Assessment Reopened Validly; Depreciation and Maintenance Expenses Allowed for Business Use of SAPT Building.

The Tribunal upheld the reopening of the assessment under section 148, finding it valid as it was based on new information from a survey. However, it directed the Assessing Officer to allow depreciation and maintenance expenses for the SAPT building, determining that the building was used for business purposes. Consequently, the assessee's appeal was partly allowed, granting relief on the disallowance of depreciation and maintenance expenses.

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Issues Involved:
1. Re-opening of assessment by issuance of notice under section 148 is bad in law.
2. Disallowance of depreciation on SAPT building.
3. Disallowance of maintenance of lift expenditure pertaining to said (SAPT) building.

Issue-wise Detailed Analysis:

1. Re-opening of Assessment by Issuance of Notice under Section 148:
The first common grievance in both assessment years is the alleged error by the Assessing Officer in reopening the assessment already made under section 143(3) by issuing a notice under section 148. The assessee argued that the reopening was barred by limitation, as it was done after four years from the end of the accounting year for the assessment year 1996-97. However, the CIT(A) held that the time limits under section 149(1) allow a notice to be issued beyond seven years but up to ten years if the escaped income is Rs. 1 lakh or more. The Assessing Officer's basis for reopening was the outcome of a survey under section 133A, which revealed that the SAPT building was not used for business purposes during the renovation period. The Tribunal upheld the reopening, noting that the notice under section 148 was served within four years and was based on new information from the survey, not merely a change of opinion.

2. Disallowance of Depreciation on SAPT Building:
The second issue concerns the disallowance of depreciation on the SAPT building. The Assessing Officer and CIT(A) concluded that the building was not used for business purposes based on statements recorded during the survey. The assessee contended that the building was used for business purposes and provided evidence of expenses like electricity and telephone bills, sales and purchase activities, and the use of the building as the registered office. The Tribunal considered the legal principle that depreciation is allowed not only for actual use but also for passive use of an asset. The Tribunal found that the building was used for business purposes, albeit partially, and that the statement from the survey had no evidentiary value without corroboration. The Tribunal directed the Assessing Officer to grant depreciation on the SAPT building.

3. Disallowance of Maintenance of Lift Expenditure Pertaining to SAPT Building:
The third issue is linked to the second and involves the disallowance of maintenance and lift expenditure for the SAPT building. The Assessing Officer disallowed these expenses on the grounds that the building was not used for business purposes. The Tribunal, however, found that the building was used for business purposes and directed the Assessing Officer to allow the maintenance and lift expenses.

Conclusion:
The Tribunal upheld the reopening of the assessment but allowed the depreciation and maintenance expenses for the SAPT building, concluding that the building was used for business purposes. The appeal of the assessee was partly allowed.

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