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TMI Blog2014 (9) TMI 892X X X X Extracts X X X X X X X X Extracts X X X X ..... discard of any depreciable assets during the year under question and additions were made - the assessee had stated that supporting documents are bulky and voluminous and it showed willingness to produce the same for verification at the time of assessment proceedings - In the assessment order passed on 30.12.2008, nowhere there is any reference of non-compliance of the direction of the AO - It also does not mention anywhere the absence of production of record ensured to be done at the time of assessment proceedings - in absence of any specific averment in the reasons recorded for reopening of the assessment, that there was any failure on the part of the assessee to disclose fully and truly all material facts, it would not be possible for the Court to allow the notice u/s 148 to be sustained,which is wholly without any backing of law. Structure of such kinds are not so uncommon that its true picture/ meaning cannot be grasped, without furnishing more details than already provided by the petitioner - Again, assuming without accepting that onus was entirely on the assessee to bifurcate all the three structures (i) The module large pre-built units meant for accommodation, production ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laws of Canada and derives income from the business of exploration, prospecting, production and marketing of natural gas and mineral oil. It entered into an agreement dated 23.9.1994 with GPCL, a company incorporated under the laws of India for production sharing contracts with the Government of India for exploration and extraction of mineral oil and natural gas in certain fields situated in the State of Gujarat. The petitioner, therefore, earned income that accrues and arises in India and is subject to taxation in India. 2. The return of income under section 139 of the Act was filed by the petitioner on 29.10.2005 for the assessment year 2005-06 declaring total income as nil along with Tax Audit Report. The petitioner paid tax under section 115JB of the Act. 3. The return of the petitioner was taken under scrutiny assessment under section 143(1) of the Act and notice issued under section 143(2) was duly served upon the assessee. The questionnaire was supplied along with notice under section 142(1) to the petitioner and pursuant to such notice, requisite details were furnished by the petitioner. A letter was issued dated 8.1.2007 requiring the petitioner to furnish all det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the drill crew operates from, whereas there is a lot more to the structure than just the derrick area. This being due to the fact that an offshore platform is usually one that is permanently fixed to the sea bed. Thus, Offshore Platform is not a plant and machinery in itself. It consists of dwelling units, production units and drilling area. The plant and machinery are installed on such Offshore Platform. Offshore Platform could therefore, correctly be classified under the Block of assets Building only. Thus, depreciation was correctly allowable on Offshore Platform @ 10% applicable to Building . Accordingly, the assessee was entitled for depreciation of ₹ 103885950/- (10% of ₹ 1038859497/-) and this excess depreciation of ₹ 155828924/- resulted in underassessment of income of ₹ 155828924/-. Therefore I have reason to believe that income to the tune of at least ₹ 155828924/- has escaped assessment in case of the assessee for AY 2005-06. Issue notice u/s 148 read with section 147 of the IT Act 1961. 7. Objections were raised by the petitioner, objecting to the reopening of the assessment, contending inter alia that the assessment bey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 1 to section 147 notes that production of accounts books or other evidence from which material evidence with due diligence have been discovered by the Assessing officer, would not amount to disclosure. It also further notes that mere production of accounts and other documents since cannot be termed as disclosure, the Assessing Officer cannot be said to have formed any opinion based on the facts that documents containing entries about the issue under consideration were not filed during the course of assessment proceedings. Thereafter on 15.3.2013, a draft of proposed reassessment order was prepared. 9. Aggrieved petitioner has preferred present petition, seeking the following prayers:- 7(aa) To quash and set aside the impugned assessment order under section 144C(1) r.w.s. 147 r.w.s. 143 at Annexure A1 7(bb) Pending the hearing and final disposal of the petition to stay the implementation and operation of the order at Annexure A1 and refrain the respondent from initiating recovery proceedings against the petitioner pursuant to the said order. 10. On issuance of notice, the respondent filed the affidavit-in-reply through the Deputy Director of Income-tax (Internat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue. 10.3 It is therefore contended that no opinion was formed by the Assessing Officer during the assessment proceedings and hence, notice of reopening is not on account of any change of opinion. The assessee, in fact, according to the respondents, has presumed on the basis of the facts that the documents were supplied during the assessment proceedings and, therefore, the Assessing Officer must have considered it. Reliance is placed on the decision of Delhi High Court rendered in the case of Commissioner of Income-Tax vs. Usha International Ltd reported in [2012] 348 ITR 485 (Delhi) wherein on a particular subject matter entry or claim had not been examined by the Assessing Officer, it was held that there cannot be deemed formation of opinion. 11. Affidavit-in-rejoinder has been filed denying all these contentions. It is emphasized that there was no failure on the part of the petitioner to disclose truly and fully all material facts. 11.1 According to the petitioner it had specifically provided the details of depreciation vide communication dated 6.7.2007 as is evident from Annexure-C. This annexure refers to the claim of depreciation as per the clause 14 of the Tax Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of offshore platform and depreciation at the rate of 25% was admissible on plant and machinery and according to section 32 of the Act read with Rule 5 of the Income Tax Rules,1962(hereinafter referred to as the Rules ), depreciation on plant and machinery is admissible at the rate of 15% whereas on building, it would be at the rate of 10% for Assessment Year 2006-07. Offshore platform since is not exclusively on plant and machinery on which various monitoring or dwelling units were installed, three key features would make the offshore platform (1) the Modules- large pre-built units that include accommodation, production and drilling zones (2) The Jacket- an intricate spiders web of steel piles, beams and triunions combine to provide a formidable foundation on which the entire platform sits and (3) Derrick is usually the highest point on the platform wherefrom drilling is carried out. It further mentioned that the offshore platform which is not a plant and machinery in itself consists of dwelling units and three drilling areas and thus plant and machineries are installed on offshore platform. Therefore, offshore platform can be classified under the block of assets building on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in [1997] 224 ITR 560 (SC). 14. In affidavit-in-rejoinder, learned Senior Advocate Mr. Soparkar urged that pursuant to the notice issued during the scrutiny assessment, if the Assessing Officer did not have sufficient details and was desirous to get more details, he could have directed to furnish more details when he allowed the assessee s claim. However, while so doing, he rejected the depreciation on wells and other pipelines. There is sufficient application of mind on the part of the Assessing Officer and, therefore, any subsequent notice in respect of the very same assessment is nothing but change of opinion. 14.1 Learned Senior Counsel urged that out of the total amount of depreciation, ₹ 25.97 crores of depreciation was only of this item. It is unlikely that such huge amount would escape the attention of the Assessing Officer. In absence of any further query with regard to offshore platform, this must be held as a review of his own decision and in absence of any averment with regard to non-disclosure of material facts fully and truly at the time of original assessment, the assessee cannot be put to any jeopardy and no jurisdiction would be available with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139: Provided that in a case- (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and (b) subsequently a notice has been served under subsection( 2) of section 143 after the expiry of twelve months specified in the proviso to sub-section(2) of section 143, as it stood immediately before the amendment of said subsection by the Finance Act, 2002(20 of 2002) but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified in subsection( 2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice: Provided further that in a case- (a) where a return has been furnished during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for reopening, such wordings are not specifically mentioned and they can be supplemented either while rejecting the objections or by way of affidavit of the Assessing Officer, then also, the revenue has failed to point out as to in what manner there has been non-disclosure on the part of the assessee. 18. Delhi High Court in the case of Commissioner of Income-Tax vs. Usha International Ltd (supra), has held that the reassessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer does not make any addition in the assessment order. In such situation, it should be accepted that the issue was examined by the Assessing Officer, who did not find any ground or reasons to make additions or he forms an opinion, rejecting the stand of the assessee. The reassessment will be invalid because the Assessing Officer had formed an opinion in the original assessment made, though he had not recorded his reasons. The expression change of opinion postulates formation of opinion and then a change thereof. In the context of assessment proceedings, it means formation of belief by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... An opinion is a conviction based on testimony... they are as a result of reading, experience and reflection . 10. We may note that the said decision was not dealing with section 147 of the Act, as amended with effect from April 1, 1989, but was with reference to section 147(b) of the Act under which an Assessing Officer could reopen assessment on the basis of information . The term to inform it was observed means to impart knowledge and it does not means mere availability. It gets transmuted into an item of information only when its existence is realized and its implications are recognized. However, it is not possible to agree with the observations made in paragraph 16, which have been underlined. The reason is that experience shows that the Assessing Officers do examine several aspects and raise queries but when the written opinion is expressed in the form of the assesment order, there is no discussion or elucidation on certain aspects and issues decided or held in favour of the assessee. The assessee is not the author of the assessment order and has no control over what the Assessing Officer wants to state or mention. It is in this context that the Delhi High Court in CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, though he had not recorded his reasons. 19. Andra Pradesh High Court in the case of GVK Gautami Power Limited vs. Assistant Commissioner of Incometax (OSD) and another reported in [2011] 336 ITR 451 (AP) extensively examined various case laws and adduced the principles governing the exercise of jurisdiction to reopen the assessment. Relevant portion of the judgment is reproduced as under:- (viii) The Assessing Officer has no power to review. He has the power only to reassess. The concept of change of opinion must be treated as an in-built test to check abuse of power by the Assessing Officer (Kelvinator of India Ltd. [2010] 320 ITR 561 (SC). (ix) The Income-tax Officer acquires jurisdiction to reopen assessment under section 147 read with section 148 of the Act only if, on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reason, which he must record, to believe that any part of the assessee s income has escaped assessment. (x) The words has reason to believe in section 147 are stronger than the words is satisfied (Ganga Saran and Sons P. Ltd. [1981] 130 ITR 1(SC)). (xv) Every disclosure is not, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1995] 215 ITR 295, Division Bench of this Court held as under:- The essential requirement for initiating proceedings under section 148 of the Act is that the Assessing Officer must have reason to believe that any income chargeable to tax has escaped assessment for any assessment year. Explanation 2 to section 147 of the Act as appended to newly substituted section 147 makes certain provisions where, in certain circumstances, the income is deemed to have escaped assessment giving jurisdiction to the Assessing Officer to act under the said provision. Another requirement which is necessary for assuming jurisdiction is that the Assessing Officer shall record his reasons for issuing notice. This requirement necessarily postulates that before the Assessing Officer is satisfied to act under the aforesaid provisions, he must put in writing as to why in his opinion or why he holds the belief that income has escaped assessment. Why for holding such belief must be reflected from the record of reasons made by the Assessing Officer. In a case where the Assessing Officer holds the opinion that because of excessive loss or depreciation allowance the income has escaped assessment, the reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s change of opinion on the same facts. The Court held:- Applying the principles laid down by the Full Bench of this court as well as the observations of the Punjab and Haryana High Court, we find that if the entire material had been placed by the assessee before the Assessing Officer at the time when the original assessment was made and the Assessing Officer applied his mind to that material and accepted the view canvassed by the assessee, then merely because he did not express this in the assessment order, that by itself would not give him a ground to conclude that income has escaped assessment and, therefore, the assessment needed to be reopened. On the other hand, if the Assessing Officer did not apply his mind and committed a lapse, there is no reason why the assessee should be made to suffer the consequence of that lapse. 22. In the case of Ketan B. Mehta vs. Assistant Commissioner of Income-Tax reported in [2012] 346 ITR 254 (Guj), the notice of reassessment was issued after the period of 4 years in wake of dissenting opinion of the two learned Members of the Bench. The matter was referred to the third judge. It has been held that with regard to the question of avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee satisfied such requirements, and, therefore, can validly contend that the reopening of assessments beyond the period of four years was invalid, is to be judged on the basis of material on record. If the assessee had discharged his primary duty, obviously, the Assessing Officer would, thereafter, have no jurisdiction to reopen the assessment beyond a period of four years. *** *** *** *** *** *** 128. To my mind, considering the facts emerging from the record, it cannot be stated that the assessee failed in his duty. His duty was to make the disclosure about the investments as well as the interest paid for borrowings for making such investments. On the basis of such material, if the Assessing Officer was of the opinion that any further inquiry was necessary to examine the nature of such investments and to ascertain whether the investment was made for the sole purpose of earning dividend income or was predominantly or exclusively for the purpose of acquiring controlling shares of the Mastek Limited, it was open to the Assessing Officer to make further inquires. To my mind, nothing is pointed out to suggest that the assessee owed such a duty to disclose further facts in thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uance of the notice under section 148 beyond the period of 4 years, it was held that only on the basis of mere change of opinion, such notice was issued, which was wholly illegal and without jurisdiction. 25. Bombay High Court in the case of Parikh Petrol Chemical Agencies P.Ltd. vs. Assistant Commissioner of Income-tax and others reported in [2004] 266 ITR 196(Bom.) was dealing with the notice under section 148 beyond the period of 4 years where the Assessing Officer, at the time of original assessment, disallowed the deduction under section 80(o) only the ground that the amount received in Assessment Year 1994-95 was for services rendered in Financial Year 1990-91. The Commissioner of Appeals concluded that the amount for services rendered became payable when the credit note was issued by the Russian Agencies in Moscow and it accordingly directed the Assessing Officer to allow deduction under section 80(o) only if the amount was brought to India within six months from the issuance of the credit note by Russian Government. On verification, such claim of the assessee was allowed. The reopening of the assessment to deny deduction under section 80(o) was held not permissible in ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and as such the notices, the speaking orders and the assessment orders made in pursuance of the notices were quashed. 27. From the ratio that can be culled out from all these decisions, it is amply clear that the Assessing Officer, who is authorized to issue notice under section 148 of the Act for reassessment, on his having a reason to believe that income chargeable to tax had escaped assessment for any assessment year, can assess or reassess such income and also any such other income chargeable to tax, which has escaped the assessment. However, no such action is permissible after lapse of 4 years from the end of the relevant assessment year unless income chargeable to tax has escaped assessment on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of such assessment. The onus is on the assessee to reveal the primary facts and to draw the inferential facts would be the responsibility of the Assessing Officer. Once having revealed from the record that the assessee disclosed full and complete facts and on scrutiny, at the time of original assessment all these details are examined, no change of opinion is pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 139 or in response to a notice issued under section 142(1) or section 148 or: (II) he failed to disclose fully and truly all material facts necessary for the assessment. 31. It is also brought to the notice of the Assessing Oficer that under section 32, the primary information on depreciation was submitted with return of income along with Tax Audit Report. The total amount of depreciation claimed on off-shore platform was to the tune of ₹ 157,867,098/-. A notice was also issued on 8.1.2007 and full details of depreciation claimed along with the items of purchase and those put to use also was sought for. Company also had submitted the reply on 6.7.2007 and had mentioned that as per Annexure-3 and Annexure-4, the claim towards the depreciation had been made by the company. Annexure-IV had indicated field wise depreciation where the particulars of all assets like, building, block, addition/deletion made during the year, total depreciation claimed and closing written down value (WDV) were tabulated. As could be noted from the information called for under section 142(1) on 8.1.2007 the Point No.5 reads thus:- 5. The full details of depreciation claimed by you. The des ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tune of ₹ 9,15,41,627/-. Thus, it can be made out that not only the complete details for the depreciation claimed by the assessee had been made but subsequently under section 142(1), the information had been called for, for the description of the items purchased and put to the use with supporting evidence. 36. The petitioner had given details of depreciation claimed by the company as per Annexure-3. It had specified that there is no sale nor any act of discard of any depreciable assets during the year under question and additions were made as per Annexure-4. It is true that the assessee had stated that supporting documents are bulky and voluminous and it showed willingness to produce the same for verification at the time of assessment proceedings. 37. In the assessment order passed on 30.12.2008, nowhere there is any reference of non-compliance of the direction of the Assessing Officer. It also does not mention anywhere the absence of production of record ensured to be done at the time of assessment proceedings. Those documents either were produced for perusal and scrutiny or the Assessing Officer, who deemed it fit not to call for them, at the time of assessment, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inevitable to refer to the case of this Court rendered in the case of Aayojan Developers vs. Income-tax Officer reported in [2001] 10 taxmann.com 226 (Guj), where no foundation was laid in reasons for reopening assessment that there was failure on part of assessee to disclose fully and truly all material facts, brought on record and by filing of affidavit-in-reply for the first time such escapement was indicated and the Court held that the notice of reopening beyond four years must fail. 41. Yet another decision of this Court rendered in Dishman Pharmaceutical Chemical Ltd. vs. Deputy Commissioner of Income-tax (OSD) (No.2) reported in [2013] 33 taxmann.com 638(Gujarat), it is held and observed that no suggestion in the reasons regarding any attribution on the part of the assessee in fully and truly not disclosing the material facts, indicated that all facts necessary for framing the assessment with respect to the issue under question was very much before the Assessing Officer when he previously took the return of the assessee for scrutiny assessment. The detailed exercise was undertaken by the Assessing Officer with respect to the claim of the assessee under question before ..... X X X X Extracts X X X X X X X X Extracts X X X X
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