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Issues: (i) Whether reopening under section 147 of the Income-tax Act, 1961 was valid in the absence of new tangible material and on the basis of the same material already examined in the original assessment; (ii) Whether the disallowance of Rs. 22,12,031 towards depreciation included in research and development expenses was sustainable on merits.
Issue (i): Whether reopening under section 147 of the Income-tax Act, 1961 was valid in the absence of new tangible material and on the basis of the same material already examined in the original assessment.
Analysis: The original assessment had been completed under section 143(3) after examination of the claim for weighted deduction under section 35(2AB). The reassessment was initiated on the same set of records and submissions already available during the original proceedings. No fresh information or tangible material was shown to have come into possession of the Assessing Officer. The reasons for reopening proceeded on an incorrect factual premise that the assessee had not separated the R&D account, whereas the separate R&D details and supporting documents had already been furnished and verified earlier.
Conclusion: The reopening was held to be bad in law and a clear case of change of opinion; the assumption of jurisdiction under section 147 failed.
Issue (ii): Whether the disallowance of Rs. 22,12,031 towards depreciation included in research and development expenses was sustainable on merits.
Analysis: The assessee had already added back the depreciation component in the computation of income, and the reassessment did not justify a separate disallowance of the same amount. The reassessment order did not disturb the weighted deduction under section 35(2AB), and there was no material to show any multiple deduction for the same expenditure. On the facts, the revenue's objection to the depreciation component was not made out.
Conclusion: The disallowance was deleted and the assessee succeeded on merits as well.
Final Conclusion: The reassessment was invalid and the addition made in reassessment could not survive; the appeal was allowed in full in favour of the assessee.
Ratio Decidendi: Reassessment cannot be sustained where it is founded on the same material already examined in the original assessment and no fresh tangible material exists, especially when the foundational facts for reopening are themselves incorrect.
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