failure on the part of the assessee to disclose fully and truly all material facts, the notice under Section 148 was not sustainable. The ITAT also noted that the reasons recorded for reopening did not indicate any such failure by the assessee, thus the notice was quashed. 3. Disallowance of depreciation on goodwill: The AO had disallowed the depreciation claimed on goodwill, which was contested by the assessee. The CIT(A) had deleted the disallowance following the ITAT's decision in the assessee's own case for previous assessment years. The ITAT upheld the CIT(A)'s decision, noting that similar claims for depreciation on goodwill had been allowed in earlier years, and there was no new material to justify the disallowance. The ITAT observed that the AO's action was based on the same facts already considered during the original assessment, and thus, it was a case of change of opinion. Conclusion: The ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s decision to quash the reassessment proceedings. The ITAT reiterated that the AO's reopening of the assessment was based on a mere change of opinion without any new material, and there was no failure on the part of the assessee to disclose fully and truly all material facts. Consequently, the notice under Section 148 was invalid, and the disallowance of depreciation on goodwill was not justified.
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