TaxTMI 
TaxTMI 
2017 (6) TMI 139
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....power shift transmissions along with their components. 4. The Petitioner entered into a Business Transfer Agreement ('BTA') with Hindustan Motors Ltd. ('HML') on 19th February, 2005. In terms thereof the Petitioner took over the business from HML. Expenses in the sum of Rs. 84,38,357 pertaining to professional and legal charges were paid in relation to the taking over of the business from HML including drafting and due diligence and other contracts reimbursed to HML and ACTIS India and South Asia Fund by a separate agreement dated 9th February, 2005. These expenses were considered as capital expenses and allocated to the block of assets. Depreciation was accordingly claimed for AY 2006-07. 5. During the course of assessment for AY 2006-07 a specific query was raised in respect of the above claim for depreciation and a reply dated 5th December, 2008 was furnished in that regard. While completing the assessment for AY 2006-07, the claim for the above depreciation on the professional charges paid was disallowed by the assessment order dated 24th December, 2008. 6. The Assessee then took the said assessment order for the AY 2006-07 in appeal to the Commissioner of Income Tax (Appeal....
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....his Court. However, since the monetary effect was below the permissible limit in terms of the extant circular, the Revenue's appeal was not entertained. In other words, the order of the CIT (A) for AY 2007-08 allowing the claim for depreciation became final. 10. The Petitioner filed its return of income for 2008-09 on 29th September, 2008. The said return was picked up for scrutiny and the assessment was completed by the AO passing an assessment order under Section 143(3) of the Act on 28th December, 2010 assessing the income at Rs. 23,76,81,420 against the returned income at Rs. 18,17,45,456 after making various additions. 11. The impugned notices dated 31st March, 2015 were issued by the AO under Section 148 of the Act seeking to reopen the proceedings for AY 2008-09, 2009-10 and 2010-11. By an order dated 18th December, 2015, a copy of the reasons was furnished to the Petitioner. These reasons were communicated in the prescribed proforma. In Column No. 11 under the caption "reasons for the belief that income has escaped assessment", it was stated as under: "The brief facts of the case are as follows: M/s Avtec Ltd has claimed depreciation of Rs. 7,16,299/- on professional....
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....sessment was bad in law as it failed to satisfy the jurisdictional requirements under the proviso to Section 147 of the Act for two of the AYs i.e., AY 2008-09 and 2009-10. As far as the reopening of the assessments for the said two AYs, it was incumbent on the Revenue to demonstrate that there was a failure on the part of the Petitioner in making a full and true disclosure of all material facts. He submitted that in fact there was no failure at all on the part of the Assesse to disclose fully and truly all material facts. From AY 2006-07 onwards, the Revenue was aware of the claim for depreciation made by allocating the aforementioned expenses to the block of assets and treating them as capital expenses and claiming depreciation thereon. 15. Mr. Kapoor further pointed out that in the subsequent years i.e., AYs 2011-12 and 2012-13 the same claim for depreciation has already been allowed. He submitted that there had to be fresh material to justify the reopening of the assessment. In the present case, he submitted that the reopening was based on a mere change of opinion on the same material that was already available with the Revenue. Even for AY 2010-11, there was no basis for form....
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..... In any event according to him the rule of consistency required the AO to follow what was done for AYs 2006-07 and 2007-08. On merits he submitted that there was no question of allowing such a claim for depreciation in terms of Section 35D of the Act which placed restrictions. Expenses like professional legal charges and contract drafting charges etc. could not be capitalised with capital assets like plant and machinery and this was not eligible for depreciation. 19. In the present case, the Court finds that the reasons for reopening the assessment for AYs 2008-09 and 2009-10 proceeded on the basis that the Assesse had failed to make a full and true disclosure of material facts concerning the claim for depreciation. This cannot be accepted for the simple reason that there was a history of litigation around such claim beginning in AY 2006-07. The mere fact that the incumbent AO dealing with the returns of the Assesse was different from the AO who dealt with there for the AYs 2006-07 and 2007-08 will not excuse the AO from examining the history of the case. 20. On its part, it was not necessary for the Assessee to enclose a copy of the BTA every year and explain the basis for the ....