2019 (2) TMI 637 - AT - Income Tax

Reopening of assessment - addition on account of disallowance of depreciation - Held that - For AY 2002-03 the assessment is reopened by issue of notice u/s 148 of the Act beyond four years from the end of the assessment years in which the original assessment was completed. The reasons recorded clearly shows that the claim of the assessee of depreciation was the reason for reopening of the assessment. It is appreciation of the same evidences which were there along with the return of income. No new tangible material was stated to have come into the possession of AO. In absence of any tangible material for reopening of the assessment we do not find any reason to reverse the decision of the ld CIT(A) wherein, he has quashed the reopening of assessment proceedings. - Decided against revenue Disallowance of depreciation - ownership with other people - Held that - it is apparent that out of the total cost of ₹ 940030383/-, 54.13% amounting to ₹ 508621383/- belongs to the assessee and 45.87% amounting to ₹ 431409000/- belong to Bharti Mobile Ltd. The assessee has claimed depreciation only on ₹ 508621383/- as held by the ld CIT(A) and not on the full amount of ₹ 940030383/-. The ld Departmental Representative also could not show that the assessee has claimed depreciation on the assets beyond his share of ownership. In view of this we do not find any infirmity in the order of the ld CIT(A) and dismiss - Decided against revenue

Summary

Issues:
1. Validity of reopening assessment under section 147 of the Income Tax Act, 1961.
2. Disallowance of depreciation claimed in excess of share of assets held by the assessee.

Issue 1: Validity of Reopening Assessment:
The appeal was filed by the revenue against the order of the ld CIT(A) for Assessment Year 2002-03, challenging the quashing of proceedings under section 147 of the Income Tax Act, 1961. The Assessing Officer (AO) had issued a notice under section 148 based on the claim that depreciation allowed to the assessee was in excess due to joint ownership of network infrastructure. The AO contended that the excess depreciation escaped assessment. However, the ld CIT(A) held that the AO lacked tangible material to support the claim of understatement or excessive deduction by the assessee. The ld CIT(A) further emphasized that the AO did not have any new information indicating income escapement, leading to the conclusion that the reopening of the assessment was unwarranted. Consequently, the appeal on the issue of reopening was dismissed.

Issue 2: Disallowance of Depreciation:
The second ground of appeal pertained to the disallowance of depreciation amounting to &8377; 53,92,61,25/- by the AO. The AO disallowed this amount as he was uncertain whether the assessee had claimed depreciation solely on its share of assets. The ld CIT(A), after examining the documents and submissions, found that the assessee had entered into an agreement with another company for asset sharing, and the depreciation was correctly claimed only on the assessee's share of assets. The ld CIT(A) noted that the audited balance sheet and tax audit report clearly indicated that the depreciation was claimed on the proportionate cost of assets owned by the assessee. The agreement between the parties also supported this claim. The ld CIT(A) observed that the assessee had capitalized only its share of assets and not the entire assets, contrary to the AO's assumption. Consequently, the disallowance of depreciation was deleted by the ld CIT(A), and the appeal of the revenue was dismissed.

In conclusion, the judgment addressed the validity of reopening the assessment under section 147 and the disallowance of depreciation claimed in excess of the share of assets held by the assessee. The ld CIT(A) ruled in favor of the assessee on both issues, emphasizing the lack of tangible material for reopening the assessment and the correct claim of depreciation made by the assessee based on its share of assets.