2015 (7) TMI 236 - AT - Income Tax

Reopening of assessment - whether CIT(Appeals) erred in confirming the addition of depreciation amounting to ₹ 4,20,24,089/- in computing total income under normal provisions of the Act? - Held that - We are unable to see any validity; rather, basis, for the Revenue to claim that the decapitalization of interest and commitment charges (hereinafter referred to as the interest component ) ought to be from the opening WDV of the relevant block of assets. When the addition to the same, which is for the completed projects, is only during the current year, separately for the first half and the second half thereof, how and why the reduction on account of the interest component of the said addition be from the opening WDV? The reason, though has a live link with the claim of depreciation, is without basis in facts and, hence, not valid in law. The assessee s objection to this reason recorded, communicated vide its letter dated 05.11.2007, merits being upheld. As regards the second reason, the validity of which is self-evident, the assessee claims that the figures per the TAR are in fact per the revised TAR, filed on 20.11.2003, which were however omitted to be considered by the AO while framing the assessment. In our clear view, there has been thus no consideration of the material being now relied upon by the A.O., i.e., in recording the reasons for the reopening and in issuing the notice u/s.148. We are unable to read any further limitation in law in the A.O. proceeding to initiate the reassessment under such a situation, except of course of reason to believe , on which aspect there is again no doubt, as discussed earlier (refer Asst.CIT v.Rajesh Jhaveri Stock Brokers 2007 (5) TMI 197 - SUPREME Court . Though the ld. CIT(A) has made out a case of there being no provision in law in filing a revised TAR and, therefore, the assessee s claim of having furnished fully and truly all material facts, as not correct, we are not inclined to dwell on that aspect of the matter inasmuch as, without doubt, the revised claim represents, by the assessee s own admission, the correct claim of depreciation. Whether legally permissible or not, the AO is not constrained to take cognizance thereof or form an opinion on its basis; the sole criteria being its relevancy and credibility Disallowance of depreciation - Held that - Even as conceded during the hearing, and in any case of the matter, the assessee has no case; the depreciation allowed on assessment being only in terms of its revised TAR, representing the correct statement of depreciation. Where, then, is there any scope for dispute, with we having rather observed that inasmuch as omission to consider the revised deprecation claim, being in a sum lower than its original claim by ₹ 420.24 lacs, the assessee ought to have itself pointed out the same to the AO, even if post assessment, being clearly in the nature of a mistake in not taking cognizance or account of the corrected claim. The same would have also enabled the assessee to bring any other aspect of the matter, where apparent from the record, beneficial to it, to the fore. This is as the scope of the reassessment proceedings is restricted only to bringing the under-assessed income to tax (refer CIT v. Sun Engineering Works (P.) Ltd. 1992 (9) TMI 1 - SUPREME Court . The asessee accordingly fails on this ground. Adjustment made in determining the books profit u/s. 115JB - Held that - A company can provide for depreciation at different rates, adopting a different method of computing depreciation in books, which is to be consistent with the mandate of the Companies Act. If, as it appears, no part of the interest component stands charged to the operating statement (P & L a/c), there is no occasion to or question of decapitalizing the same in the assessee s books of account, necessitating an adjustment to the book profit on account of revision in the book depreciation. We, accordingly, restore the matter back to the file of the assessing authority to allow the assessee an opportunity to satisfy the AO that the adjustment to book profit on account of the revised depreciation, as made, is either in excess or that no adjustment, in terms of its claim of book depreciation, to the book profit, was called for. The AO shall decide the matter by issuing definite findings of fact in accordance with law. We decide accordingly. - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Validity of reassessment proceedings under Section 147.
2. Justification of the assessment order under Section 143(3) read with Section 147.
3. Confirmation of the addition of depreciation amounting to Rs. 4,20,24,089 under normal provisions.
4. Confirmation of the addition of depreciation amounting to Rs. 4,20,24,089 in computing Book Profit under Section 115JB.

Issue-wise Detailed Analysis:

1. Validity of Reassessment Proceedings under Section 147:
The assessee challenged the reassessment proceedings initiated under Section 147, arguing that the reassessment was based on the same set of facts without any new material or information, and that there was no failure on the part of the assessee to disclose all necessary facts. The assessee relied on case laws such as CIT v. Kelvinator of India and CIT v. Amitabh Bachchan, which emphasize that reassessment must be based on tangible material with a live link to the formation of belief regarding income escapement.

The Tribunal found that the reassessment was initiated due to two reasons: (a) the decapitalization of interest and commitment charges was not correctly reflected in the opening WDV of the relevant block of assets, and (b) discrepancies in the depreciation figures between the original and revised Tax Audit Reports (TAR). The Tribunal upheld the validity of the reassessment proceedings, noting that the revised TAR was not considered in the original assessment, and thus, the reassessment was not a case of change of opinion but rather a correction of an oversight by the Assessing Officer (AO).

2. Justification of the Assessment Order under Section 143(3) read with Section 147:
The Tribunal noted that the AO had not considered the revised TAR while framing the original assessment, leading to an omission and underassessment of income. The Tribunal held that the AO's oversight constituted a valid reason for reassessment, as it was not a change of opinion but a correction of a mistake apparent from the record. The Tribunal emphasized that the law allows for reassessment in cases of oversight, inadvertence, or mistake by the AO, and thus, the reassessment proceedings were justified.

3. Confirmation of the Addition of Depreciation Amounting to Rs. 4,20,24,089 under Normal Provisions:
The assessee contested the addition of Rs. 4,20,24,089 to the total income under normal provisions, arguing that the depreciation allowed on assessment was based on the revised TAR, which represented the correct statement of depreciation. The Tribunal found no merit in the assessee's claim, noting that the revised TAR reflected the correct depreciation figures and that the assessee should have pointed out the discrepancy to the AO even after the assessment. The Tribunal upheld the addition of depreciation, as the revised TAR indicated a lower depreciation claim than the original, resulting in underassessment of income.

4. Confirmation of the Addition of Depreciation Amounting to Rs. 4,20,24,089 in Computing Book Profit under Section 115JB:
The Tribunal addressed the adjustment made in determining the book profit under Section 115JB, noting that the company could provide for depreciation at different rates in its books. The Tribunal restored the matter to the AO to allow the assessee an opportunity to demonstrate that the adjustment to book profit on account of revised depreciation was either in excess or unnecessary. The AO was instructed to issue definite findings of fact in accordance with the law.

Conclusion:
The Tribunal partly allowed the assessee's appeal for statistical purposes, upholding the reassessment proceedings and the addition of depreciation under normal provisions, while restoring the matter of book profit adjustment under Section 115JB to the AO for further examination. The order was pronounced in the open court on 22/06/2015.