2013 (8) TMI 285 - HC - Income Tax

Notice u/s 148 - Depreciation claimed on coal fired boiler building - Held that - In the detailed questionnaire called for, vide notice issued under section 142(1) of the Act, the Assessing Officer had called for details of investment in fixed assets and not calculation as regards depreciation claimed by the petitioner - Thus, there is nothing on record to indicate that the Assessing Officer had called for details as regards depreciation claimed by the petitioner in respect of the fixed assets in general and the coal fire boiler building in particular or having raised any query in that regard - The only issue discussed therein pertains to disallowance under section 14A of the Act - So far as the assessment order is concerned, it does not reflect any application of mind by the Assessing Officer to the claim of depreciation on coal fire boiler building while framing the assessment - Since the reopening is within a period of four years from the end of the relevant assessment year, the requirement of the proviso to section 147 of the Act, viz., failure on the part of the assessee to disclose fully and truly all material facts for its assessment is not required to be fulfilled - Omission of the assessee to bring to the assessing authority s attention those particular items in the account books, or to particular portions of the documents which are relevant, will amount to omission to disclose fully and truly all material facts necessary for his assessment - Assessing Officer, while framing the assessment under section 143(3) of the Act does not appear to have formed any opinion in regard to depreciation on coal fire boiler building - It was for the petitioner to bring to the notice of the Assessing Officer that it was claiming depreciation in respect thereof as under the heading plant and machinery and not as building. The petitioner having failed to do so cannot now contend that the assessment is sought to be reopened on a mere change of opinion - Following decisions of Malegaon Electricity Co. P. Ltd. v. CIT 1970 (8) TMI 8 - SUPREME Court and Calcutta Discount Co. Ltd. v. ITO 1960 (11) TMI 8 - SUPREME Court - Decided against assessee. The court while considering a challenge to the reopening of assessment can always examine the existence of the belief but the sufficiency of the reasons for the belief cannot be investigated by the court. On the facts emerging from the record, the court is of the view that there is sufficient material on record for the Assessing Officer to form a belief as regards escapement of income from assessment in the year under consideration in relation to the claim of depreciation in respect of building of coal fire boiler. - Decided against assessee. Notice u/s 148 - Carry forward of depreciation - Held that - If the reopening is sustainable on one issue, even if on the other issue the exercise of power under section 147 of the Act is not justified, it would not make render the assumption of jurisdiction under section 147 of the Act invalid - Decided against assessee.

Issues Involved:
1. Validity of the notice issued under section 148 of the Income-tax Act, 1961, for reopening the assessment.
2. Whether the reopening was based on a mere change of opinion.
3. Whether there was a failure to disclose fully and truly all material facts necessary for the assessment.
4. Whether the reassessment proceedings were justified on the grounds provided.

Issue-wise Detailed Analysis:

1. Validity of the notice issued under section 148 of the Income-tax Act, 1961, for reopening the assessment:
The petitioner challenged the notice dated June 28, 2010, issued by the respondent under section 148 of the Income-tax Act, 1961, seeking to reopen the assessment for the assessment year 2006-07. The petitioner argued that the initiation of proceedings under section 147 of the Act is without jurisdiction as the notice can only be issued if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment. The court found that the reasons recorded for reopening the assessment included the claim of excess depreciation on the coal fire boiler building and the excess set-off of unabsorbed depreciation. The court concluded that there was sufficient material for the Assessing Officer to form the requisite belief that income had escaped assessment for the assessment year under consideration.

2. Whether the reopening was based on a mere change of opinion:
The petitioner contended that the reopening was based on a mere change of opinion since all relevant materials were placed before the Assessing Officer during the original assessment. The court noted that the claim of depreciation on the coal fire boiler building did not find mention in the assessment order, nor was there any discussion in respect of the said claim. The court observed that the petitioner had not specifically drawn the attention of the Assessing Officer to the fact that it was claiming depreciation on the building as a plant. Therefore, the court held that the reopening was not based on a mere change of opinion.

3. Whether there was a failure to disclose fully and truly all material facts necessary for the assessment:
The court referred to several Supreme Court decisions to emphasize that the duty of disclosing all primary facts relevant to the decision lies on the assessee. The court found that the petitioner had not brought to the attention of the Assessing Officer the specific fact that it was claiming depreciation on the coal fire boiler building as a plant. The court concluded that the petitioner had failed to disclose fully and truly all material facts necessary for the assessment.

4. Whether the reassessment proceedings were justified on the grounds provided:
The court examined the two grounds for reopening the assessment: the excess claim of depreciation on the coal fire boiler building and the excess set-off of unabsorbed depreciation. The court held that the first ground was sufficient to justify the reopening of the assessment. Regarding the second ground, the court stated that it was not necessary to go into the merits since the reopening was sustainable on the first issue. The court emphasized that if the reopening is valid on one issue, it would not render the assumption of jurisdiction under section 147 of the Act invalid even if the other issue is not justified.

Conclusion:
The court dismissed the petition, holding that the assumption of jurisdiction under section 147 by issuance of notice under section 148 of the Act was valid and legal. The court found that there was sufficient material for the Assessing Officer to form the belief that income had escaped assessment, and the reopening was not based on a mere change of opinion. The petitioner's failure to disclose all material facts necessary for the assessment further justified the reassessment proceedings.

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