2021 (6) TMI 892 - AT - Income Tax

Reopening of assessment u/s 147 - additional depreciation u/s. 32(1)(iia) disallowed - HELD THAT - CIT(A) has no power to give directions to the AO to reopen the assessments for the assessment years which are not before him. We also do not find any direction given by the ld. CIT(A) in his order for AY 2009-10. The ld. CIT(A) applied the ratio of the judgement of the Hon'ble Supreme Court in the case of Rama Bai 1983 (9) TMI 323 - SUPREME COURT and deleted the interest added in the AY 2009-10. The other assessment years were not before him i.e. AY 2005-06 and 2006-07. The proposition of law laid down in the case law referred above is that the ld. CIT(A) has no power under the provision of law to give direction to the AO for reopening of assessment. Thus the reasons recorded for reopening of assessments is bad in law. Appeals of the assessee are allowed.

Summary

Issues Involved:
1. Legality of reopening the assessment under Section 147 of the Income Tax Act.
2. Addition of interest income on arbitration award.
3. Disallowance of additional depreciation under Section 32(1)(iia).
4. Charging of interest under Section 234D.

Issue-wise Detailed Analysis:

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

The primary issue for adjudication was whether the reopening of assessments for the Assessment Years (AY) 2005-06 and 2006-07 was legally valid. The Assessing Officer (AO) issued a notice under Section 148 on 09.10.2013 based on the findings of the Commissioner of Income Tax (Appeals) [CIT(A)] in his order dated 20.07.2016 for AY 2009-10, which stated that the interest income should be taxed in the respective assessment years for which it accrued. The Tribunal examined the legal position and referred to the judgment of the Hon'ble Kolkata High Court in the case of R.H. Dave vs. Commissioner of Income-Tax (140 ITR 1035 Cal), which held that the CIT(A) had no jurisdiction to direct the AO to bring the amount to tax in an assessment year not involved in the appeal before him. The Tribunal also cited the decision of the Kolkata 'D' Bench in Shalini Agarwal vs. ITO and the Kolkata 'C' Bench in ITO vs. Sri Biswajit Chatterjee, which reiterated that the CIT(A) does not have the power to give directions for reopening assessments for years not under appeal. Consequently, the Tribunal held that the reopening of assessments based on the CIT(A)'s order was bad in law and quashed the same.

2. Addition of Interest Income on Arbitration Award:

The assessee did not offer the interest income of ?10,58,25,030/- from the arbitration award for tax, as it was not related to AY 2009-10. The CIT(A) had earlier deleted the addition for AY 2009-10, following the Supreme Court's decisions in Rama Bai vs. CIT and CIT vs. TNK Gobindarajulu Chetty, which held that interest on delayed compensation should be assessed year-by-year from the date of delivery of the land till the date of the court order. The Tribunal agreed with the CIT(A)'s application of this principle, noting that the interest income should be taxed in the respective years it accrued and not in a lump sum in the year of receipt. Thus, the addition made by the AO was invalid.

3. Disallowance of Additional Depreciation under Section 32(1)(iia):

The AO disallowed additional depreciation of ?91,17,497/- claimed under Section 32(1)(iia), arguing that the assessee was not involved in the production of an article. The Tribunal noted that the assessee was indeed involved in production activities and was entitled to additional depreciation. The disallowance by the AO was without any specific reason, making it baseless and unjustified.

4. Charging of Interest under Section 234D:

The AO charged interest under Section 234D amounting to ?19,28,569/-. The Tribunal found this charge to be arbitrary, unjustified, and illegal, as the reasons for such imposition were not adequately substantiated by the AO.

Conclusion:

The Tribunal concluded that the reopening of assessments for AY 2005-06 and 2006-07 was bad in law, quashed the reassessment orders, and allowed the appeals of the assessee. The addition of interest income on the arbitration award was invalid, the disallowance of additional depreciation was baseless, and the charging of interest under Section 234D was unjustified. The appeals were thus allowed in favor of the assessee.