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TMI Blog2020 (2) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... m of additional depreciation was separately shown in the depreciation schedule. After considering the same, Ld. AO chose not to make any additions in this respect. Therefore, revisiting the same issue in reassessment proceedings would tantamount to review of the order, which is impermissible under law. As per assessee s submissions, it acquired new plant machinery from the parent entity and in support of the same, it filed copies of invoices clearly mentioning the description of machinery bought by the assessee. The excise duty was charged in the invoices which would make it a case of manufacturing since no excise duty would be applicable in case of old machinery. No investigation, whatsoever, was done by Ld. AO during reassessment proceedings, to rebut the assessee s claim and no further verification was done. No contrary material was brought on record to fortify the stated additions except making an allegation that the assessee claimed additional depreciation on old machinery. - Decided in favour of assessee. - I.T.A. No.6206/Mum/2017 - - - Dated:- 7-1-2020 - Shri C.N. Prasad, JM And Shri Manoj Kumar Aggarwal, AM For the Assessee : Shri Rakesh Joshi Ld. AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g resident corporate assessee stated to be engaged in the business of manufacturing of polymer products was assessed for year under consideration u/s. 143(3) r.w.s. 147 on 28/12/2016 wherein the income of the assessee was determined at ₹ 623.07 Lacs after sole addition on account of additional depreciation for ₹ 338.34 Lacs as against returned income of ₹ 284.66 Lacs e-filed by the assessee on 22/09/2011. The regular assessment was framed u/s. 143(3) of the Act on 27/02/2014 assessing the income at ₹ 284.72 Lacs. 2.2 Subsequently, the case was reopened by issuance of notice u/s 148 on 30/03/2016 which was duly served upon assessee. In response, the assessee, vide letter dated 28/04/2016, offered original return of income and requested for reasons recorded to reopen the assessment. The reasons were furnished to the assessee on 01/08/2016 and thereafter, notices were issued u/s 143(2) 142(1) on 04/10/2016 calling for requisite details and explanations. 2.3 The reason which triggered reassessment proceedings, was the fact that the assessee had claimed additional depreciation of ₹ 338.34 Lacs on account of addition of plant and machinery, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Apex Court rendered in GKN Driveshafts India Ltd. V/s DCIT (259 ITR 19) and also the decision of Hon ble Bombay High Court rendered in Asian Paints Ltd. V/s DCIT (296 ITR 96), IOT Infrastructure Engg. Services Ltd. V/s ACIT (329 ITR 547) Allana Cold Storage V/s ITO (287 ITR 1). 3.2 The assessee also pleaded that there was no tangible material before Ld. AO so as to form a belief that certain income escaped assessment rather the belief was formed merely after going through the existing records and there was a bald assertion that there was failure on the part of the assessee to disclose fully and truly all material facts during assessment proceedings. The Ld. AO merely on surmises and conjectures, held that the alienated assets were transferred to assessee without bringing anything on record to prove the same. Therefore, the notice u/s 148 was nothing but notice to make roving enquiries and issued under vague suspicion. The claim of additional depreciation was allowed during original assessment proceedings and disallowing the same in reassessment proceedings would merely be a change of opinion based on existing material on record which was impermissible under law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vations/findings of the AO in assessment order. The submissions and contentions of the appellant are being discussed and decided as under: 3. The case of the appellant was reopened u/s 147 of the Act and the assessment u/s 143(3) r.w.s 147 was completed on 28.12.2016. The appellant contested that the action of reopening u/s 147 of the Act is bad in law and is not justified. It was contested that there was no fresh tangible material available with the assessing officer so as to form a belief that the income of the assessee has escaped assessment. The Learned Assessing Officer has reopened the case on the following reasons: Subsequently, it is notice noticed that as per section 32(1)(iia) of the Act, the additional depreciation of twenty percent is allowable on new machinery purchased by an assessee engaged in manufacture of an article or thing. In the instant case, the assessment was completed under section 143(3) of the Act determining total income at ₹ 2,84,68,834/-. It was seen from the depreciation schedule of the assessee that it had claimed additional depreciation of ₹ 3,38,34,570/- on addition of P M and mould etc. However, the notes to account revealed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oving enquiries which is not permissible as per law. The following decisions are in favor of the appellant: a) High Court of Rajasthan- Mukesh Modi vs Deputy Commissioner of Income Tax. The Hon ble HC of Rajasthan has held that The reasons which were spelt out in the notice was nothing but an attempt to clear the suspicion of the AO by simply changing its opinion, which per-se cannot satisfy the test of expression reason to believe . A rowing and fishing enquiry in the hands of AO on mere suspicion or change of opinion cannot satisfy expression reason to believe exposing the assessee for reopening of assessment. While examining the matter in its entirety and on the basis of findings and conclusions, notices issued to the assessees by the AO u/s 147/148 were not satisfying the pre-requisites for the same. There was no whisper in the notice, or iota of proof that while issuing the same the AO had reason to believe that any income chargeable to tax has escaped assessment for the assessment year . b) ACIT vs Shri O.P. Chawla (Delhi ITAT): 2.1 Keeping in view the above mentioned observations I have no hesitation in holding that while the AO might have had a f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings, the Assessing Officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years. b) In the case of Asian Paint Ltd. vs. Dy. CIT (2008) 296 ITR 96 (Bom), the Hon'ble Bombay HC held that Assessing officer should dispose off the assessee objection and serve the order on assessee. c) Hon'ble Bombay High Court in the case of IOT Infrastructure and Eng. Services Ltd. vs. ACIT (2010) 329 ITR 547 (Bom) held that the reassessment framed by the assessing officer without disposing of the primary objection raised by the assessee to the issue of reassessment notice issued by him was liable to be quashed. d) Hon'ble Bombay HC in the case of Allana cold storage vs. ITO (2006) 287 ITR 1 (Bom.) (Asst Yr 2001-2002) following the order passed by Supreme Court in the case of GKN Driveshaft held that reasons for notice must be given and objections of assessee must be considered. 6. Further, ongoing through the records it was seen that the said claim of additional depreciation was allowed to the assessee during the course original assessment proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fist appellate authority in the impugned order. It is quite evident that Ld. CIT(A), upon due consideration of factual matrix, came to a conclusion that there was no fresh tangible material on record which would suggest escapement of income in the hands of the assessee. The reopening was resorted to with a view to make roving enquiries. The reassessment proceedings also suffered from legal infirmities since the objections raised by the assessee against reopening were not disposed-off by way of speaking order which was contrary to settled legal position that the objections raised by the assessee must be disposed-off before proceeding to reassess assessee s income. Further, the said claim of additional depreciation was already allowed to the assessee during the course of original assessment proceedings and in the absence of any fresh tangible material on record, disallowing the same in reassessment proceedings would be mere change of opinion which is impermissible under law. 4.2 We find that learned first appellate authority has clinched the issue in correct perspective. As rightly noted by Ld. CIT(A), the assessee s objection to the reassessment proceedings were not disposed-of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the Respondent submitted that the decision of the Hon ble Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra), as well as the said two decisions relied upon by Mr. Dada relate to the provisions of the Income Tax Act. She submits that in the present case, we are concerned with the provisions of the Expenditure Act. She submits that the rulings cited, therefore, are not applicable or, in any case, are inapplicable with all their vigour. She submits that along with the notice dated 13th March, 2003, the Assessing Officer had furnished reasons to the Assessee and, therefore, there was no question of furnishing any further reasons to the Assessee. She submits that in the assessment order dated 26th March, 2004, the Assessing Officer has dealt with and disposed of the objections raised by the Appellant to the reopening of the assessment. She, therefore, submits that without prejudice to the applicability of the decisions cited by Mr. Dada, there is substantial compliance. 8. Ms. Linhares also adopts the submissions made by her in Tax Appeal No.32/2006 and other connected Appeals, in so far as the second substantial question of law in this Appeal, is concerned. For t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out in GKN Driveshafts (India) Ltd. (supra), assuming that the same is at all applicable to the proceedings under the said Act. Mr. Dada, however, submits that such disposal in the assessment order itself does not constitute the compliance with the mandatory conditions prescribed by the Hon ble Supreme Court in GKN Driveshafts (India) Ltd. (supra). In support, as noted earlier, Mr. Dada relies upon Bayer Material Science (P) Ltd. (supra) and KSS Petron Private Ltd. (supra). 14. The contention of Ms. Linhares that the decisions relied upon by Mr. Dada relate to the provisions of the Income Tax Act and, therefore, are not applicable to the proceedings under the Expenditure Tax Act, cannot be accepted. In the first place, the provisions relating to reopening of assessment are almost pari materia. Secondly, in so far as Assessment Year 1995-96 is concerned, the Respondent applied the very same ruling in GKN Driveshafts (India) Ltd. (supra) to hold that the notice of reopening of assessment was ultra vires Section 11 of the said Act. This view, in the specific context of the said Act and incidentally in the specific context of this very Appellant, was upheld not only by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7-08. The Assessee filed a revised return of income and sought for reasons recorded in support of the notice dated 6.2.2013. The reasons were furnished only on 19.3.2015. The Assessee lodged objections to the reasons on 25th March, 2015. The Assessing Officer, without disposing of the Petitioner s objections, made a draft assessment order dated 30th March, 2015, since this was a matter involving transfer pricing. In such circumstances, the Division Bench of this Court, set aside the assessment order by observing that the Court was unable to understand how the Assessing Officer could, at all, exercise the jurisdiction and enter upon an inquiry on the reopening notice before disposing of the objections on the reasons furnished to the Assessee. This Court held that the proceedings initiated by the Transfer Pricing Officer (TPO), on the basis of such a draft assessment order, were without jurisdiction and quashed the same. 21. Similarly, in the case of KSS Petron Private Ltd. (supra), this Court was concerned with the following substantial question of law : Whether on the facts and circumstances of the case and in law, the Tribunal was justified in restoring the issue to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Linhares in defence of the impugned order. 25. Since, in the present case, the Assessing Officer has purported to assume the jurisdiction for reopening of the assessment, without having first disposed of the Assessee s objections to the reasons by passing a speaking order, following the law laid down in GKN Driveshafts (India) Ltd. (supra), Bayer Material Science (P) Ltd. (supra) and KSS Petron Private Ltd. (supra), we are constrained to hold that such assumption of jurisdiction by the Assessing Officer was ultra vires Section 11 of the said Act. The first substantial question of law will, accordingly, have to be answered in favour of the Appellant and against the Respondent-Revenue. 26. As noted earlier, in view of the aforesaid, there is no necessity to advert to the second substantial question of law, at least, in so far as this Appeal is concerned. The Appeal is, therefore, allowed and the impugned orders dated 26th March, 2004 made by the Assessing Officer, 30th November, 2004 made by the Commissioner (Appeals) and 12th January, 2007 made by the ITAT are set aside on the ground of want of compliance with jurisdictional parameters by the Assessing Officer, and witho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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