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2016 (8) TMI 1511 - HC - Income TaxReopening of assessment u/s 147 - exercise of reopening is being undertaken at the behest of the audit party - Capital gain not showed by the assessee on transfer of a land to Shri Ashwinbhai B. Patel - HELD THAT:- If the view of the Assessing Officer was that once the land was sold through a exchange deed, the assessee was liable to pay capital gain, irrespective of the subsequent cancellation of the deed, he ought to have taxed such income in the order of assessment. The fact that the assessee had executed such documents and not offered any income of capital gain to tax was thus within the knowledge of the Assessing Officer. Without there being anything additional, such issue cannot be reexamined in exercise of powers of reassessment. As noted, the letter dated 24.10.2003 of the Assessing Officer of Shri Ashwin B. Patel may prima facie, give an impression that such facts were being brought to the notice of the present Assessing Officer for the first time, but as noted, the queries raised by the Assessing Officer during the original assessment and the replies of the petitioner would show that all these details were very much part of the record. Reduction on account of withdrawal of interest and the additional depreciation claimed - As question of additional depreciation in ground (2b), the Assessing Officer had not inquired into the nature of reduction of interest - It may be that such interest though paid during the assessment year 2009-2010 was later on withdrawn. Withdrawal of the interest happened during the assessment year 2010-2011. The Assessing Officer therefore, would be prima facie, correct in questioning the assessee in reducing such interest for the assessment year in question namely, 2009-2010. Computation of income being specific to the period pertaining to the previous year relevant to the assessment year under consideration, a legal question would arise whether for a later withdrawal of interest, the assessee could have claimed effect thereof during the earlier year. Being at a stage where the assessment is yet to be framed, we would not give our conclusive opinion on this aspect. Suffice it to say, this issue was not examined by the Assessing Officer in the original assessment. Higher depreciation - additional depreciation which was on account of increase in opening WDV did not match the figures contained in the report of the Chartered Accountant - Entire claim of depreciation in whatever form presented by the assessee was under examination. The assessee had replied to such a question in detail giving sufficient materials. If the Assessing Officer was not satisfied he could have either raised further query or disallowed the claim in toto. Not having done that same cannot be reexamined in exercise of powers of reassessment. Disallowance of interest - assessee had received total interest of ₹ 2.00 crores against which it had paid interest to the department to the tune of ₹ 31.39 lacs which could not have been adjusted against the interest income - As petitioner pointed out that though such adjustment was claimed in the return, the Assessing Officer disallowed the same. He took us through the order of assessment and pointed out that such amount of ₹ 31.39 lacs was not allowed to be reduced from the interest income. Learned counsel for the Revenue was unable to controvert this aspect. This ground thus was based on inaccurate factual premise. Depreciation of windmill - AO was of the opinion that four wind turbine generators were not commissioned on 30.9.2008 thus depreciation relatable to such investment was not allowable - assessee had pointed out the factum of installation and commission of wind power turbines and the details regarding why the depreciation and additional depreciation was available on such investment. This issue was also therefore, thoroughly scrutinised. Depreciation at a higher rate on the energy saving device - Energy saving device is covered under the item (3)(8)(ix) under the heading of machinery and plant. As provided in section 32(1)(iia) additional deprecation is allowed in case of machinery and plant. It is submitted that it is fulfilling all the conditions narrated in section 32(1)(iia) and therefore it is eligible for additional deprecation.” Thus it was after a minute scrutiny that Assessing Officer did not disturb the income of higher depreciation on this investment. Reopening on such basis would not permissible. Expenditure towards notified area tax - assessee had made such payment before the due date of filing the returns and the Assessing Officer during the assessment proceedings scrutinised such issue are not in dispute. That being the position it would not be open for the Assessing Officer to revisit such a claim in reassessment. Short deduction of tax at source on freight charges - In the order of assessment, the Assessing Officer had made a detailed discussion on the payment made to clearing and forwarding agent without TDS and whenever necessary, Assessing Officer made disallowance. Thus the entire issue was examined by the Assessing Officer during the scrutiny assessment. Disallowance of interest expenditure under section 14A r.w.r. 8D - This issue also was pointedly in focus before the Assessing Officer during the scrutiny assessment. Non deduction of tax on export commission paid by the assessee - AO noted that such expenditure was allowed without deduction of tax in view of the earlier circulars of CBDT dated 23.7.1969 and 7.2.2000 - assessee had while disclosing that foreign commission was paid to non residents, no TDS was deducted in view of circular dated 7.2.2000. The assessee produced copy of such circular. It was after such inquiry that Assessing Officer made no disallowance, as can be seen from the reasons recorded on account of such circular of the CBDT. It is doubtful whether later circular of CBDT could have been pressed in service to fasten the liability on account of non deduction of tax while making payment which was being done at a time when later circular was not in existence. Quite apart from this legal question, undisputedly, the Assessing Officer was aware about such payments, as was pointed out by the assessee, that no TDS was deducted and the reason why the same was done. If we compare the audit objections and the reasons recorded, we find that the Assessing Officer has included all objections pointed out by the audit party but has also included one more ground namely, of the escaped capital gain on sale of land by the petitioner to Shri Ashwin Kumar B. Patel. This ground was not part of the audit objection. In our opinion, this would indicate that the Assessing Officer had independently applied his mind and formed a belief that on the grounds mentioned by the audit party in its objection letter and additional ground which is recorded in the reasons, the income chargeable to tax in case of assessee had escaped assessment. We may recall the issue of capital gain tax on sale of land was referred in the letter dated 24.10.2003 by the Assessing Officer of Shri Ashwin Kumar B. Patel. In our opinion therefore, on this ground also, petition must fail.
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