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TMI Blog2018 (2) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... ract including supply and sales contracts, leasehold properties, after service parts business personnel, operation associated with the assets and such other rights or tangible and intangible properties relating to the CCP business for a total consideration of Rs. 425,25,00,000/-. The petitioner filed a revised return of income on 26.09.2011, for the assessment year 2010-11 declaring income of Rs. 2,204,060,950/-. 2.Apart from other claims made, the petitioner claimed that they are entitled for depreciation on vendor and dealer network amounting to Rs. 43,29,00,068/- and the details of depreciation were disclosed in the tax audit report annexed with the return of income. On submission of the return, an intimation under Section 143 (1) of the Act was issued accepting the return filed. Thereafter, the return was selected for scrutiny and notice under Section 143 (2) of the Act was issued on 02.07.2013, calling upon the petitioner to appear before the respondent and furnish various details in connection with the assessment. In response to the notice, the petitioner appeared before the respondent and during the course of assessment proceedings, the petitioner was advised that it is leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted his rejoinder to the objections raised by the CAG. Therefore, the petitioner would state that the impugned re-assessment proceedings is based on an audit objection raised in the earlier years and not based on an independent view of the assessing officer and such reopening is impermissible in law. The petitioner responded to the notice issued under Section 142 (1) of the Act and placed all materials and details including the Business Transfer Agreement and stated before the respondent that he lacks jurisdiction to initiate the impugned reopening proceedings. 3.Further, it was pointed out that the reassessment did not emanate from any material on record, but was merely based on a change of opinion of the assessing officer. These contentions were raised by the petitioner in their objections to the reopening. However, those objections have been rejected by order dated 16.03.2016, which is impugned in this writ petition. 4.Mr.Sandeep Bagmar, learned counsel for the petitioner pointed out that the impugned reassessment proceedings is a clear case of change of opinion and there was no tangible material available with the respondent to reopen the assessment for the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing officer on the objections of the audit party, the assessing officer had to necessarily issue rectification proceedings. Therefore, it is submitted by the learned counsel for the petitioner that the impugned proceedings are liable to be set aside, as it is clearly a case of change of opinion and the assessing officer cannot reopen the proceedings based upon an audit objection and in terms of the decision in Smifs Securities Ltd. (supra) the claim of depreciation as allowed by the assessing officer in the scrutiny assessment dated 31.03.2014 is proper and the reopening proceedings deserve to be set aside. In support of such contention, the learned counsel for the petitioner placed reliance on the decision of the Hon'ble Supreme Court in the case of Commissioner of Income-tax v. Kelvinator of India Ltd. reported in [2010] 320 ITR 561(SC) with particular reference to the aspect of change of opinion. 8.With regard to audit objections, the learned counsel for the petitioner relied upon the decisions of the Hon'ble Supreme Court in Indian & Eastern Newspaper Society v. Commissioner of Income-tax reported in [1979] 119 ITR 996(SC) and in M/s.Larsen & Tubro Ltd. v. State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel for the parties and carefully perused the materials placed on record including the counter affidavit filed by the respondent. 15.Before I venture to consider as to whether the impugned reopening is a case of change of opinion or not, it would be necessary to point out that the reasons for reopening as furnished by the assessing officer vide communication dated 07.05.2015, pertains to claim for depreciation with regard to dealer and vendor network. However, the counter affidavit filed by the respondent proceeds solely on the claim for depreciation on goodwill, which was not the reason for reopening of the assessment. There is no reasonable explanation given by the respondent for such a discrepancy, which is a manifest error and the counter affidavit in this regard deserves to be rejected. 16.The second aspect to be considered is whether the Court should await the decision of the Hon'ble Division Bench, wherein the validity of the assessment orders for the years 2008-09 and 2009-10 are being tested. It is seen that the writ petition challenging those assessment orders were dismissed on the ground that the petitioner has to avail the alternate remedy of appeal. The primary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s much wider. 19.The Hon'ble Supreme Court pointed out that a schematic interpretation to the words reason to believe has to be given failing which, Section 147 would give arbitrary powers to the assessing officer to reopen assessments on the basis of mere change of opinion, which cannot be per se reason to reopen. It was further pointed out that there is a conceptual difference between power to review and power to reassess. The assessing officer has no power to review; he has power to reassess and such reassessment is to be based on certain pre-conditions. Further, the assessing officer has power to reopen, provided there is tangible material to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. 20.Now, we turn to the scrutiny assessment order for the year 2010-11 to ascertain as to whether the claim for depreciation on the vendor and dealer network was considered by the assessing officer. It is not in dispute that such claim for depreciation, (i.e.,) on the goodwill and vendor network was not claimed while filing the revised return of income. However, in the course of assessment proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... network and goodwill. Thus, it is not solely based upon what was done in the previous assessment years as contended by the learned Senior Standing Counsel for the Revenue. 21.In Smifs Securities Ltd. (supra), one of the questions, which arose for consideration is as to whether the goodwill is an asset within the meaning of Section 32 of the Act and as to whether the depreciation of goodwill is allowable under the said Section. The Hon'ble Supreme Court after taking note of the factual position in the said case, held that in the process of amalgamation, the assessee/Company had acquired a capital right in the form of goodwill because of which the market worth of assessee/Company stood increased and this finding was upheld by the Income Tax Appellate Tribunal and was affirmed by the Supreme Court. 22.In Areva T and D India Ltd. (supra), one of the questions, which arose for consideration before the Hon'ble Division Bench of the Delhi High Court was whether the know-how, business contracts, business information, etc., acquired as a part of slump sale described as goodwill, were not entitled for depreciation under Section 32(1)(ii) of the Act and the question was answered in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transferor, without any interruption. The aforesaid intangible assets are, therefore, comparable to a license to carry out the existing transmission and distribution business of the transferor. In the absence of the aforesaid intangible assets, the assessee would have had to commence business from scratch and go through the gestation period whereas by acquiring the aforesaid business rights along with the tangible assets, the assessee got an up and running business. This view is fortified by the ratio of the decision of the Supreme Court in Techno Shares and Stocks Ltd.(supra) wherein it was held that intangible assets owned by the assessee and used for the business purpose which enables the assessee to access the market and has an economic and money value is a license or akin to a license which is one of the items falling in Section 32(1)(ii) of the Act." 23.Thus, the assessing officer while completing the assessment under Section 143(3) of the Act took into consideration both the aforementioned decisions and considered what would be business or commercial rights of similar nature . The assessing officer was fully justified in holding that the vendor and dealer network rights and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Department on a point of law cannot be regarded as "information" within the meaning of section 147(b) of the Income Tax Act, 1961." 25.Recently, in the case of M/s.Larsen & Tubro Ltd. (supra), the Hon'ble Supreme Court in a case arising out of a proceedings under the Bihar Finance Act, 1981, and the Central Sales Tax Act, 1956, examined as to what would be the meaning of the expression information and held as follows: "27.The expression information means instruction or knowledge derived from an external source concerning facts or parties or as to law relating to and/or after bearing on the assessment. We are of the clear view that on the basis of information received and if the assessing officer is satisfied that reasonable ground exists to believe, then in that case the power of the assessing authority extends to re-opening of assessment, if for any reason, the whole or any part of the turnover of the business of the dealer has escaped assessment or has been under assessed and the assessment in such a case would be valid even if the materials, on the basis of which the earlier assessing authority passed the order and the successor assessing authority proceeded, wer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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