1983 (7) TMI 122

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....h the Kerela Government as grant-in-aid. The ITO who got the information about the receipt of subsidy during the course of assessment for asst. yr. 1977-78 was of the view that the subsidy so received would go to reduce the cost of assets. So depreciation will have to be worked out only on such reduced cost. But depreciation had been given for this asst. yr. at original cost itself for which assets were acquired. So the excess depreciation had been computed. So on 24th March, 1981 he issued notice for reopening u/s 147(b) of the Act. The question is whether the reopening is valid in the sense as to whether the ITO had in consequence of information in his possession reason to believe that income chargeable to ITO tax had escaped assessment. ....

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....fore the High Court. But there is no nexus between the receipt of subsidy and escapement of income in 1975 relevant to this asst. yr. 1976-77. The belief of the ITO is without any material to that effect. It is only a guesswork or reckless belief. There is absolutely no reason to believe that income had escaped assessment. The receipt cannot be worked back to find out cost and depreciation for past years. If portion of the cost is met by any other person, it is met only in 1976 and not in earlier years. So it is absolutely baseless to think that excessive depreciation has been computed. So the reopening is absolutely bad. It has only to be cancelled. 4. The submission of the departmental representative that when subsidy is received in 19....