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2015 (8) TMI 619 - GUJARAT HIGH COURT

2015 (8) TMI 619 - GUJARAT HIGH COURT - TMI - Reopening of assessment - reliance on audit objection - as per AO assessee was not entitled to the depreciation at 30% on motor vehicles and the normal rate of depreciation at 15% was allowable to the assessee being a contractor and therefore, escaped assessment - Held that:- Solely on the audit objection raised by the audit party the assessment is reopened and/or it can be said that the opinion of the Assessing Officer and/or Assessing Officer’s rea .....

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the Assessing Officer and his reason to believe that there is any escapement of income to the tune of ₹ 1,66,42,284/- for AY 2009-10 has been vitiated.

Therefore, in the facts and circumstances of the case, the formation of the opinion by the Assessing Officer while reopening the assessment proceedings and his reason to believe that the income has escaped the assessment has been vitiated and therefore, the reopening of assessment proceeding for AY 2009-10 is not valid and permis .....

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nder Section 148 of the Income Tax Act, 1961 (hereinafter referred to as "Act") for AY 2009-10 by which in exercise of powers under Section 147 of the Act the Assessing Officer has reopened the assessment for AY 2009-10. [2.0] That the petitioner - assessee was engaged in the business of contract work hiring and in the business as heavy earth mover and mining contract. That the assessee filed the return of income for AY 2009-10 declaring total income at ₹ 63,98,320/-. The said re .....

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amounting to ₹ 3,32,84,568/-. [2.1] That thereafter the petitioner has been served with the impugned notice dated 07.03.2014 under Section 148 of the Act for reassessing the income of the petitioner for AY 2009-10. On the request made by the petitioner - assessee the petitioner has been served with the reasons recorded by the Assessing Officer while reopening the assessment for the AY 2009-10 mainly on the ground that the assessee was not entitled to the depreciation at 30% on motor vehic .....

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ed by the audit party which is not permissible. It was also the case on behalf of the petitioner that the Assessing Officer in the assessment proceedings considered in detail the claim of the depreciation claimed by the assessee at 30% and thereafter allowed the depreciation at 30% as claimed by the petitioner assessee and therefore, the initiation of reassessment proceedings is nothing but a change of opinion which is also not permissible. [2.2] That vide communication dated 13.01.2015, the Ass .....

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009-10 is solely on the basis of the audit objection and/or the audit objection by the audit party and therefore, the same is not permissible. It is submitted that therefore, forming opinion by the Assessing Officer that the income has escaped assessment has been vitiated. [3.1] It is vehemently submitted by Shri Vora, learned Advocate appearing on behalf of the petitioner that though in the objections raised by the petitioner against reopening of the assessment, it was specifically stated that .....

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of the Division Bench in the case of Commissioner of Income-tax, Ahmedabad-IV vs. Shilp Gravures Ltd. reported in [2013] 40 taxmann.com 309 (Gujarat) as well as in the case of Rajrtan Metal Industries Ltd vs. Assistant Commissioner of Income Tax reported in [2014] 49 taxmann.com 15 (Gujarat), it is requested to allow the present Special Civil Application and quash and set aside the impugned reopening of the assessment for AY 2009-10. [4.0] Present petition is opposed by Shri Pranav G. Desai, lea .....

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/- has escaped assessment due to the failure on the part of the assessee to declare fully and truly all facts necessary for assessment and after recording the reasons that the aforesaid income had escaped assessment, the Assessing Officer has issued the impugned notice under section 148 of the Act. It is submitted that it was found that though the assessee was not entitled to the higher rate of depreciation at 30%, he claimed the same and without verifying the claim of the assessee in detail, th .....

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mitted that therefore no prejudice shall be caused to the petitioner if the petitioner is relegated to participate in the reassessment proceedings. [4.2] Relying upon para 6 of the communication by the Assessing Officer to the higher authority while seeking approval to initiate the reassessment proceedings and relying upon the reasons recorded by the Assessing Officer while issuing the notice under Section 148 of the Act, Shri Desai, learned Advocate appearing on behalf of the petitioner has veh .....

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ts of the case on hand and/or shall not be of any assistance to the petitioner. [4.3] Relying upon the decision of the Hon ble Supreme Court in the case of Commissioner of Income Tax v. P.V.S. Beedies Pvt. Ltd. reported in 237 ITR 13 (SC) and decision of the Division Bench of this Court in the case of N.K. Industries Ltd. v. Income Tax Officer (OSD) reported in 362 ITR 502 (Guj), it is vehemently submitted by Shri Desai, learned Advocate appearing on behalf of the Revenue that as observed by the .....

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, after forming an opinion, the reopening of assessment proceedings is permissible. Making above submissions and relying upon above decisions it is requested to dismiss the present petition. [5.0] Heard learned advocates appearing on behalf of respective parties at length. At the outset it is required to be noted that what is challenged in the present Special Civil Application is the impugned notice under section 148 of the Act by which the assessment for AY 2009-10 has been reopened. The reason .....

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and mining contractor. For the A.Y. 2009-10 the assessee firm has claimed depreciation @ 30% on dumpers, lorries etc. amounting to ₹ 3,32,84,568/- the assessee firm is primarily a contractor and income received is towards civil work executed & from contract work. The higher rate of depreciation @ 30% is admissible on motor vehicles only if they are used for the business of hiring. In other cases normal rate of depreciation i.e. @ 15% is allowable to assessee firm being a contractor and .....

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pening of the assessment is solely on the basis of the objection raised by the audit party and/or audit objection and the formation of the opinion by the Assessing Officer that the income of ₹ 1,66,42,284/- has escaped assessment has been vitiated inasmuch as there is no independent formation of opinion by the Assessing Officer on the escapement of the income from assessment. [5.2] It is required to be noted that though in the objections raised by the petitioner against reopening of the as .....

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opinion that the income of ₹ 1,66,42,284/- had escaped assessment. However, nothing has been mentioned with respect to any objections raised by the audit party and/or any audit objection. Be that as it may, to satisfy ourselves whether the reopening of the assessment proceedings is solely on the basis of the audit objection raised by the audit party and/or at the instance of the audit party only and/or whether there is any independent formation of opinion by the Assessing Officer that the .....

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that the Assessing Officer submitted its reply to the aforesaid audit query and justified the depreciation claimed by the assessee at the higher rate i.e. 30% on the dumpers and justified allowing such depreciation and requested to drop the audit objection / query. However, thereafter again the audit party maintained their objection and observed that the Assessing Officer made evasive reply. That only thereafter the Assessing Officer had decided to reopen the assessment. That prior to the issuan .....

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in the matter it is proposed to grant the approval for remedial action u/s 147 of the I.T. Act, 1961. 5. Though details of depreciation claimed made by the assessee are available on record but from the assessment folder, it is noted that the issue of depreciation has not been discussed during the assessment proceedings and the assessee has been allowed excessive relief. The issue is squarely covered with sub section (c) of explanation 2 of section 147 of the I.T. Act. Therefore I have reason to .....

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ble. As observed in para 4 as the tax effect is reported by the audit party is ₹ 74.10 Lacs and to safeguard the interest of Revenue and considering the guidelines in the matter it was proposed to grant approval for a remedial action under section 147 of the Act. It is true that in para 5 the Assessing Officer had mentioned that he has reason to believe that there is an escapement of income to the tune of ₹ 1,66,42,284/-for AY 2009-10. However, both paras 4 and 5 are required to be r .....

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to grant the approval for remedial action under section 147 of the Act, the Assessing Officer still had maintained that the audit objection raised by the audit party is not acceptable. Therefore, the formation of the opinion by the Assessing Officer and his reason to believe that there is any escapement of income to the tune of ₹ 1,66,42,284/- for AY 2009-10 has been vitiated. If aforesaid para 4 would not have been there and even on the basis of the audit objection and/or considering the .....

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of the case, the formation of the opinion by the Assessing Officer while reopening the assessment proceedings and his reason to believe that the income has escaped the assessment has been vitiated and therefore, the reopening of assessment proceeding for AY 2009-10 is not valid and permissible. [5.5] In the case of Shilp Gravures Ltd. (Supra) after considering the decision of the Division Bench of this Court in the case of Adani Exports v. Dy. CIT reported in [1999] 240 ITR 224 (Guj.) and the de .....

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(Supra). [5.6] Now, so far as the reliance placed upon the decision of the Hon ble Supreme Court in the case of P.V.S. Beedies Pvt. Ltd. (Supra) and the decision of the Division Bench of this Court in the case of N.K. Industries Ltd. (Supra) by Shri Desai, learned Advocate appearing on behalf of the Revenue is concerned, it is true that the information given by the audit party and/or on the audit objection, can be used for the purpose of reopening of the assessment. However, for that there must .....

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