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2015 (7) TMI 236 - ITAT MUMBAI

2015 (7) TMI 236 - ITAT MUMBAI - TMI - Reopening of assessment - whether CIT(Appeals) erred in confirming the addition of depreciation amounting to ₹ 4,20,24,089/- in computing total income under normal provisions of the Act? - Held that:- We are unable to see any validity; rather, basis, for the Revenue to claim that the decapitalization of interest and commitment charges (hereinafter referred to as ‘the interest component’) ought to be from the opening WDV of the relevant block of assets .....

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ing upheld.

As regards the second reason, the validity of which is self-evident, the assessee claims that the figures per the TAR are in fact per the ‘revised’ TAR, filed on 20.11.2003, which were however omitted to be considered by the AO while framing the assessment. In our clear view, there has been thus no consideration of the material being now relied upon by the A.O., i.e., in recording the reasons for the reopening and in issuing the notice u/s.148. We are unable to read any fu .....

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are not inclined to dwell on that aspect of the matter inasmuch as, without doubt, the revised claim represents, by the assessee’s own admission, the correct claim of depreciation. Whether legally permissible or not, the AO is not constrained to take cognizance thereof or form an opinion on its basis; the sole criteria being its relevancy and credibility

Disallowance of depreciation - Held that:- Even as conceded during the hearing, and in any case of the matter, the assessee has no .....

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cognizance or account of the corrected claim. The same would have also enabled the assessee to bring any other aspect of the matter, where apparent from the record, beneficial to it, to the fore. This is as the scope of the reassessment proceedings is restricted only to bringing the under-assessed income to tax (refer: CIT v. Sun Engineering Works (P.) Ltd. [1992 (9) TMI 1 - SUPREME Court]. The asessee accordingly fails on this ground.

Adjustment made in determining the books profit u .....

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depreciation. We, accordingly, restore the matter back to the file of the assessing authority to allow the assessee an opportunity to satisfy the AO that the adjustment to book profit on account of the revised depreciation, as made, is either in excess or that no adjustment, in terms of its claim of book depreciation, to the book profit, was called for. The AO shall decide the matter by issuing definite findings of fact in accordance with law. We decide accordingly. - Decided in favour of asses .....

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1961 ( the Act hereinafter) for Assessment Year (AY) 2002-03 vide order dated 27.11.2007. 2. The assessee s challenge to the impugned order, which is on, both, the legal ground/s, as well as the merits of the adjustment/s made to the returned income, is per four grounds, as under: 1. That on the facts and in the circumstances of the case, the Learned Commissioner of Income Tax (Appeals) [here-in-after referred to as Ld. CIT(Appeals)] has grossly erred in confirming the action of the AO in initia .....

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43(3) r.w.s 147 dated 27-11-2007 passed by the AO is unjustified, erroneous and needs to be summarily cancelled. 3. That on the facts and in the circumstances of the case, Ld. CIT(Appeals) erred in confirming the addition of depreciation amounting to ₹ 4,20,24,089/- in computing total income under normal provisions of the Act. 4. That on the facts and in the circumstances of the case, Ld. CIT(Appeals) erred in confirming addition of depreciation amounting to ₹ 4,20,24,089/- in comput .....

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t of case law; the principal being the decision in the case of CIT v. Kelvinator of India [2010] 320 ITR 561 (SC) and CIT v. Amitabh Bachchan [2012] 349 ITR 76 (Bom). While the former judgment emphasizes that reassessment is to be based on tangible material which has a live link therewith, the latter holds the formation of belief as to the escapement of income chargeable to tax by the Assessing Officer (AO) to be on fresh tangible material . It shall at this stage be relevant to recount the back .....

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ost, including interest and commitment charges, is transferred from CWIP Account to the relevant block of assets. The interest and commitment charges, included therein, having been however claimed as revenue expenditure per the returns of income for the preceding years, were, correspondingly, decapitalized so as to avoid a claim of depreciation on an amount already claimed and allowed as revenue expenditure and, as such, a double claim by way of depreciation on sums liable to be decapitalized. T .....

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on schedule forming part of the Tax Audit Report (TAR) was at ₹ 2975.07 lacs and ₹ 12.36 lacs for the first half and the second half of the year respectively. This led to a difference between the exigible depreciation allowance as per the two depreciation charts at ₹ 420.24 lacs. The figure as per the TAR, being certified by the Auditors, was more authentic. This led to the belief as to an excess claim and allowance of depreciation by that sum (Rs. 420.24 lacs) and, consequentl .....

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to as the interest component ) ought to be from the opening WDV of the relevant block of assets. When the addition to the same, which is for the completed projects, is only during the current year, separately for the first half and the second half thereof, how and why the reduction on account of the interest component of the said addition be from the opening WDV? The reason, though has a live link with the claim of depreciation, is without basis in facts and, hence, not valid in law. The assesse .....

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filing it. Why, it is, in character, the same document (as the relevant annexure of TAR), as filed originally, seeking to correct the figure of depreciation as claimed. In-as-much as the revised claim of deprecation is at a lower sum, there is an underassessment of income and, thus, escapement of income chargeable to tax from assessment to the extent of the difference. Further, the very fact that the assessee seeks to revise its claim, by substituting the original figure, signifies the same, i.e .....

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aw does not authorize a review by the assessing authority of its order, which is thus impermissible in law. It is, however, an admitted fact in the present case that the AO had overlooked the assessee s revised claim of depreciation while framing the original assessment on 28/2/2005. Reference for this may be made to paragraph 4.1 of the assessee s letter dated 05.11.2007 (PB pages 91- 98), also reproduced at pages 4-6 of the assessment order, as well as paragraph B(1.1) of the assessee s writte .....

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e only in the case of consideration and formation of a view or opinion. Rather, where and to the extent the original claim, again, admittedly, is not a correct claim, the reduction on account of decapitalization of the interest component of the cost of acquisition having been made incorrectly, its adoption constitutes, or can be argued to constitute, a mistake apparent from record. The argument of all the material being available on record, or of no fresh material coming to the possession of the .....

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correction, which of course has to be subject to the process of law - and which stands observed in the present case, or envisages a correction only at the instance of, or of a mistake by, the assessee, which could be of/by the assessing authority as well, so that what is of relevance and consequence is that there is a mistake or omission resulting in an under-assessment of income. The apex court in Kalyanji Mavji & Co. (supra), listed oversight, inadvertence or mistake committed by the A.O. .....

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e assessee to, inter alia, disclose fully and truly all material facts necessary for assessment for the relevant year, for which a higher time period of six years (as per the extant law) is provided and, two, for the rest, and for which the said time limit is set at four years (from the end of the relevant assessment year). In our clear view, there has been thus no consideration of the material being now relied upon by the A.O., i.e., in recording the reasons for the reopening and in issuing the .....

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terial facts, as not correct, we are not inclined to dwell on that aspect of the matter inasmuch as, without doubt, the revised claim represents, by the assessee s own admission, the correct claim of depreciation. Whether legally permissible or not, the AO is not constrained to take cognizance thereof or form an opinion on its basis; the sole criteria being its relevancy and credibility (refer: Pooran Mal v. DI (Inv.) [1974] 93 ITR 505 (SC)). The Revenue has also relied on case law, which has no .....

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TR 485 (Del)(FB); and Dalmia (P.) Ltd. vs. CIT [2012] 348 ITR 469 (Del), with in fact the apex court refusing to admit the appeal against the decision by the jurisdictional high court in Eleganza Jewellery Ltd. vs. CIT (in WP No. 2763 of 2013 dated 18.02.2014). In fact, the courts have gone to the extent of saying that where the AO has taken an erroneous view, i.e., one which could not be taken by one properly instructed in law, the same cannot be said, or would not qualify, to be a view, while .....

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s not proposed any adjustment qua the first reason recorded, independently, as by working out the deprecation allowance exigible by reducing interest component from the opening WDV. There is thus a valid assumption of jurisdiction for assessment u/s. 147 of the Act. We decide accordingly, upholding the assessee s first two grounds. 5. The third ground agitates the disallowance of depreciation on merits. Even as conceded during the hearing, and in any case of the matter, the assessee has no case; .....

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