2016 (11) TMI 362 - AT - Income Tax

Validity of reopening of assessment - depreciation claim - Held that - As far as the facts are concerned they are not in dispute as admittedly the issue sought to be addressed by the AO u/s 154 which was given up is the same issue which was subsequently picked up by him for re-opening. Admittedly the assessment originally was made u/s 143(3) and the issue has been enquired into and examined by the AO himself as the calculation of the depreciation allowable was done by the AO himself. Re-opening in the peculiar facts and circumstances of the case by the AO in the absence of any new material justifying the re-opening and on the very same facts tantamounts to abuse of his power. See BERGER PAINTS INDIA LTD. Versus ASSISTANT COMMISSIONER OF INCOME-TAX AND OTHERS 2009 (8) TMI 557 - CALCUTTA HIGH COURT - Decided in favour of assessee

Summary

Issues:
1. Validity of re-opening proceedings u/s 147/148 by the AO.
2. Justification for re-opening based on incorrect rate of depreciation quoted by the assessee.
3. Comparison of original assessment order u/s 143(3) with re-opening proceedings.
4. Consideration of rectification proceedings u/s 154 in relation to re-assessment notice.
5. Requirement for failure on the part of the assessee for re-opening assessment.
6. Application of legal principles from relevant case laws in deciding the validity of re-opening proceedings.

Analysis:

Issue 1: Validity of re-opening proceedings u/s 147/148 by the AO
The assessee challenged the correctness of the order dated 05.05.2014 of CIT(A)-XII, New Delhi pertaining to the 2005-06 assessment year. The key grounds of appeal included the alleged error by the Ld.CIT(A) in annulling the proceedings initiated u/s 147/148 by the AO, thereby allowing consequential relief.

Issue 2: Justification for re-opening based on incorrect rate of depreciation
The Ld. Sr. Dr argued that re-opening was necessitated due to the incorrect rate of depreciation quoted by the assessee, leading to income escaping assessment. The AO's reliance on the assessment order dated 21.03.2013 u/s 147/143(3) was crucial in justifying the re-opening.

Issue 3: Comparison of original assessment with re-opening proceedings
The Ld.AR contended that the original assessment order u/s 143(3) by the AO had thoroughly examined the depreciation issue, making the re-opening unwarranted. The AO's calculation of depreciation and subsequent re-calculation were highlighted to support this argument.

Issue 4: Consideration of rectification proceedings in relation to re-assessment
Reference to rectification proceedings u/s 154 on the same issue raised concerns about the validity of re-assessment notice. The argument was made that initiating re-assessment after dropping rectification proceedings amounted to an abuse of provisions.

Issue 5: Requirement for failure on the part of the assessee for re-opening assessment
The absence of any failure on the part of the assessee, as the calculation was done by the AO himself, was emphasized. Legal precedents and principles were cited to support the claim that re-opening without a genuine failure on the part of the assessee was unjustified.

Issue 6: Application of legal principles from relevant case laws
The judgment extensively referred to legal principles from various cases to establish the impropriety of re-opening proceedings without new material justifying it. The decision relied on precedents to conclude that the re-opening lacked legal basis due to the absence of any failure on the part of the assessee.

In the final analysis, the Tribunal dismissed the departmental appeal, upholding the CIT(A)'s decision to annul the re-opening proceedings due to the absence of a genuine failure on the part of the assessee. The judgment, pronounced on 21st September 2016, highlighted the importance of meeting statutory conditions before exercising jurisdiction u/s 148.