TaxTMI 
TaxTMI 
TaxTMI 
2015 (8) TMI 1350
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....ded in section 147. 3. On the facts and in the circumstances of the case and in law, the Learned Commissioner of Income-tax (Appeals)-III has erred in including the expenditure incurred on the civil work in the construction of the windmill while granting depreciation @ 80% on the windmill as there was nothing on record to establish that the said civil work could only be used for power generation by the windmill. 4. On the facts and in the circumstances of the case and in law, the Learned Commissioner of Income-tax (Appeals)-III has erred in granting depreciation on civil work & electrical work without examining the functional test of the said structure & components." From the grounds of appeal above, we can see that the objections of the Revenue are two-fold. Firstly, the Revenue has challenged the quashing of reopening proceedings under section 147 of the Income Tax Act, 1961 (in short "the Act") on legal grounds. Secondly, the Department has also questioned the findings of the CIT(A) on merits. 3. Since, the Revenue has questioned the interference of the CIT(A) on usurpation of jurisdiction under section 147 of the Act, we shall deal with this substantive issue first. 4. T....
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....ber, 2006. However, the detailed chart of various expenses show that depreciation at higher rate has been claimed even on Civil Construction Work on which depreciation is allowable @ l0% and Electrical items on which it is allowable @ 15%. Such excess claim made by the assessee is worked out as under: Sr. No. Nature of Expenditure Amount in Rupees Before September, 2006 After September, 2006 1. Civil Works 4,15,29,120/- 3,80,68,360/- 34,60,760/ - 2. a. Electrical Items 1,74,72,000/- (5,43,19,192/- + 49,38,108/ - = Rs. 5,92,57,3001-) b. Installation charges 2,02,25,220/- c. Labour related to installation 2,15,60,080/- 5,92,60,080/- Computation of expenses depreciation is as under:- a. Civil Work - Excess Dep @ 70% on Rs. 3,80,68,360/ - = Rs. 2,66,47,852/- Excess Dep @ 35% on Rs. 34,60,760/- = Rs. 12,11,266/- b. Electrical Work - Excess Dep @ 65% on Rs. 5,43,19,192/- = Rs. 3,53,07,474/- Excess Dep @32.5%onRs. 49,38,108/- = Rs. 16,04,885/- Rs. 6,47,71,477/- Accordingly, the assessee has claimed excess depreciation at Rs. 6,47,71,477/ - as above which has escaped assessment. ....
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.... and cannot be of some other authority. In the light of the aforesaid facts and the decision of Hon'ble High Court, the CIT(A) held the proceedings under section 147 of the Act as bad in law. The relevant findings of the CIT(A) is reproduced hereinunder for ready reference :- "3.2 I have examined the submissions made on behalf of the appellant with regard to the statutory provision relating to sec. 147. The earlier provisions of sec. 147 required the Assessing Officer to reopen assessment if, in his opinion and by reasons to be recorded by him in writing that income chargeable to tax has escaped assessment, to assess or reassess such income, subject to the provision of sec. 148 to 153. However, by the amendment brought in by the Direct Tax Laws (Amendment) Act, 1989 w.e.f. 01.04.1989 and the insertion of the words 'reasons to believe' in that section, reassessment on the basis of 'change of opinion' cannot, per se, form the reason to reopen. Since the reopening the present case is within 04 years from the end of the relevant assessment year that is before 31.03.2012, it is seen that the proviso to sec. 147 [which places fetters on the Assessing Officer to reopen a....
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....'tangible material' to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to Section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words 'reasons to believe' but also inserted the word 'opinion' in Section 147 of the Act. However. on receipt of representations from the companies against omission of the words 'reason to believe', Parliament reintroduced the said expression and deleted the word 'opinion' on the ground that it would vest arbitrary powers in the Assessing Officer. " 3.4. It has also been pointed out to me that following an audit objection on the very same issue, the learned Assessing Officer issued notice u/s 154/155 dated 09.12.2011 directing the appellant to show cause why the mistake which is apparent from record, namely grant of excess depreciation, may not be rectified. No further action was taken u/s 154 on receipt of the reply of the appellant. However, the learned Assessing Officer issued notice u/s 148 on 30.03.2012.....
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....upreme Court of India in the case of Indi-Aden Salt Mfg. & Trading Co. (P.) Ltd. vs. CIT reported as 25 Taxman 356 (SC) and the decision of Hon'ble Kerala High Court in the case of CIT vs. National Tyres & Rubber Co. of India Ltd. reported as 202 Taxman 625 (Kerala). 9. The Ld. Authorized Representative for the assessee, on the other hand, vehemently contended that from a conjoint reading of the original assessment order and reasons recorded under section 148(2) of the Act, it is self-evident that full facts concerning claim of depreciation were placed before the Assessing Officer in the original assessment. It is further evident that the Assessing Officer in the first round of proceedings has allowed the claim of depreciation after due diligence and indulgence. The Assessing Officer disallowed part of depreciation and also made adjustments having regard to the tax audit report etc.. Therefore, it will be farfetched to say that no opinion was formed on the claim of this staggering amount of depreciation. There was no remissness on the part of the Assessing Officer in the first assessment. The ld. AR stridently pleaded that the order of the CIT(A) is passed on legally sound basis a....
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.... Officer to invoke the provisions of section 147 of the Act. Hence, we have no hesitation in holding that the action of the Assessing Officer in invoking the provisions of section 147/148 of the Act is to enable him to review his own action of accepting depreciation claim in the original assessment. This is clearly not permissible in law. The Courts have time and again held that in the absence of new facts or material, the Assessing Officer cannot invoke section 147 to review his own order. No new facts have come on record after assessment. 11. The Full Bench of the Hon'ble Delhi High Court in the case of Kelvinator of India (supra), inter-alia, has observed that section 147 enabling jurisdiction will itself be rendered unconstitutional and ultra-virus Article 14 of the Constitution of India, if the state action of 'arbitrary' reopening the case on mere change of opinion is approved. The Hon'ble Delhi High Court also took note of clause 7.2 CBDT No.549 dated 31.10.1989, according to which, reopening on mere change of opinion will not amount to "reasons to believe" as contemplated under section 147 of the Act. We are also guided by decision of the Hon'ble Jurisdictional High Court....
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....o tax under section 45(2) has escaped assessment. It was observed that there was no consideration of issue in the regular assessment by the Assessing Officer and therefore, the Assessing Officer had no occasion to form any opinion. In the backdrop of these facts, the Hon'ble High Court held the reassessment proceedings to be valid. Another decision relied upon by the Ld. Departmental Representative is in the case of Indi-Aden Salt Mfg. & Trading Co. (P.) Ltd. (supra). In that case, it was an admitted position that the assessee had not disclosed the vital facts concerning the claim of depreciation. It was the contention of the assessee that the Assessing Officer could have found the position by further probe. In these facts, it was held by the Hon'ble Supreme Court that there has been non-disclosure of primary facts concerning the issue which has caused escapement of income which is basically a question of fact. In the present case, it is nowhere stated, either in the recorded reasons, or in the assessment order as to what material facts has not been disclosed in the original assessment proceedings. The Assessing Officer is merely seeking review of his original assessment order on ....