2014 (7) TMI 469 - AT - Income Tax

Assessment u/s 147 of the Act - Reasons properly recorded Notice u/s 148 of the Act Held that - The assessment had already been made u/s 143(3) of the Act - the re-opening has been made after expiry of four years from the end of the relevant assessment year and, therefore, the validity of re-opening has to be examined within the ambit of proviso to section 147 - It is from the reasons recorded alone that the AO can to assume the jurisdiction u/s 147, for re-opening the case - the reasons recorded should be such, that it should provide a live link nexus between the material brought on record and the income escaping assessment - the claim of depreciation on the assets, has been completely set out in the balance sheet and in the income and expenditure account filed by the assessee along with the return of income, which has also been examined by the Assessing Officer in scrutiny proceedings. There was no failure on the part of the assessee to disclose fully and truly, relevant material facts on this score - the claim made by the assessee with regard to depreciation in the computation for the purpose of section 11, is not a false claim as it has also been described in Commissioner of Income-Tax Versus Institute of Banking 2003 (7) TMI 52 - BOMBAY High Court - the depreciation on the fixed assets has to be allowed on commercial principles even if the capital expenditure on the same has been held to be application of income under section 11 - there are absolutely no details as to which fact or material was not disclosed by the Petition that lead to its income escaping assessment - There is merely a bald assertion in the reasons that there was a failure on the part of the petitioner to disclose fully and truly all material facts thus, the order of the CIT(A) is upheld Decided against Revenue.

Summary

Issues involved:
Challenge to impugned order dated 30th June 2011 by Revenue for assessment year 2003-04 under section 143(3) r/w 147 of the Income Tax Act, 1961.

Analysis:

1. Ground 1 - Annulling Assessment:
- Facts: Charitable trust claimed exemption under section 11, filed return of income declaring 'nil' income, subjected to scrutiny, and assessment completed under section 143(3).
- Reasons for Re-opening: Claimed depreciation on fixed assets and deemed income under section 11(3) led to double deduction.
- Assessee's Objections: No failure to disclose material facts; re-opening based on 'change of opinion'.
- Commissioner (Appeals): Held re-opening based on 'change of opinion', no failure to disclose material facts, and cited relevant case laws.
- ITAT Decision: Re-opening after four years requires failure to disclose facts or make a return; no failure found in this case; upheld Commissioner's decision.

2. Ground 2 - Double Deduction Issue:
- Assessing Officer's View: Claimed depreciation on fixed assets and expenditure from deemed income resulted in double deduction.
- ITAT Analysis: No failure to disclose material facts by the assessee; depreciation claim legitimate as per commercial principles; no invalid claim found.

3. Legal Principles on Re-opening:
- Proviso to Section 147: Limits re-opening after four years unless failure to disclose facts; two conditions must be met.
- Reasons Recorded: Must clearly show failure to disclose facts; reasons are crucial for justifying re-opening.
- Jurisdictional High Court's View: Reasons for re-opening must be clear, unambiguous, and based on evidence; failure to disclose facts must be explicitly stated.

4. Conclusion:
- ITAT Decision: Upheld Commissioner's order annulling the assessment; reasons for re-opening not valid; cited Lupin Ltd. case for clear reasons requirement.
- Outcome: Revenue's appeal dismissed; assessment annulled as re-opening found to be bad-in-law.

This comprehensive analysis covers the grounds of challenge, factual background, reasons for re-opening, legal principles, and the final decision of the ITAT Mumbai in the cited judgment.