2023 (8) TMI 447 - AT - Income Tax

Reopening of assessment - tangible material on record that there is escapement of income from assessment - reopening after four years - HELD THAT - From the reasons recorded by the A.O., it clearly reflects that the same are based on the books of accounts and balance sheet filed by the assessee. Further the claim of additional depreciation which was considered by the AO while passing original assessment order u/s. 143(3) - Thus the reasons recorded by the AO does not show that any new tangible material available on record and there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of assessment, when the same is reopened after four years period. As examined the applicability of case of CIT Vs. Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT wherein it was categorically held that the AO has no power to review his assessment order, but has only the power to reassess, provided there is tangible material on record that there is escapement of income from assessment. Thus no hesitation in holding that in the absence of tangible material, reopening of assessment after four years period amounts to change of opinion only. Therefore the reopening of assessment is not valid as per the provisions of section 147 - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reopening the assessment beyond four years.
2. Eligibility for additional depreciation on Fluidized Bed Furnace.
3. Jurisdiction and legal basis of the assessing officer's order.

Summary:

1. Validity of Reopening the Assessment Beyond Four Years:
The primary issue contested by the assessee was the reopening of the assessment beyond the four-year period. The assessee argued that there was no failure on their part to disclose fully and truly all material facts necessary for the assessment. The Tribunal noted that the reasons recorded by the Assessing Officer for reopening were based on the books of accounts and balance sheet filed by the assessee, which were already considered during the original assessment under section 143(3) of the Income Tax Act, 1961. The Tribunal cited the Supreme Court judgment in the case of CIT Vs. Kelvinator of India Ltd., emphasizing that the Assessing Officer has no power to review his assessment order but can reassess only if there is "tangible material" indicating escapement of income. Since no new tangible material was presented, the Tribunal held that the reopening after four years amounted to a "change of opinion," rendering the reopening invalid.

2. Eligibility for Additional Depreciation on Fluidized Bed Furnace:
The assessee claimed additional depreciation on a Fluidized Bed Furnace used for generating hot air, arguing it was part of their manufacturing process. The Assessing Officer disallowed this claim, stating that the furnace was used for generating hot air and not directly for manufacturing articles or things, thus not qualifying for additional depreciation under section 32(iia) of the Act. The Tribunal, however, found that the assessee had provided sufficient details and justification for the claim during the original assessment proceedings. The Tribunal referred to the Jurisdictional High Court's judgment in the case of CIT Vs. Diamines & Chemicals Ltd., which supported the assessee's claim for additional depreciation on similar grounds. Consequently, the Tribunal allowed the claim for additional depreciation.

3. Jurisdiction and Legal Basis of the Assessing Officer's Order:
The Tribunal examined whether the Assessing Officer had the jurisdiction to reopen the assessment based on the same set of facts without any new tangible material. It was observed that the Assessing Officer's action was not based on any new information but merely a reconsideration of the existing facts, which amounted to a change of opinion. The Tribunal held that the Assessing Officer's jurisdiction is confined to rectifying mistakes apparent on record under section 154 of the Act and does not extend to reviewing his own order. The Tribunal concluded that the reopening of the assessment was without jurisdiction and legally invalid.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, quashing the reopening of the assessment and upholding the claim for additional depreciation. The judgment emphasized the necessity of new tangible material for reopening assessments beyond four years and reinforced the legal principles limiting the jurisdiction of the Assessing Officer to reassessments based on substantial new evidence.