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TMI Blog2010 (11) TMI 570X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation on ITG Networking Equipment @ 25% as against 60% claimed by the assessee without discussing the merits of the addition made by the A.O. 4. The appellant craves leave to add, to alter, or amend any grounds of appeal raised above at the time of hearing." CO. No.345/Del/2010 1. Based on the facts and circumstances of the case, the notice issued under section 148 by the learned Deputy Commissioner of Income-tax 6(1) (hereinafter referred to as the learned Assessing Officer) is illegal, bad in law, without jurisdiction and barred by time limitation, hence, the reassessment order dated 31st July 2008 passed by the learned Assessing Officer is also illegal, bad in law and without jurisdiction. 2. Based on the facts and circumstances of the case, there is no failure on part of the Respondent to disclose truly and fully all material facts necessary for assessment, hence, the notice issued under section 148 of the Act and the reassessment order are illegal, bad in law and without jurisdiction The respondent craves, to consider each of the above grounds of cross objections without prejudice to each other and craves, leave to add, alter, delete or modify all or any of the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia Pvt Ltd., it has been found that depreciation on "networking equipments" has been allowed inadvertently @ 60% under the category of 'computer' whereas it should have been allowed @ 25% as in the case of 'Plant and Machinery', as "Networking equipments" forms a part of plant and machinery. The incorrect allowance of incorrect depreciation has resulted into under-assessment of income by Rs. 46,78,313/-. In addition, interest u/s 234B has also been undercharged. Therefore, I have reasons to believe that income of the assessee for the A.Y. 2002-03 chargeable to tax amounting to Rs.46,78,313/- has escaped assessment, I am also satisfied that the case of the assessee for the A.Y. 2002-03 is a fit case for taking action u/s 147/148 of the IT Act, 1961. Notice u/s 148 of the IT Act issued to the assessee. Sd/- DCIT, Circle 6 (1)" 5. The objections against initiation of re-assessment proceedings were filed vide letter dated 8th January, 2008 which was disposed of by the Assessing Officer vide order dated 7th July, 2008. The copy of objections dated 8th January, 2008 is filed by the assessee in the paper book at pages 102 to 112. The assessee had submitted that during the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 147 is not satisfied and notice as well as proceedings pursuant thereto are liable to be quashed and also the contention that where reasons recorded did not indicate the failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment, then also, the initiation of re-assessment proceedings would be without jurisdiction as per proviso to section 147. He also relied upon the decision of ITAT in the case of Bank of Tokyo-Mitsubishi UFJ Ltd. v. ADIT, International Taxation, Kolkata dated 12th December, 2008 wherein both the aforementioned decisions of jurisdictional High Court were considered and it was held that where there is no specific averment made in the reasons recorded regarding the failure on the part of the assessee to disclose fully and truly all material facts relating to assessment, the proviso to section 147 will be applicable and he drew our attention towards the observations of the Tribunal contained in para 6. The copy of the order has been placed at pages 57-79 of the paper book in which one of us (Accountant Member) is a party. 10. We have heard both the parties and we have carefully gone-through the. documents r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. From the above discussion, it has already been made clear that neither it is the allegation of the Assessing Officer that there was any such failure of the assessee nor the record has shown such failure. Rather, the issue on merit was required to be explained by the Assessing Officer and the same was explained during the course of original assessment proceedings. Having fulfilled the aforementioned twin conditions, the first proviso to section 147 debarred the initiation of reassessment proceedings as the notice u/s 148 is issued on 18/23.07.2007 which is beyond the four years from the end of relevant assessment year which period ends on 31.03.2003. 13. The ratio of two decisions of jurisdictional High Court relied upon by Ld. AR, as mentioned in para 8 of this order, are fully applicable to the present case, relying upon which, the co-ordinate Bench in the case of Bank of Tokyo-Mitsubishi UFJ Ltd. v. ADIT, International Taxation, Kolkata (supra) has held that re-assessment proceedings were not valid. Conclusion of the Tribunal as contained in para 6 is reproduced below:- " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, it is held that the AO did not have jurisdiction to issue notice u/s 147. Consequently, assessment made thereon was bad in law. 14. So far as it relates to merits of the issue i.e., regarding grant of depreciation @ 60% on ITG networking equipments, it was the contention of Ld. AR that this issue is covered in favour of the assessee by the Special Bench decision in the case of DCIT v. Data Craft India Ltd., a decision recently rendered by Special Bench on 9th July, 2010 and reported as 40 SOT 295, a copy of which is filed at pages 225 to 234 of the paper book. He specifically relied upon the following, observations from the said decision:- "In short, "Router" is a hardware device that routes data (hence the name) from a local area network (LAN).to another network connection. A router acts like a coin sorting machine, allowing only authorized machines to connect to other computer systems Most routers also keep log files about the local network activity. Now the question is whether this "machine" can be used independent of computer. If yes, then it cannot be called "Computer Hardware" in all circumstances. When "Computer Hardware" is used as a component of the comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ators which are not programmable and capable of being used in conjunction with external files, or more of which contain computer programmes, electronic instructions, input data and output data, that performs functions including, but not limited to logic, arithmetic, data storage and retrieval, communication and control' As evident from the details of additions included within the tax audit report, the equipments included within ITG networking primarily includes routers, switches, modems, etc. which are primarily in the nature of input and output support devices that performs functions including communication and control. Accordingly, such assets qualify as computer systems under the Act and depreciation at the rate of 60 percent has been claimed." 16. From the above note, it is clear that the above equipment primarily include the routers, switches, modems, etc. which are in the nature of input and output support devices which performs the functions including communication and control and, thus, they are computer hardware when they are used along with computer and when their functions are integrated with 'computer.' Such devices used as part of the computer in its functions and, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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