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TMI Blog2019 (11) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment u/s 143(1) of the Act. Subsequently, the AO found that the assessee had claimed the depreciation on plant and machinery @30% which is to be allowed in the case of the business of running vehicles on hire. Normal depreciation allowable in the case of usage of vehicles in the business is 15%. As the plant and machinery are in the nature of earth moving machinery, which cannot be classified as motor lorries used in the business of running them on hire and the assessee engaged in the business of civil contracts, the AO is of the view that assessee was not eligible for depreciation @30%, hence reopened the assessment u/s 147 by issue of notice u/s 148 with prior approval of Ld.Pr.Commissioner of Income Tax-2 Visakhapatnam and subsequently issued the notices u/s 143(2) and 142(1) and completed the reassessments u/s 143(3) r.w.s. 147 by making following additions to the returned income in the respective assessment years. A.Y. Returned Income (Rs.) Addition Made (Rs.) Total Income (Rs.) Dep.on Plant & Machinery (Rs.) EPF & ESI (before filing ROI) (Rs.) EPF/ ESI (After filing ROI) (Rs.) Service Tax Expenditure (Rs.) 2011-12 95,26,110 9,98,056 43,542 27,236 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of Hon'ble Supreme Court in the case of ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt Ltd. [2007] 291 ITR 500 (SC) and upheld the validity of issue of notice u/s 148 and dismissed the appeal of the assessee on this ground. 4. Against the order of the Ld.CIT(A), the assessee filed appeal before us. During the appeal hearing, the Ld.AR argued that issue of notice u/s 147 for reopening of assessment and consequent issue of notice u/s 148 is invalid and it was due to change of opinion, but not having reason to believe that income had escaped assessment. The Ld.AR further argued that if there is excess claim of depreciation, there are other remedial measures available in the Act, which the AO ought to have taken action u/s 154 or 263 instead of reopening the assessment. No fresh information was received by the AO and the assessment was reopened only on account of audit objections as per the information obtained from the AO under RTI Act, hence argued that invoking the jurisdiction u/s 147 is illegal and requested to set aside the orders of the Ld.CIT(A) and to quash the notice issued u/s 148 of the Act. 5. On the other hand, the Ld.DR supported the orders of the lower authoriti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee on this ground for the A.Y. 2011-12, 2012-13, 2014-15 and 2015-16. A.Y.2013-14 7. In the instant case, the assessment was originally completed u/s 143(3). Later on, the AO found that the assessee had claimed the depreciation on earth moving machinery @30% against the actual rate of 15%. Therefore, the AO reopened the assessment u/s 147 and issued notice u/s 148 of the Act. On appeal before the first appellate authority, the Ld.CIT(A) upheld the validity of issue of notice u/s 148 placing reliance on various case laws. The Ld.CIT(A) has made elaborate discussion upholding the action of the AO. For the sake of clarity and convenience, we extract relevant part of the order of the Ld.CIT(A) from para No.7.2. to 7.2.10 which reads as under : "7.2.0 INITIATION OF PROCEEDINGS U/S 147 OF THE ACT : Ground No.1 & 2 1. The order passed by the learned Asst.Commissioner of Income Tax for the assessment year 2013-14 u/s 143(3) r.w.s. 147 is erroneous in law, contrary to the facts, probabilities of the case and against the principles of natural justice. 2. Initiation of reassessment proceedings is one to change of opinion and the same is against provisions of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts at the time of original assessment u/s. 143(3) of the Act, it cannot be considered as change of opinion, when the income which was chargeable to tax is actually taxed correctly in accordance with the provisions of law which was omitted to be considered due to mistake by the AO at the time of completion of the original assessment. Under the circumstances, when the issue itself was not at all considered at the time of original assessment u/s. 143 (3) of the Act, the question of attributing change of opinion while passing the reassessment order rectifying such mistake doesn't arise. 7.2.6. It is also important to note that the basic requirement to reopen the assessment u/s. 147 of the Act is that there should be reason to believe on the part of the AO that income has escaped assessment while passing the original assessment u/s. 143(3) of the Act. In this regard, it is trite law that the word 'reason' in the phrase 'reason to believe' would mean "cause or justification." Accordingly, if the AO has a cause or justification to think that the income had escaped assessment, it can be construed that AO has reason to believe that such income had escaped assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of the law derived from relevant judicial decisions; (2) where in the original assessment the income liable to tax has escaped assessment due to oversight, inadvertence or a mistake committed by the ITO. This is obviously based on the principle that the taxpayer would not be allowed to take advantage of an oversight or mistake committed by the taxing authority; (3) where the information is derived from an external source of any kind. Such external source would include discovery of new and important matters or knowledge of fresh facts which were not present at the time of the original assessment; (4) where the information may be obtained even from the record of the original assessment from an investigation of the materials on the record, or the facts disclosed thereby or from other enquiry or research into facts or law. If these conditions are satisfied then the ITO would have complete jurisdiction to reopen the original assessment. It is obvious that where the ITO gets no subsequent information, but merely proceeds to reopen the original assessment without any facts or materials or without any enquiry into the materials which form part of the original assessment, sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter the assessment was over, prima facie, suggesting that the assessee company had received bogus share application/premium money from number of shell companies. 11. Merely because the transactions in question were examined by the Assessing Officer during the original assessment would not make any difference. The scrutiny was on the basis of disclosures made and materials supplied by the assessee. Such malarial is found to be prima facie untrue and disclosures not truthful. Earlier scrutiny or examination on the basis of such disclosures or materials would not debar a fresh assessment. Each individual case of this nature is bound to have slight difference in facts. 7. Krishna Developers and company vs DCIT [2017] 84 taxmanm.com 166 (Gui.): In the above case, Hon'ble Gujarat High court held that merely because reasons recorded by AO proceeded on same basis on which AO initially desired to make additions but which failed on account of setting aside of order of assessment by CIT(Appeals), it would not preclude the AO from carrying out exercise of reopening of assessment. The relevant portion of the decision is reproduced below for ready reference. "20. Nothing contained i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e u/s 148 of the Act, absolute certainty regarding the escapement of income from assessment is not necessary. However, "reasons to believe" recorded prior to issue of notice must not be based on mere suspicion, gossip or rumour. There should be live link between the information available with the AO and inference drawn that income has escaped assessment. 7.2.9 In the instant case, it is clearly established that the AO has fulfilled the crucial requirement of live link between the information available and inference drawn in as much as, prima facie, the assessee, who is engaged in the business of execution of civil contract works claimed higher rate of depreciation @ 30% in respect of earth moving machinery, which is applicable in respect of motor buses, motor lorries and motor taxis used in a business of running them on hire, resulting in excess amount of depreciation allowance of Rs. 1O,58,518/-. In this regard, reliance is placed on the following latest decisions on the issue of the AO need not be certain at the time of issuance of notice u/s. 148 of the Act that income had actually escaped assessment. 1) Jayant Security & Finance Ltd. [2018] 91 Taxmann.com 181 dated 12.02. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailable at the disposal of Assessing Officer, have to be expressed in any rigid format in the reasons recorded. Hence, as these two essential requirements can be gathered from the reasons recorded, the notice for reopening cannot fail on such basis. [Para 7] The question of change of opinion and failure on the part of the assessee to disclose truly and fully all material facts, in the present case are closely connected. Undoubtedly, as noted earlier, the Assessing Officer during the original assessment had examined the transactions, However, such examination would necessarily be on the basis of disclosures made by the assessee in the return filed and during the scrutiny assessment. If the Assessing Officer has information to form a reasonable opinion that prima facie the entire transaction itself was sham and bogus, as reference to such transaction during the original assessment and raising certain queries in this respect would not prevent him from reopening the assessment on the principle of change of opinion. As noted, the opinion would be formed on the basis of disclosures. When disclosures are found to be prima facie untrue, the opinion formed earlier would not prevent Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of details with regard to claim of higher rate of depreciation with the relevant evidences before the AO. As per para 2 of the assessment order dated 29.10.2015 for the A.Y.2013-14, the AO called for the various details and the AR had produced the books of accounts, bills and vouchers for verification which was observed that the bills, vouchers and books of accounts were torn out and not in verifiable condition. The assessee also stated that due to HudHud cyclone that took place in the month of October 2014, the office premises was severally damaged and consequently the relevant records and books of accounts got spoiled. From the above submission of the assessee, it is evident that the assessee could not submit complete information before the AO. Further since the assessment was reopened within 4 years from the end of the relevant A.Y. As per the provision of the income tax failure attributable to the assessee is not applicable in case of assessments reopened within four years. It is evident from the assessment order that the assessee has claimed higher rate of depreciation for which the assessee did not furnish the details and the AO also did not examine the issue at the time o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the Ld.AR and reject the same. A.Y.2011-12 12. The next issue in Ground No.2 for the A.Y.2011-12 is with regard to the delay in remittances of EPF and ESI contributions of employees u/s 43B of the Act. This issue is involved for the A.Ys.2012-13, 2013-14, 2014-15 and 2015-16 also. From the assessment order, it is found that the assessee remitted the employees contribution relating to the PF, ESI beyond the due date provided under the provisions of relevant Act, but before the due date for filing the return of income. Therefore, the AO disallowed the deduction claimed u/s 43B of the Act against which the assessee preferred appeal before the Ld.CIT(A) and the Ld.CIT(A) confirmed the addition made by the AO. Hence, the assessee preferred appeal before this Tribunal. 13. We have heard both the parties and perused the material placed on record. For all the impugned assessment years, it is found from the assessment order that the assessee remitted the employees contribution relating to EPF and ESI beyond due date provided under the relevant Acts but before the due date for filing the return of income. This Tribunal has consistently taken view that PF, ESI remitted before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g services, erecting machinery and communication business services and construction services in respect,, of the commercial and industrial buildings and civil contractors. Therefore, the AO found from the service tax returns also that the assessee was not in the business of running the vehicles on hire. The Ld.AO further gone through the definitions of the lorry and held that motor lorries as per the IT Rules should mean motor taxes and not earth moving machinery. Therefore, the AO restricted the depreciation @15% and disallowed the excess depreciation claimed by the assessee for the A.Y.2011-12 to 2015-16 as under: A.Y. Depreciation Claimed @30% (Rs.) Depreciation allowed @15% (Rs.) Excess Depreciation allowed (Rs.) 2011-12 19,96,113 9,98,056 9,98,056 2012-13 16,52,700 12,84,873 9,85,056 2013-14 27,10,468 16,52,700 10,58,518 2014-15 16,91,161 12,66,577 4,22,564 2015-16 9,92,176 7,73,107 2,19,069 15. Aggrieved by the order of the AO, the assessee filed appeal before the CIT(A) and the Ld.CIT(A) confirmed the addition made by the AO. The Ld.CIT(A) found that the assessee is not engaged in the business of running the vehicles on hire, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The Ld.AR even could not provide the details of the dates on which the vehicles were given on hire to ascertain the facts, whether the assessee has given the vehicles on hire. The dominant object of the assessee is to use the motor lorries / trucks in it's own business but not running them on hire. In the instant case, as discussed earlier, the assessee failed to establish that the dominant purpose was to use the vehicles for running them on hire. The dominant purpose is to use the vehicles for its own business. The purpose of allowing deduction at higher rate of depreciation in vehicles running them on hire is that the vehicles are used extensively without taking much care and suffer heavy wear and tear. Whereas in the case of assessee's own business, the wear and tear is lesser than the vehicles used in running on hire. In the instant case, the assessee also failed to establish that the vehicles were used in the business of running them on hire. Following the decision of Hon'ble Kerala High Court in the case of N.D.Joseph Vs.CIT (2010) 325 ITR 200 and the decision of Hon'ble Supreme Court in the case of CIT Vs. Gupta Global Exim (P.)Ltd, 171 taxman 474 (SC), we hold that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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