TMI Blog2009 (4) TMI 972X X X X Extracts X X X X X X X X Extracts X X X X ..... d of ₹ 30,30,976 was granted. The A.O. issued a notice under section 148 on 21.3.2006. In response to the notice, the assessee filed a return under protest under section 148 on 26.4.2006. The reason for reopening given by the Assessing Officer was on excess depreciation granted on (a) Cylinders at the rate of 100% instead of 25% and (b) the assets acquired from other business unit on the actual cost of acquisition to the assessee instead of cost to previous owner. The assessee supplies gases in three different modes viz on-site, bulk and packaged cylinders are used only when gases are delivered through packaged mode. These cylinders are durable and returnable packing materials used for effecting delivery of gases to the customers. The assessee has applied the prescribed depreciation rate of 100% on cylinders as per Item No. III(3)(V) of Part A in Appendix I of Income Tax Rules, 1962 which does not distinguish cylinders for rate of depreciation on basis of the usage. The Assessing Officer has however allowed depreciation at the rate of 25% as elaborated in his impugned order. The assessee has acquired certain assets from other business units and has considered the actual cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee held that provision of Expln. 3 to Section 43(1) would apply to the assessee's case. He held that the Assessing Officer was satisfied that the main purpose of such assets directly or indirectly to the assessee was to reduce to the liability of income tax by claiming depreciation with reference to enhanced cost when the only cost to the assessee had been adopted by the Assessing Officer on the approval of Joint Commissioner. 5. The learned counsel before us initiated his arguments by submitting primarily holding that the reassessment proceedings have not been complied in accordance with the provisions of Income Tax Act, 1961 as duly supported by the various case laws on the issue which subject matter converges to the fact that the reasons which are recorded should be disclosed by the Assessing Officer when income having escaped assessment should have been fully noted by the Assessing Officer. This factual link is to safe guard to reopening of the concluded assessments. As per the action of the Assessing Officer and part relief granted by the learned CIT(A), it clearly indicates that neither of the authorities were aware of the basic requirement of bringing to tax the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of rectification of mistake apparent from record could not to be left undone after assuming jurisdiction under section 147/148. On perusal of both the orders would indicate that the assumption of jurisdiction under section 147/148 has been left in the lurch by both the authorities when the significant basis for allowing depreciation on the gas cylinders purchased by the assessee from the vendor company stood established to be allowed at 100% clinches the issue in favour of the assessee when the learned CIT(A) chose to give part relief to the assessee without elaborating on the issue of assessee's ground agitating the assuming of jurisdiction under section 147 by the Assessing Officer. Because the assuming of jurisdiction under section 147 has close connection to the merits of the assessee's claiming depreciation, he argued that the CIT(A) erred in upholding the disallowance of depreciation made by the Assessing Officer on the assets valued at ₹ 302,237,311. The CIT(A) erred in concluding that the ground taken by the assessee is diversed from the facts obtained from the impugned reassessment order under section 147 of the Income Tax Act, 1961. In this regard, the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en fraud or collusion between the vendor and the vendee and there has been inflation of the value for ulterior purposes. It is only under these circumstances that the Income Tax authorities can refuse to accept the contractual price and ascertain what actual cost is. This judgment has been subsequently followed in several High Court judgments. The CIT(A) failed to note the English decision in Craddock vs. Zevo Finance Co. Ltd. (1944) 1 All ER 566 which held that as long as the purchaser has regarded the consideration for transfer as proper, his estimate could not be critically examined and the transfer remained unimpeachable. This decision has been cited with the approval of the Supreme Court in Jogta Coal Co. Ltd. vs. CIT (1959) (36 ITR 521). The CIT(A) failed to note that the decision of the Bombay High Court in Bansilal Abirchand Spinning and Weaving Mills vs. CIT (75 ITR 260). It was held that unless there is material on record to show that the valuation made was either exaggerated or incorrect, the department could not ignore the amount paid. The cost has to be ascertained by what price could reasonably be paid taking into account the conditions of the market. On the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee is what it is legitimately entitled to and is based on the actual value it has paid for the assets, it took over, as part of the business/division that it acquired from the transferor. Given the same, the grounds for relying upon the afore mentioned Explanation do not exist and hence, the Department ought to allow the depreciation claimed by the assessee. Further, the appellate order of the respondent does not state any reasons for either rejecting the depreciation claimed by the assessee or for invoking the provisions of the aforementioned Explanation. In the light of the same, the impugned order was in violation of the principles of natural justice and hence ought to be set aside. The respondent ought have held that there was no authority of law for the Assessing Officer to call upon the assessee to submit the written down value of the assets in the hands of the transferor and that the assessee was not bound by law to do so. The assessee having acquired the assets at a particular price, based on a valuation report, the assessee is entitled to claim depreciation on the same figure and is not required to either rely upon the written down value's of the said assets in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /148 but confined himself to consider the assessee's agitation on two effective grounds whether the assets procured by the assessee during the impugned assessment year were entitled for depreciation other than as claimed by the assessee. He considered that the gas cylinders so procured by the assessee were entitled to depreciation @ 100% but on the pretext of considering the provisions of Expln. 3 to section 43(1) held that the main purpose of the transfer of such assets directly or indirectly to the assessee was for reducing the liability of income tax which as per the assessment order was purely on giving a finding that excess depreciation had been claimed @ 100% on those assets as against 25% allowed. This indicates that the assumption for reassessment proceedings and partly allowing the appeal of the assessee for claiming 100% depreciation on gas cylinders was complimentary. In partly allowing the assessee's appeal by bringing on record a fact which was neither considered for assuming jurisdiction nor for actually deciphering the same was merely because the Assessing Officer had sought the assessee's assistance for bringing out the value as was inscribed by the vend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We also find this issue as dealt with by the Chennai ITAT Bench in the case of ACIT vs. Ashok Leyland Ltd. reported in 111 ITD 341, although when the value of an asset being the land was sought to be enhanced by assuming jurisdiction under section 148 but was considered as based on suspicion and surmises and the claim of depreciation was found not to be admissible. The cost of the assets as taken by the assessee was to claim depreciation in accordance with the provisions of Income Tax Act, 1961 as prescribed in the agreement for transfer of land along with the other plant and machinery. The physical valuation of the gas cylinders therefore became part of the value of the asset acquired as per the agreement against which finding no effort appears to have been made by the Assessing Officer for assuming jurisdiction under section 148. We find force in the submission of learned counsel that the provision of Expln. 4A to Section 43(1) cannot be made applicable to the assessee's case once the assessee has rendered to tax by claiming depreciation in accordance with the income tax provisions vis-a-vis the reason recorded by the Assessing Officer was only with respect to claim of depr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord by the department, we are of the considered view that a pre condition assuming jurisdiction under section 147/148 is to bring on record only the material facts that had not been brought on record by the assessee on having filed a revised return. We have perused in the paper book that all the records were available and more material for the Assessing Officer to establish that the value for depreciation had not been wrongly inscribed. The Assessing Officer after assuming jurisdiction could not ask the assessee to furnish the value of those very assets only to invoke the provisions of section 43(1) Expln. 3. Therefore, we are inclined to hold that assuming jurisdiction under section 147/148 was without basis when the material facts were available to the Assessing Officer in accordance with the provisions of Income Tax Act, 1961. The claim of depreciation on gas cylinders @ 100% could not be reduced to 25% which the learned CIT(A) allowed was the core consideration by the Assessing Officer therefore allowed the assessee's contention that there was no basis for him to assume jurisdiction under section 147/148. From the foregoing, we are inclined to hold that there was no mater ..... 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