TaxTMI 
TaxTMI 
2009 (11) TMI 556
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the IT Act?" 2. The first issue is regarding validity of reopening in all the appeals. We have heard the learned counsel for the assessee as well as the learned Departmental Representative and considered the relevant record. The main contention of the learned counsel for the assessee against the reopening is that the AO has reopened the assessment merely on the basis of change of opinion and therefore the AO has (sic-not) legally assumed the jurisdiction. On the other hand learned Departmental Representative submitted that for reopening of assessment what is required is only formation of reasonable belief and the sufficiency of material cannot be questioned at the time of issue of notice for reopening. He has further submitted that since the return of income was originally processed under s. 143(1) only and in such cases reopening is valid. He placed reliance on the decision of the apex Court in the case of Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 210 CTR (SC) 30 : (2007) 291 ITR 500 (SC). 3. We have considered the rival contentions and the relevant material. We note that the returns filed by the assessees in all these cases were processed under s. 143(1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of power. The assessees here adopted the rate as prescribed on the block of assets as borne out by the books of account, audit reports dated before and filed on or before the due date of filing the return of income under s. 139(1), for the respective assessment years. Therefore the returns filed by the asses sees along with the claim of depreciation as per Appendix 1 as well as audit report clearly indicate the depreciation claimed by the assessees amounts to exercising of option as provided under second proviso to r. 5(1A) well in time. He has pointed out that the authorities below have interpreted the word 'before' as appearing in second proviso to r. 5(1A) as not the due date under s. 139(1), but earlier than the due date. He has submitted that when the assessees have filed returns of income along with claim of depreciation and relevant record including the audit reports showing the claim of depreciation of the assessee duly recorded in the books of account on the due date of filing of return of income under s. 139(1) the same must be treated as the option exercised by the assessees before the due date. He has relied on the decision of the Bombay High Court, in the case of CIT v....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3 wherein it was held that after having claimed depreciation under general provisions of Appendix 1, the assessee cannot be permitted to plead that he has not exercised his option as contemplated in the second proviso to r. 5(1A). The learned counsel for the assessee contended that when the depreciation on windmill prescribed in Appendix 1 is alone applicable then the depreciation provided under Appendix 1A will not be applicable to the assessee. He has pointed out that in the cases of the assessee in ITA Nos. 828 and 829 of 2009 the claim of the assessee regarding depreciation of windmill under Appendix 1 was found in order and allowed by the AO in the assessment under s. 143(3) for the asst. yr. 2002-03 then for the subsequent assessment years which are subject-matter of the appeals here there is no need of exercising any fresh option because once the option is exercised the same will be binding for the subsequent years. He has also referred the main features of the ordinance whereby sub-s. 1A of s. 32 was brought into the statute and submitted that with a view to enable power generating units to depreciate their capital assets in a straightline method at the same rate at which i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ases relied upon are not comparable to the facts of this case. (c) Even though there is no prescribed form to exercise the option, the assessee could well submit his exercising the option in the form of a simple letter as he claims to have done for the asst. yr. 2005-06. So the assessees' argument that there is no need to exercise such an option in the absence of a format is not correct. The assessee relied on the case of Jindal Steel & Power Ltd. vs. Addl. CIT (2007) 106 TTJ (Del) 943 and the case is not applicable to the facts of this case because in that case, the return itself was filed before the due date for furnishing the return under s. 139(1) and hence, in the absence of any specific option, the claim as per return was taken as sufficient compliance. In my view, strict interpretation of the statute has to be complied with when the language is clear, i.e., if the statute says that the assessee has to exercise an option before the due date, it means 'before' only, but not on the due date or after the due date. In this context, he relied on the following decisions relating to interpretation of statutes: (i) Where the provision is clear, words cannot be ignored or ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cause the Revenue has not disputed the entitlement on merits. But the claim was disallowed by the AO on the ground that the assessee did not exercise the option as prescribed under second proviso to r. 5(1A). The two questions arising for consideration and determination in the facts of these cases are: "(i) whether the claim made in the return of income along with audit report showing the claim of the assessee regarding depreciation of windmill would amount to exercising option as required under second proviso to r. 5(1A) of IT Rules? (ii) whether the return filed on the due date of filing the return of income under s. 139(1) would be considered as exercising of option before due date as prescribed in the second proviso of r. 5(1A)?" Before discussing these two questions, it is appropriate to discuss the relevant provisions for depreciation provided under s. 32 of IT Act as well as Appendix 1 and Appendix 1A to r. 5(1A) of IT Rules. For better understanding we quote sub-cls. (i) and (ii) of s. 32(1) which are as under: 32(1). In respect of depreciation of- (i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such ....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... (1) of s. 139 [sic-s. 32] of the Act, therefore the provisions contained in the Rules cannot override the provisions contained in the statute and the requirement of option under proviso to r. 5(1A) cannot be held in the nature that on failure of the same would be so fatal that the very object of the provision for providing higher rate of depreciation is defeated. When there is no specific form or method prescribed for exercising the said option then the claim made in the return of income as well as reflected from the books of account and audit report filed along with return of income is more than the exercise of the option as required under second proviso to r. 5(1A). 8. In the case of CIT vs. Shivanand Electronics, the Hon'ble Bombay High Court has held at p. 71 as under: "The requirement of filing the audit report 'along with the return of income' is directory and if the assessee complies with the same before completion of the assessment and offers a satisfactory explanation for his failure to submit the same in time, the ITO may consider the same and examine the claim of the assessee for deduction under s. 80J on the basis of such report. We, however, do not subscribe to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on fail even narrowly in one of the exempted categories, then the exemption notification has to be construed broadly and widely vide Bombay Chemical (P) Ltd. vs. CCE AIR 1995 SC 1469. The table includes energy saving device in the context and for the purpose of encouraging industries to adopt energy saving measures. While it was possible, in the context of encouraging industrial activity, to bring within the net of exemption, manufacture of products which may even be remotely considered as 'paper'; we cannot adopt the same reasoning here, since the table indicates its intention to afford depreciation at the rates mentioned only to the specifically listed equipments. It is not even proved that a drier of the kind mentioned herein is an energy saving device." In our view, the requirement of second proviso to r. 5(1A) is satisfied if the option is exercised before the expiry of due date of filing of return of income under s. 139(1) of the IT Act. The meaning of the term 'before due date' shall be understood as it is understood by a man of ordinary prudence. Before due date simply refers and means that not after the expiry of due date. If the requisite act is done before the last....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... way of making claims of depreciation in the return of income along with audit report and books of account wherein the assessees have adopted the rate as claimed is within time-limit prescribed under second proviso to r. 5(1A) of IT Rules. Even otherwise as held by the Bombay High Court in the case of CIT vs. Shivanand Electronics the provision can be understood with reference to the intent of legislature and not upon the language in which the intent is clothed. If the object of enactment will be defeated by holding it as directory it should be construed as mandatory. Whereas if by holding it mandatory, serious general inconvenience will be created to innocent persons without very much furthering the object of the enactment, it should be construed as directory. The limit provided under the second proviso to r. 5(1A) is only to facilitate the AO in discharging its obligations and duties as per the provisions of sub-s. (1) of s. 32 of the IT Act. Therefore the said requirement cannot be considered as mandatory. Moreover the AO cannot act on the option exercised before the return is filed and therefore no fruitful purpose or object can be achieved by mandating exercise of option prior....