Invalid Reassessment Based on Change of Opinion; Tribunal Rules in Favor of Assessee

The Tribunal allowed the appeal of the Assessee, finding the initiation of reassessment proceedings invalid as it was solely based on a change of opinion without tangible material indicating income escapement. The Tribunal did not address the merits of the deduction issue under section 80 IB due to the decision on the validity of the reassessment proceedings.

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Issues:
1. Validity of initiation of reassessment proceedings under section 147 of the Income Tax Act.
2. Deduction of depreciation in respect of profits of the Goa unit for calculating deduction under section 80 IB.

Issue 1: Validity of initiation of reassessment proceedings under section 147 of the Income Tax Act:
The appeal involved a challenge to the validity of the initiation of reassessment proceedings under section 147 of the Income Tax Act. The Assessing Officer (AO) had issued a notice under section 148 based on the Assessee's claim of deduction under section 80IA without claiming depreciation on the profits of the Goa unit. The Assessee contended that the reassessment proceedings were invalid as they were solely based on a change of opinion without any new tangible material. The CIT(A) upheld the initiation of reassessment proceedings, stating that the proviso of section 147 did not apply as the proceedings were within four years from the end of the assessment year. However, the Tribunal held that without tangible material indicating income escapement, the initiation of reassessment proceedings was invalid, citing the decision in the case of Kelvinator of India Ltd. The Tribunal emphasized that giving such power to the AO would amount to providing a review power not contemplated under the law, ultimately annulling the order of assessment under section 147.

Issue 2: Deduction of depreciation in respect of profits of the Goa unit for calculating deduction under section 80 IB:
The second issue revolved around the deduction of depreciation in respect of profits of the Goa unit for calculating deduction under section 80 IB. The AO had disallowed the deduction under section 80IA as the Assessee had not claimed depreciation on the profits of the Goa unit, resulting in excess deduction claimed. The CIT(A) confirmed the AO's order. However, the Tribunal, while addressing the validity of the reassessment proceedings, did not delve into the merits of this issue. Citing a Full Bench decision of the Bombay High Court in the case of Plastiblance India Ltd., the Tribunal noted that depreciation must be claimed to qualify for deduction under section 80IA. Despite the merits of the deduction issue raised by the Assessee, the Tribunal did not delve into it due to the decision on the validity of the reassessment proceedings.

In conclusion, the Tribunal allowed the appeal of the Assessee based on the finding that the initiation of reassessment proceedings was invalid due to being solely based on a change of opinion without tangible material indicating income escapement. The Tribunal did not address the merits of the deduction issue under section 80 IB due to the decision on the validity of the reassessment proceedings.

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