2022 (6) TMI 343 - AT - Income Tax

Validity of reopening of assessment u/s 147 - Notice beyond 4 years - HELD THAT - Hon ble Delhi High Court in the case of Central India Electric Supply Co. Ltd. 2011 (1) TMI 89 - DELHI HIGH COURT that there was no lack of disclosure by assessee inasmuch issue of enhanced compensation was settled only when Supreme Court pronounced its judgment and on receipt of enhanced compensation assessee had disclosed same in its return for that year. The Hon ble Bombay High Court in the case of Sterling Wilson P. Ltd 2021 (12) TMI 1092 - BOMBAY HIGH COURT held that where assessee filed details regarding claim of depreciation on goodwill in original assessment proceedings and A.O after considering same, allowed said claim, initiation of reassessment to disallow depreciation was nothing but change of opinion. With the assistance of the ld. Representative we have also gone through the copy of reason recorded for issuing notice u/s 148 of the Act. It is noticed that in the form for reopening the assessment for initiating proceeding u/s 147 approval of commissions of Income Tax was obtained on 29.03.2010, however, the reason for belief that income has escaped assessment were recorded on 30.03.2010 after obtaining the approval for issuing of notice u/s 148 - Therefore, we consider that initiation of proceeding u/s 147of the Act in the case of the assessee is not valid, therefore, we quash the issuing of notice u/s 148 of the Act. Since, we have set aside the proceeding u/s 147, therefore, other ground of appeal of the assessee not required any adjudication. Accordingly, appeal of the assessee is allowed.

Summary

Issues Involved:
1. Validity of reopening the assessment under Section 147 of the Income Tax Act, 1961.
2. Disallowance of depreciation on the alleged excess capitalization of the value of Safe Cable network.
3. Excess disallowance of depreciation.
4. Disallowance of deduction under Section 35D of the Income Tax Act.
5. Levy of interest under Section 234D of the Income Tax Act.

Detailed Analysis:

1. Validity of Reopening the Assessment under Section 147:
The primary issue was whether the assessment was validly reopened under Section 147. The assessee argued that the reopening was based on a change of opinion, as all relevant details were provided during the original assessment proceedings. The tribunal noted that the original assessment was completed under Section 143(3) and the reopening was initiated after four years, requiring satisfaction from the Commissioner of Income Tax. The reasons for reopening were recorded after obtaining approval, which was contrary to the procedure mandated by Section 151. Citing various judicial pronouncements, including the Bombay High Court's decision in Lintas India Pvt. Ltd., the tribunal held that the reopening was invalid as the reasons for belief that income had escaped assessment were recorded after obtaining approval. Consequently, the notice issued under Section 148 was quashed.

2. Disallowance of Depreciation on Alleged Excess Capitalization:
The assessee contested the disallowance of depreciation of Rs. 4,14,25,000 on the alleged excess capitalization of the value of Safe Cable network. The tribunal found that the assessee had provided detailed information about the capitalization and the reversal of liability during the original assessment proceedings. The tribunal observed that the reassessment was based on the same facts already considered, thus constituting a change of opinion. Therefore, the disallowance of depreciation was not justified.

3. Excess Disallowance of Depreciation:
Without prejudice to the previous ground, the assessee argued that the excess disallowance of depreciation amounting to Rs. 76,25,593 was computed on an incorrect value. The tribunal, having already quashed the reassessment proceedings, did not find it necessary to adjudicate this ground separately.

4. Disallowance of Deduction under Section 35D:
The assessee challenged the disallowance of deduction to the extent of Rs. 15,00,000 under Section 35D. Given that the reassessment proceedings were invalidated, this ground also did not require separate adjudication.

5. Levy of Interest under Section 234D:
The assessee contested the levy of interest of Rs. 2,57,20,271 under Section 234D. As the reassessment proceedings were set aside, this ground was rendered moot and did not require further consideration.

Conclusion:
The tribunal allowed the appeals of the assessee, quashing the reassessment proceedings initiated under Section 147. Consequently, the other grounds of appeal did not require separate adjudication. The findings in ITA No. 4486/Mum/2013 were applied mutatis mutandis to the other two appeals, resulting in all appeals being allowed. The order was pronounced in the open court on 31.05.2022.