TMI Blog2017 (2) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... rom truck terminus and since tax liability of the assessee is dependent on this very issue, the contention raised by the learned counsel for the Revenue that this question cannot be examined by us in this proceeding under section 260A of the Income-tax Act is rejected. The ratio in National Thermal Power Co. Ltd. v. CIT reported in [1996 (12) TMI 7 - SUPREME Court] supports our decision. Substantial questions of law are answered in favour of the assessee and we further declare that the Gotanagar truck terminus is a plant and not building, for the purpose of claiming depreciation under section 32 read with section 43 of the Income-tax Act. Consequently the assessee is held entitled to depreciation at the rate of 25 per cent. as prescribed for plant and not at 10 per cent., as applicable for building. - Decided against revenue - I. T. A. Nos. 7 and 8 of 2014 - - - Dated:- 24-11-2016 - Hrishikesh Roy And Nelson Sailo, JJ. For the Appellant : U. K. Borthakur and D. Nath For the Respondent : S. Sarmal JUDGMENT 1. Heard Mr. U. K. Borthakur, the learned counsel for the appellant/assessee. Also heard Mr. S Sarma, the learned standing counsel, Income-tax Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erminus by considering the same to be plant for the purpose of quantifying the applicable rate of depreciation. 5. The above claim, in the understanding of the Assessing Officer, was found to be an excess claim towards depreciation and thus the Assistant Commissioner of Income-tax opined that he has reason to believe that income has escaped assessment, within the meaning of section 147 of the Income-tax Act. Thus notice for reassessment was issued under section 148 of the Income-tax Act. 6. In their response, the assessee submitted that their original return should be treated as their response to the notice under section 148 of the Income-tax Act and they contended in their letter dated July 18, 2007 as follows : The truck terminus has been constructed on a plot of land measuring 27 bighas (36,415 sq. mtr.) of land allotted by the Government of Assam. We spend an amount of ₹ 193.82 lakhs on development of land for construction of truck parking yards, RCC ramp for truck washing, dormitory for the truck drivers, lavatory to be used by the trucks drivers with an intention to earn income by way of parking fees from the trucks to be parked there. Around 300 trucks can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act, it was found that the Assessment Officer had bona fide reason to believe that income has escaped assessment and there was linkage between material and belief and thus the jurisdiction question was answered against the assessee. 9. The matter was then taken by the aggrieved assessee to the Income-tax Appellate Tribunal, where both the appeals were considered analogously. In its judgment, the Income-tax Appellate Tribunal held as under : 13. In the assessment years under consideration, the Assessing Officer has reopened the assessment under section 147 of the Act and there is amendment in section 147 of the Act with effect from April 1, 1989 and as per the amended provisions, it requires fulfilment of one condition namely the Assessing Officer has reason to believe that income has escaped assessment. Once, the said condition is fulfilled, the Assessing Officer has the jurisdiction to take action under section 147 of the Act. There being no finality of the assessment at the notice under section 143(1) of the Act, it will be justified for the Assessing Officer to take into consideration the materials placed before him by the assessee along with the original retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... space for use of parking of trucks. The truck terminus is parking yard. Therefore, it cannot be considered as plant . . . 16. In view of the above, we are of the opinion that our interference is not required in the findings of the learned Commissioner of Income-tax (Appeals). Accordingly, we dismiss this ground of appeal of the assessee in both the assessment years. 10.1 Representing the appellant (assessee), Mr. U. K. Borthakur, the learned counsel submits that reassessment can be ordered only when the Assessing Officer has reasons to believe that income chargeable to tax has escaped assessment and such reasons to believe cannot just be suspicion of the Income-tax Officer and there has to be live link between the materials under consideration and the belief reached by the Assessing Officer. In the instant case no reasons are disclosed by the Assessing Officer to proceed under section 147/148 of the Income-tax Act and therefore the entire proceeding is contended to be without jurisdiction. 10.2 Referring to the order passed by the Assessing Officer on April 10, 2007, the learned counsel for the assessee submits that what exactly was the basis of the belief of the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not be read as income from plant, which attracts higher depreciation benefits for the assessee. 10.8. The learned counsel for the Revenue relies on CIT v. Anand Theatres [2000] 244 ITR 192 (SC) to contend that separate rates of depreciation are envisaged for plant and building, under section 32 of the Income-tax Act and since plant with its exclusive meaning under section 43(3), does not include building, the depreciation in the present case for the truck ter minus has to be related to income earned from building and not from plant, which has higher rate of depreciation. 11. We have carefully considered the submissions made by the learned counsel for the parties. The first issue that needs to be considered here is whether initiation of reassessment proceeding under section 147 of the Income-tax Act was justified on the materials. This section allows the Assessing Officer to reassess income only if, he has reason to believe that income for concerned assessment year has escaped assessment. The material basis for the reason to believe will justify the action of the Assessing Officer to act against a particular assessee. Therefore it is relevant to determine whether relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be a live link between the material and the belief. In Ganga Saran and Sons [1981] 130 ITR 1 (SC), the apex court has observed that if there is no rational and intelligible nexus between the reasons and the belief, so that on such reasons no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the Assessing Officer could not have rea son to believe that any part of the income of the assessee had escaped assessment . . . 13. The analysis of the judicial pronouncement as extracted above reflects that there must be a live connection between the materials on which conclusions are reached by the Assessing Officer in formation of his belief that income chargeable to tax has escape assessment. The reasons must be based on bonafide belief and cannot be based upon extraneous materials. In other words, there must be rational or intelligible nexus between the reason and the belief so that any reasonable person properly instructed on facts and on laws, can reasonably entertain the belief needed for acting under section 147 of the Income-tax Act. It is also important that the relevant materials must appear from the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppurtenant building in the truck terminus. The definition of the term plant is of wide magnitude and when it is clear enough that the buildings are not let out by the assessee to earn rent, the parking fee income generated by the truck terminus cannot be attributed to the building which houses the resting quarters and the toilet facility, for the truck drivers. 17. Under section 43 of the Income-tax Act, for the purpose of allowable depreciation of income under section 32, unless the context otherwise requires, the definition given in sub-section (3) of section 43 has to be taken into account. Under section 43(3), plant includes ships, vehicles, books, scientific apparatus and surgical equipment used for the purpose of the business or profession and this itself makes it clear that the facility or the tools used for generating income, can be a plant and need not connote only factories or require use of machinery. Of course buildings are excluded from the definition of plant, under section 43(3) of the Income-tax Act. 18. In the above context, the Madhya Pradesh High Court in Babulal Agrawal v. CIT reported in [2005] 272 ITR 454 (MP) was considering whether depreciation on open ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer on April 10, 2007 is liberally construed, we do not find the requisite material or the nexus on the basis of which, the reasonable belief is reached, for ordering the reassessment proceeding. Therefore in our understanding, the action initiated against the assessee under section 147/148 appears to be without any jurisdiction and it is declared so accordingly. 20. As the learned counsel for the Revenue has raised the question on whether the jurisdictional issue can be questioned before the High Court in a proceeding under section 260A of the Income-tax Act, we may note here that the assessee, even before the first appellate authority, had questioned the legality of reassessment under section 147 of the Income-tax Act and this issue was specially dealt in para 5.1 and 5.4 by the Commissioner (Appeals) when he rejected the assessee's appeal, through his order dated November 9, 2010 (annexure C). Also before the Tribunal, the jurisdictional question to act under section 147 of the Income-tax Act was again raised by the assessee and the Tribunal too rejected the contention. Moreover, the substantial question of law formulated by the High Court when the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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