2017 (12) TMI 991 - AT - Income Tax

Reassessment quashed for lack of new material; Revenue's appeal dismissed.

DCIT, Circle-II, Block-B, New CGO Complex, Faridabad Versus Voith Paper Fabrics India Ltd

DCIT, Circle-II, Block-B, New CGO Complex, Faridabad Versus Voith Paper Fabrics India Ltd - TMI Issues Involved:1. Validity of reassessment proceedings under Section 147 of the Income Tax Act, 1961.2. Determination of whether the expenses on repairs were capital or revenue in nature.Detailed Analysis:1. Validity of Reassessment Proceedings under Section 147 of the Income Tax Act, 1961:The primary issue was whether the reassessment proceedings initiated under Section 147 were valid. The Revenue contended that the reassessment was validly initiated due to the assessee's failure to disclose true and correct information. The assessee argued that the reassessment was based on a change of opinion, which is not permissible in law.The Tribunal noted that the original assessment under Section 143(3) was completed on 09/12/2009, and the reassessment notice under Section 147 was issued on 22/03/2013, which was beyond four years from the end of the relevant assessment year. According to the proviso to Section 147, reassessment beyond four years requires a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment.The Tribunal found that the reassessment was based on an audit objection and the reasons recorded for reopening were the same as those considered during the original assessment. The Tribunal upheld the CIT(A)'s decision that the reassessment proceedings were invalid because they were based on a mere change of opinion and not on any new tangible material. The Tribunal cited various judicial precedents, including the Gujarat High Court's decisions in Vishwanath Engineers vs. ACIT and Siddhi Vinayak Transport vs. ACIT, which held that reassessment based on a change of opinion is not permissible.2. Determination of Whether the Expenses on Repairs were Capital or Revenue in Nature:The Assessing Officer (AO) had initially noted that the assessee debited Rs. 1.82 crore under repairs to plant and machinery and Rs. 34.67 lakh under repairs - others. The AO believed these expenses were capital in nature, as they were substantial and intended to bring new assets into existence or provide an enduring advantage. Consequently, the AO concluded that the income had escaped assessment and required reassessment.During the original assessment, the AO had examined these expenses and accepted them as revenue in nature. The CIT(A) found that the AO had already scrutinized these expenses during the original assessment, and there was no failure on the part of the assessee to disclose material facts. The Tribunal agreed with the CIT(A) that the reassessment proceedings were based on the same set of facts previously examined, and thus, the reassessment was invalid.The Tribunal emphasized that the reassessment notice lacked any new tangible material and was merely a reappraisal of the same facts, which constitutes a change of opinion. The Tribunal confirmed the CIT(A)'s order quashing the reassessment proceedings and dismissed the Revenue's appeal.Conclusion:The Tribunal upheld the CIT(A)'s decision to quash the reassessment proceedings under Section 147, as they were based on a change of opinion without any new tangible material. The expenses on repairs were already scrutinized and accepted as revenue in nature during the original assessment, and there was no failure on the part of the assessee to disclose material facts. The Revenue's appeal was dismissed.