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2015 (5) TMI 872 - PUNJAB & HARYANA HIGH COURT

2015 (5) TMI 872 - PUNJAB & HARYANA HIGH COURT - [2015] 375 ITR 109 (P&H) - Reopening of assessment - whether the ATM is a computer or ought to be treated as normal plant and machinery, attracting different rates of depreciation? - Held that:- When the returns for the subsequent years were processed, the AO had disallowed the claim made @ 60% and added a sum of ₹ 3,71,00,000/- to the income of the assessee-Bank, by allowing depreciation @ 15% only, by treating the ATMs as plant and machine .....

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aken under the said section, after the expiry of 4 years from the end of the relevant assessment year unless any income chargeable to tax has escaped assessment, by reason of failure on the part of the assessee to make the return or respond to the notice issued under Section 142(1) or Section 148. The other condition is that there should be disclosure of fully and truly all material facts necessary for the said assessment year.

The reason for reopening, thus, being merely a change of .....

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ta Saxena, Advocate, for the respondent JUDGEMENT G. S. Sandhawalia J. 1. This judgment shall dispose of CWP Nos.6765, 17892 & 6767 of 2013, pertaining to assessment years 2005-06, 2006-07 & 2007-08, respectively, since common questions of law and facts are involved. However, to dictate orders, facts have been taken from CWP No.6765 of 2013. 2. The petitioner-Bank has challenged the order dated 25.03.2013 (Annexure P1), passed by respondent No.2, the Assistant Commissioner of Income Tax .....

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ing to assessment years 2005-06 & 2006-07, is that once there was no finding recorded by the Assessing Officer (its acronym, 'AO') that the petitioner had not disclosed fully and truly all the material facts and a period of 4 years had expired from the end of the relevant assessment year, reopening could not be done on account of change of opinion, which had led to the notices being issued. In CWP No.6767 of 2013, the challenge was on the ground that since it was only a change of opi .....

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itors reports, directors report etc. The Bank had installed various Automatic Teller Machines (its acronym, 'ATM'), for the benefit of its customers and claimed depreciation @ 60%, by treating it as computers instead of claiming 15% depreciation, which was in the case of a plant and machinery. The assessment was finalised upto the year 2007-08 and no disallowance was made on account of the depreciation claimed @ 60%. 5. After the expiry of 4 years from the date of the order passed under .....

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perationalisation of 251 ATMs had been done by March, 2005 and no fresh material had come to the notice of the AO to reopen the assessment and issue the notice under Section 148. The reopening, thus, was alleged to be a change of opinion by the successor, which was not permissible. Another detailed reply was submitted on 23.03.2013 (Annexure P4), placing reliance upon various judgments that since there were two views on the ATMs, the view in favour of the assessee should be adopted. 6. The said .....

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spondent No.2, for issuing the notice under Section 147 read with Section 148, would go on to show that when the assessment proceedings for the subsequent years 2008-09, were being processed, it came to the notice of the said AO that depreciation had been claimed @ 60%, which was disallowed and an addition of ₹ 3,71,00,000/- was made by disallowing the cost of depreciation claimed and only allowing depreciation @ 15% on the ATM by treating the same as plant and machinery. Accordingly, noti .....

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s it was only a change of opinion, being recorded by the AO by submitting that the Bombay High Court in Commissioner of Income Tax-1 Vs. M/s Saraswat Infotech Ltd. (in ITA(L) No.1243 of 2012) decided on 15.01.2013 (Annexue P10), has held against the Revenue on the said issue. Reliance has also been placed upon the judgment of the Income Tax Appellate Tribunal, New Delhi Bench, to contend that ATMs are computerized telecommunications and therefore, the depreciation was rightly claimed @ 60%. Simi .....

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ssessment as the ATM was not a computer and complete disclosure of material facts had not been made in the return filed and that depreciation @ 33.33% on straight-line method had been provided and there was no full disclosure to the annual report and accordingly, there was a valid reason to issue notice. 10. Without going into the merits of the issue as to whether the ATM is a computer or ought to be treated as normal plant and machinery, attracting different rates of depreciation, we are of the .....

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rse of assessment proceedings for the assessment year 2008-09, it has been noticed that the assessee bank has claimed depreciation on ATM @ 60% by treating the ATM as Computer. At the time of finalizing the assessment, the assessee was allowed depreciation on ATM @ 15% as allowed under I.T. Laws on Plant & Machinery by treating the ATM as Plant & Machinery. Accordingly, an addition of ₹ 3,71,00,000/- was made by disallowing the excess depreciation claimed by the assessee. Similar i .....

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would go on to show that when the returns for the subsequent years were processed, the AO had disallowed the claim made @ 60% and added a sum of ₹ 3,71,00,000/- to the income of the assessee-Bank, by allowing depreciation @ 15% only, by treating the ATMs as plant and machinery. Keeping in view the fact that the ATMs had been operationalised by March, 2005, reasons were recorded to believe that the income of the assessee, chargeable to tax, had escaped assessment. There is no disputing the .....

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the return or respond to the notice issued under Section 142(1) or Section 148. The other condition is that there should be disclosure of fully and truly all material facts necessary for the said assessment year. 12. The issue of initiating proceedings under Section 147 was considered by this Court in Duli Chand Singhania Vs. Assistant Commissioner of Income Tax (2004) 269 ITR 192, wherein, it was held that in the absence of valid assumption of jurisdiction under Section 147, the notice after 4 .....

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on about escapement of income. According to him, it was a clear case of escapement of income as defined in Explanation-2 to Section 147 as the assessee had been allowed excessive relief under Section 80-O of the Act. However, it is not necessary for us to go into the merits of this finding as the second requirement of the proviso has not been satisfied obviously. The reasons recorded by the Assessing Officer for initiation of proceedings under Section 147 of the Act have already been reproduced .....

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taken by the Assessing Officer wholly without jurisdiction. As already observed, the learned counsel for the Revenue has conceded that neither in the reasons recorded nor in the order dated 13-3-2003, has the assessee been charged with failure to disclose, fully and truly all material facts necessary for his assessment. 13. The said view was followed in Mahavir Spinning Mills Ltd. Vs. Commissioner of Income Tax & another [2004] 270 ITR 290, and the objections raised by the Revenue that the w .....

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li Chand Singhania's case, absence of this finding makes the action of the Assessing Officer wholly without jurisdiction. Since the illegality of notice under Section 148 of the Act is apparent from the reasons recorded for initiation of proceedings under Section 147 of the Act, it is a fit case for interference in the exercise of our writ jurisdiction. Sending the petitioner back to the Assessing Officer to raise these objections and requiring him to pass an order thereon would be prolongin .....

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portion of the judgment reads as under: 14. The limitation of four years provided in the proviso to Section 147 has been made applicable only to cases where assessments have already been completed under Sub-section (3) of Section 143 or under Section 147. There is a specific purpose behind it. Where the return is processed under Section 143(1)(a), the Assessing Officer has no jurisdiction to examine the genuineness of the claims made in the return of income. He has only limited power of making .....

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and depreciation charts of the assessment years 1995-96 and 1996-97 for examining the correctness of the claim under Section 80IA of the Act, he could have required the assessee to produce the same. Failure of the Assessing Officer to do so, cannot be treated at par with the failure of the assessee to disclose fully and truly all material facts necessary for its assessment. 15. The reasons for opening the assessment which had already been concluded on 28.11.2007 and 30.11.2007, thus, do not sho .....

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6767 of 2013, pertaining to assessment year 2007-08, the writ petition is liable to be allowed, in view of the principle of law laid down by the Apex Court in Commissioner of Income Tax, Delhi Vs. Kelvinator of India Ltd. [2010] 320 ITR 561 wherein it has been held that jurisdiction could not be conferred on the basis of mere change of opinion and it could not be a reason per se to reopen assessments which had been finalised and change of opinion was not relevant ground for reason to believe for .....

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has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re- open the assessment. Therefore, post-1st April, 1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere change of opinion", which ca .....

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change of opinion" as an inbuilt test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to Section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parl .....

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