TaxTMI 
TaxTMI 
2026 (6) TMI 1087
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....ompany and is, inter alia, engaged in the business of manufacturing and sale of paints, varnishes, primers, etc. The Petitioner filed its original Return of Income on November 29, 2017, declaring a total income of Rs. 23,45,41,30,700/-. During the course of assessment proceedings, the Petitioner, along with the computation of income, also filed a detailed note explaining the various deductions claimed in the return. In the notes to the computation of income, the Petitioner furnished a detailed explanation in relation to the following issues: (i) Deduction under Section 80G of the Act of Corporate Social Responsibility expenditure ('CSR expenditure'); (ii) Additional depreciation under Section 32(1)(ii) of the Act carried forward to the year under consideration on plant and machinery added in the 2nd half of the financial year 2015-16 relevant to AY 2016-17; 4. Disclosures were made in the Tax Audit Report in Form No. 3CD furnished along with the Return of Income with respect to the following issues: (i) Depreciation on computer; (ii) Depreciation claimed under Section 80G of the Act; (iii) Balance additional depreciation carried forwa....
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..... (ii) Details of plant and machinery with installation certificate. Further, the Assessing Officer directed the Petitioner to clarify in regard to additional depreciation as to whether the proviso to Section 32(1)(iia)/32(1)(iib) of the Act has been complied with or not. The Assessing Officer also directed the Petitioner to show cause as to why additional depreciation claimed should not be disallowed, as disallowed in earlier years. 10. The Petitioner, in response, vide submission dated November 15, 2019, submitted the following details / explanation: (i) The Petitioner provided details of addition / sale of computers and computer software in a tabulated format, including the date of installation / asset put to use and whether the asset is used for more than or less than 180 days. (ii) In relation to balance additional depreciation claimed on plant and machinery, the Petitioner submitted that, based on the third proviso to Section 32(1)(ii) of the Act (effective from AY 2016-17), balance depreciation on additions made in the second half of FY 2015-16 had been claimed. Further, even prior to the insertion of the third proviso, learned Commissioner of I....
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....pondents have filed an affidavit in reply affirmed on November 11, 2022 by one Dr. Deepak Shukla, Deputy Commissioner of Income tax, Circle 3(4), Mumbai. 17. Mr. Agrawal, learned Counsel appearing on behalf of the Petitioner, assailed the impugned reassessment proceedings on the following grounds: (i) Mr. Agrawal contended that reopening of an assessment is not permissible based on a mere change of opinion. He contended that once the queries are raised during the course of assessment proceedings and the Petitioner has responded to the same, the Assessing Officer has considered the said issues while completing the assessment and any attempt of the Assessing Officer to reopen the said issues would clearly be a case of change of opinion which is not permissible under Section 147 of the Act. It was contended that the Assessing Officer has no jurisdiction to review his own Assessment Order. He placed reliance upon the decision of the Hon'ble Supreme Court in the case of CIT v. Kelvinator of India Ltd. (320 ITR 561). He further contended that it is not necessary that an Assessment Order should contain reference or discussion on the said issues to conclude that the Assessing O....
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.... (iii) Mr. Agrawal further contended that reopening of the assessment is not permitted merely on the basis of audit objections. From the reasons recorded for reopening as well as the averments made in the affidavit-in-reply filed by Respondent No. 1, it is evident that reopening of the assessment is based on audit objections. He submitted that once detailed enquiries were made during the assessment proceedings, details were sought, clarifications were asked, and submissions have been filed, reopening of the assessment on the same issues based merely on the audit objections is not permissible. Audit objections cannot be considered as a new tangible material that has come into possession of Respondent No. 1 pursuant to the completion of original assessment proceedings. He placed reliance upon the decision of this Court in the case of Castrol India Ltd. v. DCIT, (161 taxmann.com 75), against which a special leave Petition has been dismissed by the Hon'ble Supreme Court reported in (173 taxmann.com 686). (iv) Mr. Agrawal further submitted that a plain reading of the provisions of the Act and the rules shows that some of the issues for which reopening is proposed are clearl....
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....urisdiction. (iv) Reopening of assessment within a period of four years can be resorted to in order to remedy errors, either due to oversight or inadvertence, made in the original assessment proceedings, as there is no requirement to establish that there is a failure on the part of the Assessee in disclosing fully and truly all material facts. He pointed out that the Assessing Officer in the order disposing of the objections has placed reliance upon the decision of the Hon'ble Supreme Court in the case Kalyanji Mavji & Co. v. CIT (102 ITR 287) and particularly the following observations: "Where in the original assessment the income liable to tax has escaped assessment due to oversight, inadvertence or a mistake committed by the Income-tax Officer. This is obviously based on the principle that the taxpayer would not be allowed to take advantage of an oversight or mistake committed by the taxing authority". (v) Mr. Sharma also placed reliance upon the decision of the Delhi High Court in the case of Consolidated Photo & Finvest Ltd. v. ACIT (281 ITR 394) to substantiate that reopening is permissible even based on material already on record. He submitted that this Cou....
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....scaped assessment, he may, subject to the provisions of Sections 148 to 153, assess or reassess such income. The Hon'ble Supreme Court in the case of CIT v. Kelvinator of India Ltd. (supra) has held that the words "reason to believe" have to be given a schematic interpretation, failing which Section 147 of the Act would give arbitrary powers to the Assessing Officer. The Hon'ble Supreme Court held that the conceptual difference between the power to review and the power to reassess has to be kept in mind. The Assessing Officer has no power to review; he has the power to reassess. We may also gainfully refer to the decision of this Court in the case of Aroni Commercials Ltd. v. DCIT (supra), wherein this Court, after referring to the decision of the Hon'ble Supreme Court in the case of CIT v. Kelvinator of India Ltd. (supra), held that the power to reassess cannot be exercised on the basis of mere change of opinion. It was further held that the reopening must be based on tangible material. Most crucially, this Court held that "The powers under Section 147 / 148 of the Act cannot be exercised to correct errors / mistakes on the part of the Assessing Officer while passing the ....
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....n of Rs.19,79,38,799/-. Thus the assessee has availed excess depreciation of Rs.2,77,30,937/-, which is required to be disallowed." In the reasons recorded for reopening, Respondent No. 1 has simply alleged that an amount of Rs. 2,77,30,937/- has been claimed as excess depreciation. However, no basis for such an allegation has been given. It is only when we perused, with the assistance of Counsel, the working of depreciation claimed on written down value as per the Act, it became apparent that Respondent No. 1 alleges escapement of income in two parts: first, the balance additional depreciation carried forward on computers added in the second half of FY 2015-16 amounting to Rs. 1,56,18,708/- and, second, computers are not eligible for additional depreciation aggregating to Rs. 1,21,12,228/-. The aggregate of both amounts is Rs. 2,77,30,936/- (the difference of Rs. 1 is apparently due to rounding off). In our view, such vague reasons where the Assessing Officer is not establishing any live nexus between the material and the reason to believe, cannot be sustained 25. In any case, with respect to the aforesaid reasons, we notice that the Assessing Officer, vide notice dated Octo....
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.... for "computer including computer software" in the category of 'Machinery And Plant' in Part III of Part A, which provides for the rate of depreciation for tangible assets. Therefore, the legislature itself has prescribed the computer to be treated as plant and machinery. In view of the same, Respondent No. 1 cannot have any reason to believe that computers were not eligible for additional depreciation since they are not plant and machinery. Therefore, on all the above three grounds, reasons for reopening cannot be sustained. Issue No. 2: Deduction under Section 80G of the Act of CSR expenditure: 28. In the reasons recorded for reopening, Respondent No. 1 alleged that "Assessee claimed CSR expenses of Rs. 51,47,80,309/-in the P&L account which was added back in the computation of income. It is found from para 9 of Notes to the Statement of Income, the assessee himself declared that, they have claimed deduction u/s 80G for the CSR expenses of Rs. 51,47,80,309/- and made a further claim of deduction of Rs. 13,09,46,072/- u/s 80G in its computation of income which was allowed in completion of assessment. Hence treating the same expense under two different heads would amount to d....
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....al depreciation claimed on computer software was Rs. 24,96,74,435/- Thus, in the assessee's own treatment computer software is not same as computers however the depreciation thereon was being taken in the block of computers, which was not allowable. The correct depreciation rate should have been 25% instead of 60% which resulted in excess depreciation to the extent of difference of Rs. 16,00,35,725/- (Rs. 27,43,46,958 - Rs. 11,43,11,233) which was required to be disallowed." With regard to the aforesaid reasons, it is seen that the same notice, which was issued by the Assessing Officer with respect to Issue No. 1, dealt with herein above, i.e. notice dated October 31, 2019 issued under Section 142(1) of the Act, also deals with this very issue and the response of the Petitioner, vide submission dated November 15, 2019, also covers the aforesaid issue. Therefore, on this issue as well, queries have been raised, and a reply has been furnished by the Petitioner. Reopening is nothing more than a change of opinion. 30. Further, as noted above, sub-clause (5) of clause III of part A of New Appendix-I prescribed in Rule 5 of the Income-tax Rules, 1962, treats computer and computer s....
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....A is contemplated for 10 years. Para 17 reads as under - "17. The order passed by the Assessing Officer on the objections of the Assessee adverts to two considerations. First, the Assessing Officer notes that IT enabled services necessitate a value addition, something which, according to him, the activity of a domain registry does not fulfill. This reason, is a mere change of opinion. As a matter of fact, in the assessment order for Assessment Year 2003-04, the Assessing Officer had taken the same view holding that the business of the Assessee in itself is a mere purchase and sale, the only value addition being the manual service of assessee. This view was reversed in appeal by the Commissioner (Appeals). The second consideration which has weighed with the Assessing Officer is that a decision taken in a particular year cannot bind the Assessing Officer for subsequent years. Now, it is true that each Assessment Year constitutes a separate unit in itself and the principles of res judicata as such are inapplicable. Equally, though the principles of res judicata do not strictly apply, as in the case of different Assessment Years, there is some value to be placed on the need for unif....
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.... On this issue, the Assessing Officer, in the original assessment proceedings, vide notice dated August 21, 2019, in point No. 11 of the said notice, directed the Petitioner to furnish a brief note on the deduction held on the short provision made in financial year 2016-17 towards discount. In response thereto, the Petitioner, vide submission dated August 26, 2019, in point No. 8(v), clarified that the Petitioner had created provisions in March 2017 on an estimated basis with respect to the discount. However, the actual discount was more than the provisions created in March 2017 and hence, while filing the Return of Income, the excess amount has been claimed as a deduction. Therefore, it is apparent that the Assessing Officer has examined this issue in the original assessment and satisfied himself. Clearly, the present reopening of this issue is merely a change of opinion, which cannot be permitted. Issue No.6: Additional depreciation on plant and machinery: 34. In the reasons recorded for reopening, Respondent No. 1 has observed that "The assessee is claiming depreciation on Plant and Machinery at the rate of 15% and on Plant and Machinery - Energy saving equipme....
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....Respondent No. 1 cannot seek to review the assessment. 36. Further, we have already held that in view of the third proviso to Section 32(1)(ii) of the Act, Respondent No. 1 cannot have any reason to believe that income chargeable to tax has escaped assessment. 37. Moreover, from the perusal of the reasons recorded for reopening on all the issues, it is evident that Respondent No. 1 is proceeding on the basis of material already available on record and there was no new tangible material with him to justify the reopening. We hold that, once the aforesaid issues have been enquired into by the Assessing Officer, reopening would not be justified in the absence of any new tangible material before the Assessing Officer. 38. Further, we agree with the contention of Mr. Agrawal that the decision of the Hon'ble Supreme Court in the case of Kalyanji Mavji & Co. (supra), to the extent it holds "Where in the original assessment the income liable to tax has escaped assessment due to oversight, inadvertence or a mistake committed by the Income-tax Officer. This is obviously based on the principle that the taxpayer would not be allowed to take advantage of an oversight or mistake committe....
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....the issue was examined but the Assessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because the Assessing Officer had formed an opinion in the original assessment, though he had not recorded his reasons." 39. We agree with Mr. Sharma that tangible material need not be something which is new. It is correct that an Assessing Officer who has plainly ignored relevant material in arriving at an assessment acts contrary to law, which may be a ground for reopening of the assessment within a period of four years as held by this Court in Export Credit Guarantee Corporation of India Ltd. (supra). However, in the present case, various queries have been raised during the original assessment proceedings and the response furnished by the Petitioner. It follows that the Assessing Officer has examined those issues and formulated an opinion. Subsequent audit objections raised by the audit party are merely the opinion of the audit party. Such audit objections on issues examined by the Assessing Officer during the assessment proceedings cannot be equated with the tangible material for the pur....