TMI Blog2015 (7) TMI 764X X X X Extracts X X X X X X X X Extracts X X X X ..... opening the assessment the AO should apply his mind and reach a prima facie conclusion regarding escapement of income and should not mechanically record his reasons without due application of mind. The absence of any application of mind is manifest from the fact that while making the assessment, the AO himself did not make any addition on this count. Therefore, reasons recorded on this count, were rightly not sustained by ld. CIT(A). Addition on account of repair and maintenance, building expenses and design and Act work expenses - CIT(A) deleted additions - Held that:- Before AO itself the assessee had pointed out that a query was raised during assessment proceedings in respect of design and art work expenses and the same was specifical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I 7 - SUPREME Court ) - Decided against revenue. - ITA no. 5263/Del/2012 - - - Dated:- 8-7-2015 - Shri S.V. Mehrotra and Shri A.T. Varkey, JJ. For the Petitioner : Shri Hiren Mehta CA For the Respondent : Shri B.R.R. Kumar Sr. DR ORDER PER S.V. MEHROTRA, A.M: This appeal, preferred by the revenue, is directed against CIT(A) s order dated 11-07-2012 relating to A.Y. 2004-05. Following grounds are raised: 1. The Ld. CIT(A) erred in law and on facts by quashing reassessment under section 147/148 of the Act as the failure is on part of the assessee to disclose truly and fully all material facts. 2. The Ld. CIT(A) erred on the facts and circumstances of the case and law in deleting the addition on account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e treated as return of income in response to notice u/s 148. Assessee further requested for reasons recorded for reopening the assessment, which were also provided to it. The AO, subsequently issued notice u/s 142(1) and completed the assessment making addition of ₹ 45,51,667/- by treating the expenditure incurred on account of design and art work and expenditure incurred on repairs of machinery and building aggregating to ₹ 66,57,239/- as capital expenditure. Since in the original assessment, AO had disallowed an amount of ₹ 5,88,350/-, the AO made the impugned addition after allowing 25% depreciation on addition of ₹ 60,68,889/-. 4. Before ld. CIT(A) the assessee assailed the reassessment proceedings initiated u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the reasons recorded by AO makes it evident that the reopening has been done, firstly, on the basis of alleged difference between the unsecured loans from directors in schedule 4 of the balance-sheet as against details as per Annexure I-1 to form 3CD of the audit report. Secondly, the AO reopened the assessment considering the repairs to machinery and building and purchase of capital items and design and art work as capital expenditure. Thus, in the reasons, the AO has nowhere mentioned about any kind of failure on the part of AO to disclose fully and truly all material facts. The AO adopted the figure of outstanding loan against the directors from audit report at ₹ 17,76,66,492/-, whereas in the balance-sheet it was ₹ 4,13,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irement of questionnaire dated 29-6-2006. All these aspects have not at all been controverted by department. From the above it is evident that there was no failure on the part of the assessee to disclose fully and truly all material facts, necessary for coming to a conclusion, whether the amounts claimed by assessee in its P L a/c were revenue or capital in nature. The AO had applied his mind during assessment proceedings and after examining in detail the evidence furnished by assessee came to the conclusion that the amounts were allowable as revenue expenditure, after disallowing ₹ 5,88,350/- under the head Repairs and maintenance , treating the same in capital field. . Therefore, it is evident that reopening has been done purely on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would take place. One must treat the concept of 'change of opinion' as an inbuilt test to check abuse of power by the AO 8. Further, we are in agreement with ld. CIT(A) that in view of the decision of Hon ble Supreme Court, in the case of GKN Driveshaft Ltd. (supra), the AO was required to dispose of the assessee s objections to the reasons recorded by passing a reasoned order and not summarily rejecting the same without any specific finding. On this basis reassessment proceedings could not be quashed but the mater could be restored to the file of AO. However, since we find that the reasons recorded do not meet the mandate of proviso to section 147 and are purely on the basis of change of opinion, therefore, the reasons recorde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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