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2015 (5) TMI 433 - GUJARAT HIGH COURT

2015 (5) TMI 433 - GUJARAT HIGH COURT - [2015] 376 ITR 567 (Guj) - Reopening of assessment - initiation of the reassessment proceedings beyond the period of 4 years -additional depreciation claim - Held that:- Applying the decision of the Division Bench of this Court in the case of Niko Resources Ltd. (2014 (9) TMI 892 - GUJARAT HIGH COURT ) as well as Gujarat Lease Financing Limited (2013 (10) TMI 101 - GUJARAT HIGH COURT ), to the facts of the case on hand and as observed hereinabove, there do .....

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e Tax Act for A.Y. 2007-2008 is hereby quashed and set aside and the impugned reassessment proceedings of reopening assessment for the A.Y. 2007-2008 are hereby terminated on the aforesaid ground alone. - Decided in favour of assessee. - Special Civil Application No. 16680 of 2014 - Dated:- 8-4-2015 - M. R. Shah And S. H. Vora, JJ. For the Petitioner : Mr Hardik V Vora, Adv. For the Respondent : Mr Sudhir M Mehta, Adv. JUDGMENT (Per : Honourable Mr. Justice M. R. Shah) 1.00. By way of this petit .....

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n in nutshell are as under :- 2.01. That the petitioner filed its return of income for A.Y. 2007-2008 declaring total income at ₹ 87,66,926/-. That the petitioner assessee Company stated source of income from business of cutting and polishing of diamond. The case was selected for scrutiny assessment by issuing notice under section 143(2) of the Income Tax Act. That after making detailed inquiry, the Assessing Officer assessed the income at ₹ 84,80,421/- after accepting the rectificat .....

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r the petitioner submitted detailed objections vide communication dated 27/6/2014 objecting to reassessment proceedings. 2.05. That by order / communication dated 25/9/2014, the assessing officer overlooked the objections raised by the petitioner against the impugned reassessment proceedings and hence the petitioner has preferred the present Special Civil Application under Article 226 of the Constitution of India challenging the impugned reassessment proceedings which are initiated beyond the pe .....

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ly and truly all the material facts. 3.01. Mr.Hardik Vora, learned advocate appearing on behalf of the petitioner - assessee has further submitted that in the present case, as such there is/ was no failure on the part of the assessee to disclose truly and fully material facts necessary for assessment. It is submitted that all details were duly provided as and when sought and/or required to the Assessing Officer and the same was scrutinized by the Assessing Officer. It is submitted that therefore .....

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vailable, additional depreciation was incorrectly claimed by the assessee and therefore, the claim of the additional depreciation, contrary to the provisions of the Act had resulted into escapement of income to the extent of ₹ 14,77,669/-. It is submitted that on the aforesaid ground, reassessment proceedings cannot be initiated beyond the period of 4 years. It is submitted that when the Assessing Officer passed the assessment order and allowed the claim of additional depreciation claimed .....

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k Vora, learned advocate appearing on behalf of the petitioner - assessee has heavily relied upon the decision of this Court in the case of Niko Resources Ltd. Versus Assistant Director of Income Tax, reported in (2014) 51 Taxman.com 568 (Gujarat) in support of his request to quash and set aside the impugned reassessment proceedings. 3.04. Mr.Hardik Vora, learned advocate appearing on behalf of the petitioner - assessee has also heavily relied upon the decision of the Division Bench of this Cour .....

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itiation of the reassessment proceedings. It is submitted that as it was found that the assessee claimed additional depreciation incorrectly, though the additional depreciation was not allowable, as in view of the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax Versus Gem India Manufacturing Co., reported in (2001) 249 ITR 307 (SC) , cutting and polishing of diamond cannot be considered as business of manufacture or production and therefore, the assessee wrong .....

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ng on behalf of the revenue has vehemently submitted that as such the present petition is filed at premature stage, unless and until a notice under section 148 read with section 147 of the Income Tax Act has been issued. It is submitted that in the event the petitioner assessee is aggrieved by the reassessment order, alternative efficacious remedy is available by way of an appeal to the CIT(A) and thereafter to the learned tribunal as per the provisions of the Act. Therefore, it is requested not .....

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ctive parties at length. 5.01. At the outset, it is required to be noted that what is challenged in the present Special Civil Application by the petitioner - assessee is the reopening of the assessment for the A.Y. 2007-2008 and initiation of the reassessment proceedings for the A.Y. 2007-2008, in exercise of the powers under section 147 read with section 148 of the Income Tax Act. It is required to be noted that in the present case initiation of reassessment proceedings is beyond 4 years from t .....

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147 after expiry of 4 years only if (1) assessee failed to make a return under section 139 or in response to the notice under section 142(1) or under section 148 and he failed to disclose truly and fully all material facts necessary for the assessment. Once the case of the assessee is covered by the first proviso to section 147, reassessment proceedings beyond the period of four years from the end of the relevant assessment year would be without jurisdiction and bad in law. If all material fact .....

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3. In the present case, reassessment proceedings under section 147 of the Act for A.Y. 2007-08 are initiated beyond the period of four years. The reasons recorded for reopening of the assessment for A.Y. 2007-2008, which are communicated to the petitioner assessee vide communication dated 6/6/2014 are as follows:- "Reasons recorded under section 148(2) of the Income Tax Act: Section 32(1) provides that in the case of new machinery of plant (other ships and aircraft acquired and installed af .....

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p; Ghanti A/c. and plant and machinery depreciation worked out includes depreciation at 15% / 7.5% and additional depreciation at 20% / 10%. The assessee was engaged in the manufacturing of diamond cutting and polishing. The cutting and polishing of diamond cannot be considered as a business of manufacturing of production as held by Hon ble Supreme Court in the case of CIT Vs. Gem India Mftg. Co. (2001) 249 ITR 307 (the Hon'ble Supreme Court). Accordingly additional depreciation was not allo .....

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7 3-438868 4-134259 1399734 764169 TOTAL 4153673 2676004 1477669 The claim of additional depreciation contrary to the provisions of the Act had resulted into the escapement of income to extent of (Rs. 14,77,669/-) due to the failure on the part of the assessee to disclose truly all material facts necessary for his assessment." Thus, from the aforesaid, it appears that the assessment for A.Y. 2007-2008 is sought to be reopened on the ground that in view of the decision of the Hon'ble Sup .....

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m the original assessment order that while submitting the original return of income, the assessee claimed depreciation at 20% / 10% in respect of Lesser Machine, Leth, Ghanti and Plant & Machinery which came to be considered and granted by the A.O. Therefore, as such it cannot be said that there was any failure on the part of the assessee to disclose truly and fully all material facts necessary for the assessment with respect to the additional depreciation claimed. 5.04. The reasons for reop .....

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truly all material facts with respect to the additional depreciation claimed. Under the circumstances, the condition precedent for invoking powers under section 147 of the Income Tax Act to initiate reassessment proceedings beyond the period of 4 years are not at all satisfied. 5.06. Identical question came to be considered by the Division Bench of this Court in the case of Niko Resources Ltd. (supra) and while considering the scope and ambit of powers to be exercised under section 147 of the I .....

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so to section 147 of the Act, assessment can be reopened under section I47 of the Act after expiry of 4 years only if (1) the assessee failed to make a return under section I39 of the Act or in response to notice issued under section 142(1) or under section 148 of the Act, he failed to disclose truly and fully all material facts necessary for the assessment. Once all primary facts are before the assessing authority, no further assistance is required by way of disclosure. All inferences of facts .....

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remained no omission or failure on the part of the assessee to disclose truly and fully all material facts. This Court, after extensively discussing law on the issue in case of Gujarat Lease Financing Ltd. (supra), has held thus: "10. It can be clearly noted from the reasons recorded that there is no mention at all of the assessee having not disclosed fully or truly material facts which were necessary for the purpose of computing the income of the assessee. Assuming that in the notice for .....

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on his having a reason to believe that income chargeable to tax had escaped assessment for any assessment year, can assess or reassess such income and also any such other income chargeable to tax, which has escaped the assessment. However, no such action is permissible after lapse of 4 years from the end of the relevant assessment year unless income chargeable to tax has escaped assessment on account of failure on the part of the assessee to disclose fully and truly all material facts necessary .....

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