2020 (7) TMI 402 - HC - Income Tax

Validity of Reopening of assessment - change of opinion - same reasons were the subject matter of the proceedings under Section 143(3) or the proceedings under Section 263 once again - assessee claimed depreciation on block of assets water supply and drainage at 15% and the said asset was shown separately and not in the plant and machinery - as per AO restriction of depreciation to 10% was for a small portion of the block of assets and 5% on rest was to be disallowed and this had resulted in short computation of disallowance of depreciation - HELD THAT - Issue cannot be permitted to be raised more than once. Not stopping with that, upon change of officer, the Department, once again, issued notice dated 28.3.2013 to reopen the assessment and in that notice, a finding was rendered that the relevant portion of the order under Section 143(3) of the Act was restricted and the Assessing Officer stated that the restriction of depreciation to 10% only to a small portion of the block of assets was incorrect. In fact, this was the very same reason, which was posed to the respondent - assessee in the proceedings under Section 143(3) of the Act. Therefore, it is evidently clear that reopening was a case of change of opinion. A bare reading of Section 147 of the Act will clearly show that in all contingencies of reopening, the Assessing Officer should have reasons to believe that income chargeable to tax escaped assessment. If the very same reasons were the subject matter of the proceedings under Section 143(3) of the Act or the proceedings under Section 263 of the Act, once again, for the very same reasons, the power under Section 147 cannot be invoked and having done so, the CIT(A) as well as the Tribunal were right in coming to the conclusion that the reopening was bad in law. Thus, by applying the decision of Kelvinator of India Ltd. 2002 (4) TMI 37 - DELHI HIGH COURT a s confirmed by the Hon ble Supreme Court 2010 (1) TMI 11 - SUPREME COURT where the case pertains to an assessment before 01.4.1989 or thereafter, mere change of opinion cannot confer jurisdiction upon the Assessing Officer to initiate proceedings under Section 147 of the Act, we hold that the judgment under appeal does not call for interference. - Decided against revenue.

Issues Involved:
1. Reopening of assessment under Section 147 of the Income Tax Act.
2. Change of opinion in the context of reassessment.
3. Applicability of judicial precedents and statutory provisions.

Detailed Analysis:

1. Reopening of Assessment under Section 147 of the Income Tax Act:

The primary issue in this case was whether the reopening of the assessment by the Assessing Officer (AO) under Section 147 of the Income Tax Act was valid. The AO issued a notice under Section 148 on 28.3.2013, stating that income had escaped assessment due to the incorrect depreciation rate applied to water supply and drainage assets. The AO referenced decisions from the Supreme Court and the Delhi High Court to justify restricting depreciation to 10% instead of 15%.

2. Change of Opinion in the Context of Reassessment:

The respondent-assessee argued that the reopening was merely a change of opinion, which is not permissible. During the original assessment under Section 143(3), the AO had already scrutinized the depreciation claim and restricted it to 10% for non-productive assets. The assessee had responded to the AO's queries, and the AO had accepted the explanation. Later, a notice under Section 263 was issued for the same reason, but the proceedings were dropped after the assessee's reply. The Tribunal and CIT(A) both held that the reopening was based on the same reasons previously considered and thus constituted a change of opinion.

3. Applicability of Judicial Precedents and Statutory Provisions:

The Revenue contended that the reopening was not a change of opinion and cited several judicial precedents, including:

- CIT Vs. Sun Engineering Works Private Limited
- Aquagel Chemicals Private Limited Vs. ACIT
- Girilal & Co. Vs. ITO, Mumbai

The Revenue also argued that the case of CIT Vs. Kelvinator of India Ltd., which restricts reopening based on a change of opinion, was not applicable as the reopening occurred within four years.

The assessee countered by stating that the Kelvinator decision applied universally, requiring the AO to have "reasons to believe" that were not based on a change of opinion. The assessee also highlighted that the same reasons had been previously addressed during the original assessment and Section 263 proceedings.

Court's Findings:

The Court analyzed the provisions of Section 147 and the judicial precedents. It emphasized that the AO must have "reasons to believe" that income escaped assessment, which cannot be based on a mere change of opinion. The Court noted that the reasons for reopening were identical to those considered during the original assessment and Section 263 proceedings. Therefore, the reopening was indeed a change of opinion.

The Court also referred to the Full Bench decision of the Delhi High Court in Kelvinator of India Ltd., which was confirmed by the Supreme Court. This decision established that a mere change of opinion does not confer jurisdiction to the AO for reopening an assessment under Section 147.

Conclusion:

The Court concluded that the reopening of the assessment was invalid as it was based on a change of opinion. The appeal by the Revenue was dismissed, and the substantial question of law was answered against the Revenue. The decision of the Tribunal and CIT(A) was upheld, confirming that the reopening of the assessment was bad in law.

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