TaxTMI 
TaxTMI 
2009 (8) TMI 859
X X X X Extracts X X X X
X X X X Extracts X X X X
.... appellant craves for leave to add, delete or modify any of the grounds of appeal before or at the time of hearing." 2. The assessee has filed cross-objection taking the following grounds : "(1)(a) The CIT(A) erred on the facts of case and in law in dismissing the ground challenging the initiation of proceeding under section 147 of the Income-tax Act. The CIT(A) failed to appreciate that none of the conditions precedent for assumption of jurisdiction under section 147 of the Act existed and/or were complied with. (b) The CIT(A) failed to appreciate that admittedly the reassessment proceedings for year under consideration were initiated after the period of four years. The CIT(A) has not at all alleged that the appellant has not disclosed all the basic facts and materials fully and truly. (c) On proper appreciation of the facts of the case and correct construction of law, the CIT(A) should have quashed the proceedings initiated under section 147 of the Act. (2) The CIT(A) should have allowed the expenditure of Rs. 3,76,96,350 on sale of assets as revenue expenditure without prejudice to the contention of the appellant that the said expenditures were rightly deducted from the sal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. 98,75,195 Computers 60 % block Rs. 51,934 Furniture 15 % block Rs. 1,26,477 Vehicles 20 % block Rs. 55,497 Total Rs. 3,76,96,350 4.1 Accordingly, the assessee filed the return disclosing total loss from business for Rs. 1,15,75,11,320. With the return filed, the assessee enclosed a letter dated 9-2-2001 addressed to the Assessing Officer stating the above facts of sale of EED unit and adjustment of the expenses aggregating Rs. 6,57,82,046, the details of which have been mentioned hereinabove. A copy of the said letter is placed at pp. 21 to 23 of the paper book. The said return was processed under section 143(1) of the Act on 27-12-2001. 5. Subsequently, the Assessing Officer initiated reassessment proceedings by issuing notice under section 148 of the Act on the ground that the assessee did not reduce the gross consideration in depreciation chart on the amount received on sale of EED unit. This resulted in allowance of excess depreciation. A copy of the reasons recorded is placed at p. 20 of the paper book. The assessee disputed the validity of initiation of reassessment proceedings under section 147 of the Act by issuing notice under section 148 of the Act....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ormed part of block of assets and accordingly, the assessee had claimed excess depreciation. Therefore, the income chargeable to tax had escaped assessment. The learned Departmental Representative referred to Explnation 2 to section 147 of the Income-tax Act and submitted that it is a case of deemed escapement of income and the Assessing Officer is within his right to initiate reassessment proceedings under section 147 of the Act by issuing notice under section 148 of the Act. The learned Departmental Representative submitted that the assessee only furnished along with the return the details of pro rata expenses and not the whole information. The learned Departmental Representative relying on the decision of the Hon'ble Supreme Court in the case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500 (SC) submitted that at the time of initiation of reassessment proceedings only reason to belief that income chargeable to tax has escaped assessment is sufficient to invoke jurisdiction of the Assessing Officer to initiate reassessment proceedings. He submitted that when the return is processed under section 143(1) of the Act, the Assessing Officer is not empowered t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... only a subjective satisfaction of the Assessing Officer. The Hon'ble apex Court has further held in the above case, that at the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed the requisite belief as to whether an income chargeable to tax had escaped assessment. The said expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. Whether material would conclusively prove escapement of income is not the concern at that stage. The Hon'ble apex Court has also held that failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings when intimation under section 143(1) has been issued. Considering the facts of the case before us and the decision of the Hon'ble Apex Court (supra), we are of the considered view that the Assessing Officer has validly issued the notice under section 148 of the Act to initiate reassessment proceedings. Hence, we uphold the order of learned CIT(A) to confirm the action of the Assessing Officer to initiate reassessment proceedings under sect....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e adjusted in the block of assets. To substantiate his submission, the learned Departmental Representative referred to section 43(6) of the Income-tax Act, which defines the WDV of block of assets. The learned Departmental Representative, submitted that Explnation 4 thereof provides that the expression money payable on sale of depreciable assets' is to be read along with the Explanation to sub-section (4) of section 41 of the Income-tax Act and it states that the price for which the depreciable asset is sold is to be considered as the money payable. Thus the money received by the assessee on transfer of depreciable assets which forms part of the block of assets is to be taken and not the net consideration. The learned Departmental Representative submitted that no deduction on account of expenses is to be allowed from money received by the assessee on sale of part of the block of assets. The learned Departmental Representative submitted that the analogy drawn by the learned CIT(A) from section 48 and section 50(1) of the Act does not apply when a part of depreciable asset from a block of assets is sold. He submitted that the action of the Assessing Officer should be confirmed. 13. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessee is to be reduced for the purpose of allowing depreciation to the assessee. 15. There is no dispute to the fact that the assessee has allocated an expenditure of Rs. 3,76,96,350 from the gross consideration received on transfer of a part of the depreciable assets. The Department has not doubted the expenses claimed by the assessee on transfer of the said assets. There is also no dispute to the fact that the assets transferred are depreciable assets to which provisions relating to block of assets apply. There is also no dispute to the fact that the assessee has been allowed depreciation under section 32 of the Act and as such the assets transferred are from a part of the block of assets. Clause (iii) of sub-section (1) of section 32 of the Income-tax Act provides that in case of any building, machinery, plant or furniture in respect of which depreciation is claimed and allowed under clause (i) is sold, discarded, demolished or destroyed in the previous year (other than the previous year, in which it is first brought into use), the amount by which the money payable in respect of such building, machinery, plant or furniture, together with the amount of scrap value, if any, f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on 48 and. section 49 shall be subject to the following modifications : (1) Where the full value of consideration received or accruing as a result' of the transfer of the asset together with the full value of such consideration received or accruing as a result of the transfer of any other capital asset falling within the block of assets during the previous year, exceeds the aggregate of the following amounts : (i)expenditure incurred wholly and exclusively in connection with such transfer or transfers; (ii)the WDV of the block of assets at the beginning of the previous year; and (iii)the actual cost of any asset falling within the block of assets acquired during the previous year. Such excess shall be deemed to be the capital gains arising from the transfer of short-term capital assets. Therefore, while computing capital gains, the expenditure incurred in connection with transfer of assets has to be deducted. Considering the above scheme of the Act, we are of the considered view that the money payable on transfer of any building, machinery, plant or furniture, which is sold is to be the net consideration and not the gross amount, i.e., the expenses incurred in effecting the s....