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2015 (7) TMI 764 - AT - Income TaxReopening of assessment - CIT(A) quashed reopening orders - Held that:- In the reasons, the AO has nowhere mentioned about any kind of failure on the part of AO to disclose fully and truly all material facts. The AO adopted the figure of outstanding loan against the directors from audit report at ₹ 17,76,66,492/-, whereas in the balance-sheet it was ₹ 4,13,61,284/-. The reopening solely on the basis of different figures, appearing in the balance-sheet and in form 3CD in respect of same item, could not be done without proper application of mind before recording the reasons. The cardinal principle is that before reopening the assessment the AO should apply his mind and reach a prima facie conclusion regarding escapement of income and should not mechanically record his reasons without due application of mind. The absence of any application of mind is manifest from the fact that while making the assessment, the AO himself did not make any addition on this count. Therefore, reasons recorded on this count, were rightly not sustained by ld. CIT(A). Addition on account of repair and maintenance, building expenses and design and Act work expenses - CIT(A) deleted additions - Held that:- Before AO itself the assessee had pointed out that a query was raised during assessment proceedings in respect of design and art work expenses and the same was specifically replied vide assessee’s letter . Similarly, it was pointed out that in regard to repairs and maintenance of building and plant & machinery, the assessee was asked to furnish explanation for each and every item, which was duly complied with by filing a letter in this regard. Further, it was pointed out tht the details of machinery and building repairs along with the copy of bills were also filed during assessment in compliance to the requirement of questionnaire dated 29-6-2006. All these aspects have not at all been controverted by department. From the above it is evident that there was no failure on the part of the assessee to disclose fully and truly all material facts, necessary for coming to a conclusion, whether the amounts claimed by assessee in its P&L a/c were revenue or capital in nature. The AO had applied his mind during assessment proceedings and after examining in detail the evidence furnished by assessee came to the conclusion that the amounts were allowable as revenue expenditure, after disallowing ₹ 5,88,350/- under the head “Repairs and maintenance”, treating the same in capital field. . Therefore, it is evident that reopening has been done purely on the basis of change of opinion in regard to the items mentioned in the reasons recorded by AO, which is not permissible in view of the decision of Hon’ble Supreme Court in the case of CIT Vs. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA] . Also see GKN Driveshaft Ltd. ( 2002 (11) TMI 7 - SUPREME Court ) - Decided against revenue.
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