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2017 (6) TMI 139 - DELHI HIGH COURTValidity of reopening of assessment - existence of reasons to believe - capitalization of expenses - Held that:- In the present case, the tangible material that the AO came across for the AYs in question that warranted the reopening of the assessments is not clear from the 'reasons to believe' recorded by the AO. The reasons merely record the fact that HML had borne the costs and expenses including professional fee and, therefore, the capitalization of those expenses to the various block of assets was not allowable under Section 43(1) of the Act. After recording the above statement, the AO adds: “I have reason to believe that due to failure on the part of the assesse to disclose all the material facts truly or fully, income of ₹ 7,16,299 have escaped assessment.” This does not satisfy the requirement of law that the reasons to believe should, where the reopening is after the expiry of four years from the end of the FY, specifically state in what manner there was a failure by the Assessee to make a full and true disclosure of material facts. That, again, will have to be preceded by spelling out the tangible fresh material that led the AO to come to that conclusion. None of this is found in the reasons to believe recorded by the AO in the case on hand. The necessity for tangible material to be present to trigger the reopening was emphasized in Commissioner of Income tax v. Orient Craft Ltd. (2013 (1) TMI 177 - DELHI HIGH COURT ). The repeated assertion by Mr. Manchanda that the claim for depreciation for AYs 2006-07 and 2007-08 was disallowed by the AO is not entirely correct. It overlooks the history of the litigation around the claims for those AYs with both ending in the Assessee ultimately succeeding on the point after the remand to the AO by the ITAT for AY 2006-07 and the level of the CIT (A) for AY 2007-08 . Mr. Manchanda has also not been able to counter the submission that for AYs 2011-12 and 2012-13 the same claim for depreciation has been allowed. - Decided in favour of assessee.
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