Reassessment and MAT adjustment upheld where exhausted depreciation was claimed again, while concealment penalty was deleted.

Reassessment under section 147 was treated as valid where unabsorbed depreciation had already been exhausted in an earlier year and was wrongly considered available again, so the reopening was not a mere change of opinion. Under section 115JB, only depreciation or business loss actually available for carry forward can be reduced from book profit, and a second reduction of the same amount was disallowed. Penalty under section 271(1)(c) was not sustained because the assessment was ultimately on book profit, the disputed normal-computation adjustment did not by itself establish concealment, and a retrospective amendment could not alone justify penalty where the return matched the law then prevailing.

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Issues: (i) Whether reassessment was validly initiated under section 147 of the Income-tax Act, 1961 on account of a double claim of unabsorbed depreciation while computing book profit; (ii) Whether unabsorbed depreciation already exhausted in an earlier year could again be reduced from book profit under section 115JB of the Income-tax Act, 1961; (iii) Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was sustainable where the assessment was made on book profit and the disputed adjustment related to normal computation and a retrospective amendment.

Issue (i): Whether reassessment was validly initiated under section 147 of the Income-tax Act, 1961 on account of a double claim of unabsorbed depreciation while computing book profit.

Analysis: The earlier assessment order had not examined the computation of brought forward unabsorbed depreciation for the purpose of book profit. The same depreciation amount had already been claimed and reduced in the earlier assessment year, and therefore it could not again be treated as available for the relevant year. On those facts, the reassessment was founded on escaped income and was not barred as a mere change of opinion.

Conclusion: The reopening was held to be valid and this issue was decided against the assessee.

Issue (ii): Whether unabsorbed depreciation already exhausted in an earlier year could again be reduced from book profit under section 115JB of the Income-tax Act, 1961.

Analysis: The provisions governing section 115JB permit reduction only of carried-forward unabsorbed depreciation or business loss to the extent actually available. Once the amount had already been utilised in the earlier year, no further reduction could be made in the relevant year. The assessee was therefore not entitled to a second reduction of the same amount while computing book profit.

Conclusion: The adjustment made by the Assessing Officer was confirmed and this issue was decided against the assessee.

Issue (iii): Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was sustainable where the assessment was made on book profit and the disputed adjustment related to normal computation and a retrospective amendment.

Analysis: The income was ultimately assessed under the MAT provisions, and the penalty order did not clearly establish concealment with reference to a definite income item. The addition in normal computation did not warrant penalty once the assessed income was governed by book profit. As regards deferred tax liability, the return had been filed in accordance with the law then prevailing, and a later retrospective amendment could not, by itself, justify concealment penalty.

Conclusion: The deletion of penalty was upheld and this issue was decided in favour of the assessee.

Final Conclusion: The quantum challenge failed, the reassessment and MAT adjustment were sustained, and the penalty deletion was affirmed, resulting in dismissal of the connected appeals.

Ratio Decidendi: A reassessment is valid where an item has been incorrectly allowed despite having already been exhausted, and penalty under section 271(1)(c) cannot be sustained merely because of an unsustainable claim in normal computation or because of a subsequent retrospective amendment when the assessment is ultimately made on book profit.

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