TaxTMI 
TaxTMI 
TaxTMI 
2010 (3) TMI 317
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.... The Assessing Officer after discarding the value adopted by the assessee worked out long-term capital gains at Rs. 10.66 crores. The Assessing Officer allowed a deduction of Rs. 2.89 crores on account of an amount paid as "tank land liability". This amount is, according to the Assessing Officer not allowable as a deduction in computing the long-term capital gains under section 48. Secondly, the Assessing Officer added back, after disallowing an amount of Rs. 64.62 lakhs on account of depreciation on obsolete assets which was worked out at the rate of 20 per cent. The correct depreciation to be disallowed is claimed to be 25 per cent. and there is alleged to be an underassessment of an amount of Rs. 16.15 lakhs on this count. These are the only two reasons which weighed with the Assessing Officer. The assessee lodged its objections to the reopening of the assessment on December 11, 2009. The objections were disposed of and rejected by an order of the same date. 4. The submission which has been urged on behalf of the assessee is that a full disclosure was made in the return of income. Pursuant thereto, the Assessing Officer passed an order of assessment under section 143(3). It was....
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.... 2.89 crores claimed to have been paid towards meeting the dues of the Government of Maharashtra. In the statement of long-term capital gains, a deduction was claimed in respect of the consultancy fees and in respect of the amount which was paid to the purchaser towards the demand of unearned increment raised by the Government of Maharashtra. Those were claimed as selling expenses and/or as adjustment of sale consideration. 9. During the course of the assessment proceedings, the Assessing Officer raised a query as to why the transaction for sale of the land at Mulund under a development agreement should not be treated as a business transaction for computing business income, instead of treating the transaction on capital account, in turn giving rise to capital gains, as claimed by the assessee. The assessee furnished an explanation to the Assessing Officer on September 22, 2006. Subsequently, on November 30, 2006 the assessee furnished a further explanation in pursuance of a hearing that took place before the Assessing Officer, on the question as to whether section 50C would be attracted. 10. The Assessing Officer passed an order of assessment under section 143(3). Paragraph 15 of....
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....reason to believe that income chargeable to tax has escaped assessment. The power is not akin to a review. The existence of tangible material is necessary to ensure against an arbitrary exercise of power. There is no tangible material in the present case. B. Disallowance of depreciation on obsolete assets 11. The assessee submitted a tax audit report under section 44AB. Under item 17(a) of the report, the amount debited to the profit and loss account is shown to include expenditure of a capital nature, being a loss on obsolete assets of Rs. 21.98 lakhs. This amount was added back in the computation of income for the assessment year 2004-05. In the assessee's letter dated September 22, 2006 a working of depreciation on obsolete assets was enclosed, without prejudice to the contention of the assessee that depreciation on the written down value of obsolete assets has to be allowed. A without prejudice working of depreciation on obsolete assets to be disallowed was furnished to the Assessing Officer. In that statement, depreciation to be disallowed on obsolete assets for the financial year 2003-04 was calculated at 20 per cent. and computed at Rs. 64.62 lakhs. In another letter dated....
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....able to be allowed on plant and machinery ; whereas, in the present case, the issue relates to the disallowance which was to be effected in respect of the depreciation which was claimed on obsolete assets which had been written off. Consequently, the basis which has been suggested in the affidavit-in-reply is lacking in substance, apart from the fact that the reasons that have been furnished by the Assessing Officer while reopening the assessment do not even advert thereto. 14. The view which we have taken of the provisions of section 147 is consistent with the law laid down by the Supreme Court in CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561. The Supreme Court has held that (page 564): "Therefore, post-1st April, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words 'reason to believe' failing which we are afraid section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of 'mere change of opinion', which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to rev....