TMI Blog2010 (3) TMI 317X X X X Extracts X X X X X X X X Extracts X X X X ..... instructed by Kanga and Co., for the petitioner. Ms. Suchitra Kamble, instructed by Suresh Kamble, for the respondents. JUDGMENT The judgment of the court was delivered by 1. Dr. D. Y. Chandrachud J.- Rule, by consent made returnable forthwith. Counsel for the respondents waives service. With the consent of counsel, the petition is taken up for final hearing. 2. By a notice dated March 16, 2009, issued under section 148 of the Income-tax Act, 1961, an assessment for the assessment year 2004-05 is sought to be reopened on the ground that income chargeable to tax has escaped assessment within the meaning of section 147. 3. The reasons for reopening the assessment are two. Firstly, according to the Additional Commissioner of Income-tax, the assessee had written off a long-term capital loss of Rs. 11.14 crores from the sale of certain land at Mulund. The Assessing Officer after discarding the value adopted by the assessee worked out long-term capital gains at Rs. 10.66 crores. The Assessing Officer allowed a deduction of Rs. 2.89 crores on account of an amount paid as "tank land liability". This amount is, according to the Assessing Officer not allowable a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of development rights in respect of the land at Mulund. The assessee disclosed that it had entered into an MOU on March 31, 2000 with Nirmal Lifestyle Pvt. Ltd. for granting development rights in respect of the land, which admeasures 115,050 square meters, for a total consideration of Rs.35.82 crores. The consideration was stated to have been received in three phases for different tranches of land. 8. The computation appended to the return included a statement of the profits on the sale of fixed assets. The sale proceeds received from the purchaser for phase III during the course of the previous year relevant to the assessment year in question were disclosed as Rs. 10.62 crores. A deduction was claimed in respect of the expenses incurred on the transfer of the property. Amongst those deductions were towards (i) consultancy fees in the amount of Rs. 27.50 lakhs, and (ii) an amount of Rs. 2.89 crores claimed to have been paid towards meeting the dues of the Government of Maharashtra. In the statement of long-term capital gains, a deduction was claimed in respect of the consultancy fees and in respect of the amount which was paid to the purchaser towards the demand of unearned in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the two items. The computation of capital gains was reworked after accepting the total deduction claimed in the amount of Rs. 3.16 crores in respect of the aforesaid two items. There is merit in the submission which has been urged on behalf of the assessee that there was no tangible material before the Assessing Officer on the basis of which the assessment could have been reopened and what is sought to be done is to propose a reassessment on the basis of a mere change of opinion. This, in view of the settled position of law is impermissible. No tangible material is shown on the basis of which the assessment is sought to be reopened. In the absence of tangible material, what the Assessing Officer has done while reopening the assessment is only to change the opinion which was formed earlier on the allowability of the deduction. The power to reopen an assessment is conditional on the formation of a reason to believe that income chargeable to tax has escaped assessment. The power is not akin to a review. The existence of tangible material is necessary to ensure against an arbitrary exercise of power. There is no tangible material in the present case. B. Disallowance of depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer was in terms of the without prejudice statement that was submitted by the assessee, as noted earlier. 13. The Assessing Officer now proposes to reopen the assessment by contending that the correct depreciation to be disallowed would be at the rate of 25 per cent. instead of 20 per cent. This it has been submitted on behalf of the assessee, would constitute a mere change of opinion without any tangible material. We may note that in the affidavit-in-reply filed in this proceeding, the Assistant Commissioner of Income-tax has stated that the rate of depreciation was taken at 20 per cent. in the original assessment against 25 per cent. provided in clause III(1) to Part A to Appendix I of rule 5(1) of the Income-tax Rules, 1962. There is merit in the submission which has been urged on behalf of the assessee that under the aforesaid Rules, the reference is to the rate at which depreciation is liable to be allowed on plant and machinery ; whereas, in the present case, the issue relates to the disallowance which was to be effected in respect of the depreciation which was claimed on obsolete assets which had been written off. Consequently, the basis which has been suggested in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch are not used in business and included in the written down value of the block of assets. Similarly, another point in the appeal is that the Assessing Officer erred in determining long-term capital gains arising on the sale of phase III-land at Mulund to the extent of Rs. 10.66 crores. The contention is that in view of the proviso to section 147, the Assessing Officer is precluded from reopening the assessment on an issue which is the subject-matter of a pending appeal. The second submission was based on section 120 of the Act and it was urged that since the original order of assessment was passed by the Additional Commissioner of Income-tax, Range 8(1), Mumbai, it was not within the jurisdiction of the Assistant Commissioner, who is a subordinate authority, to reopen the assessment. For the reasons already indicated, on the question as to whether the Assessing Officer had reason to believe that income had escaped assessment within the meaning of section 147, we have come to the conclusion that there was no tangible material before the Assessing Officer to hold so and that the reasons recorded for reopening the assessment constitute a mere change of opinion. In the circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X
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