TMI Blog2016 (1) TMI 1393X X X X Extracts X X X X X X X X Extracts X X X X ..... be a precedent for assessee’s claim of depreciation on GDS and interconnect TAS at the rate of 60% by treating them as a computer. That issue has to be decided according to its own merit in an appropriate case. - decided in favour of assessee. Grant depreciation on TAS for the full year of the eligible depreciation - Held that:- On a perusal of the order passed by CIT(A) it is observed that after examining the relevant facts and materials on record he has given a categorical finding of fact that interconnect TAS was put to use in July 2000 hence the observation of the AO that it was used for less than six months is not proved on record. D.R. has not brought any material before us to controvert the above said finding of the Ld. CIT(A), we are unable to accept the plea of the Department. Accordingly, this ground is also dismissed. - ITA No.3417/M/2009 & CO No.201/M/2012, ITA No.3326/M/2009 - - - Dated:- 29-1-2016 - Shri Saktijit Dey And Shri Ramit Kochar, JJ. Assessee by : Shri Dinesh Vyas, A.R. Revenue by : Shri G.M. Doss, D.R. ORDER Saktijit Dey, These cross appeals and CO are directed against consolidated order of Ld. CIT(A)-XXI, Mumbai dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 147 of the Act. 4) On the facts and circumstances of the case, the notice dated March 30, 2006 issued under Section 148, though issued within four years from the end of the relevant assessment year, is ab inito void and bad in law and therefore, the reassessment proceedings deserve to be quashed on the following counts - no new I tangible material has been brought on record at the time of reassessment; - the reassessment is based on mere change of opinion. The Appellant prays that the notice issued under Section 148 dated March 30, 2006 be quashed and entire reassessment proceedings held to be ab initio void and bad in law. The Appellant craves leave to add to, alter, amend or withdraw the above Ground of Appeal and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing. As the issue raised by the assessee in the additional grounds are purely legal issues affecting the jurisdiction of the AO, hence, goes to the root of the, we propose to dispose of the additional grounds at the first instance. 4. The Ld. D.R. has raised a preliminary objection that the assessee having not raised the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsequently, as it appears, on verifying the assessment records the AO formed an opinion that the assessee has claimed excess depreciation by treating certain assets as computers instead of plant machinery. Accordingly, after recording reasons for formation of belief that income has escaped assessment or has been under assessed, AO issued a notice under section 148 of the Act on 30.03.06. During the reassessment proceedings, though, the assessee objected to the proposed disallowance of depreciation on GDS and interconnect tax audit system (TAS) claiming them to be part of computer system, hence, eligible for depreciation at the rate of 60% and in support of such claim furnished an opinion from a technical expert but the AO was not convinced with the same. He observed that GDS system does not process any data or generate any new entity. He therefore held that GDS is to be treated as plant machinery and not computer and the proper rate for depreciation is 25% which was also the decision by the AO in the assessment year 2000-01. Similarly, the AO also held that interconnect system TAS is also not computer but part of plant machinery, hence depreciation at the rate of 25% is allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submitted, the AO only reviewing or revisiting the materials available on record which were considered at the time of original assessment proceedings has reopened the assessment. Further, explaining Ld. Sr. Counsel submitted, in the tax audit report filed by assessee along with the return of income in compliance to section 44AB of the Act all materials/informations relating to claim of depreciation on GDS as well as interconnect TAS was disclosed. He submitted, in course of the original assessment proceeding under section 143(3) of the Act, the AO had not only inquired into assessee s claim of depreciation but has also applied his mind to the facts and materials on record and completed the assessment after accepting assessee s claim. He therefore submitted that the AO having already formed his opinion with regard to assessee s claim of depreciation on GDS and interconnect TAS at the time of completion of original assessment, reassessment proceeding on the basis of very same material amounts to review of the earlier order passed on a mere change of opinion. To demonstrate the fact that the assessee s claim of depreciation on GDS was enquired into and examined by the AO during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court as well as different High Courts including the Jurisdictional High Court. 11. The Ld. CIT D.R. Shri G.M. Doss on the other hand justifying the validity of reopening of assessment submitted, when the AO has not examined the issue relating to claim of depreciation on GDS and interconnect TAS and has not applied his mind to that issue it cannot be said that there is formation of opinion by the AO resulting in change of opinion, hence, reopening of assessment is invalid. The Ld. D.R. submitted, the assessee has not demonstrated that the AO during the original assessment proceeding has examined the issue relating to claim of deprecation on GDS and interconnect TAS. The Ld. D.R. submitted, in the questionnaire issued by the AO during the original assessment proceedings there is nothing to suggest that AO has specifically inquired into these two issues. Though, in the statement of depreciation forming part of tax audit report assessee has furnished information relating to claim of depreciation on interconnect TAS but there is no indication that the AO has either examined the issue or applied his mind relating to assessee s claim of depreciation on it. As far as claim of depre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant. 14. We have patiently heard the Ld. Counsels and carefully considered the submissions made by them on the basis of facts and materials on record and relevant case laws. The sum and substance of the argument from assessee s side is the reopening of assessment is invalid as no new information/tangible material came to the possession of the AO after completion of original assessment to form a belief that income has escaped assessment or has been under assessed. 15. The second contention from the assessee s side is, AO having examined all these materials and formed an opinion while accepting assessee s claim of depreciation in the original assessment, the reopening on basis of very same material amounts to review of the earlier order passed on a mere change of opinion which is not permissible under law. For examining the validity/acceptability of the above said contentions of the assessee it is necessary to examine the facts on record to ascertain whether the AO in course of the original assessment proceeding has examined assessee s claim of depreciation on GDS and interconnect TAS and whether subsequent to the completion of original assessment there is any fresh informatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a catena of decisions have been cited by Ld. Counsels, it is not necessary to deal with each one of them. Suffice to say, we would prefer to discuss the principles laid down in some of the judicial precedents placed before us. In case of Ranbaxy Laboratories Ltd. vs. DCIT (supra) the Hon ble Delhi High Court referring to explanation 1 of section 147 observed that disclosure made by the assessee in a tax audit report is in the nature of statutory disclosure hence cannot be considered to be a piece of evidence which was hidden in some books of account which the AO could have possibly with due diligence discovered. It was held that the tax audit report having placed before the AO along with the return which the AO was duty bound to go through before completing the assessment will not fall in the category of material as referred to in explanation 1 to section 147. The Hon ble Bombay High Court in case of 3 I Infotech Ltd. vs. CIT (supra) after examining the true import of explanation 1 to section 147 and the legislative intent expressed similar view. The Hon ble Supreme Court in much referred case of CIT vs. Kelvinator of India Ltd. 320 ITR 561 has in clear terms held that even after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same set of facts and materials would tantamount to review of the assessment order passed earlier that too on a mere change of opinion which is not permissible under law. Accordingly, in our considered opinion issuance of notice under section 148 of the Act in the present case is invalid. As a natural consequence the assessment order passed in consequence thereof also has to be declared as invalid and accordingly is to be quashed. Before parting, we may make it clear that the decision rendered by us as above is purely in the context of validity of reopening of assessment under section 147 of the Act and cannot be considered to be a precedent for assessee s claim of depreciation on GDS and interconnect TAS at the rate of 60% by treating them as a computer. That issue has to be decided according to its own merit in an appropriate case. As we have quashed the assessment order while considering the issue raised in the additional ground, the grounds raised on merits are of mere academic interest, hence there is no necessity to adjudicate them. 16. In the result, assessee s appeal is allowed. ITA No.3326/M/09 17. Department has raised the following grounds in its appeal: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has used the asset for more than six months, hence, eligible to claim full depreciation. Against the aforesaid order of the Ld. CIT(A) the Department is before us. 20. However, as could be seen from the grounds raised, they relate to relief granted by the Ld. CIT(A) in both the appeals filed by the assessee, though, the Department has filed a single appeal. As far as ground Nos.1(a) and 2 are concerned they relate to the relief granted by the Ld. CIT(A) against the first assessment order passed on reopening. As we have held the reopening of assessment to be invalid in that case and quashed the assessment order these grounds have become redundant and do not require to be adjudicated. As far as ground Nos.1(b) is concerned, on a perusal of the order passed by Ld. CIT(A) it is observed that after examining the relevant facts and materials on record he has given a categorical finding of fact that interconnect TAS was put to use in July 2000 hence the observation of the AO that it was used for less than six months is not proved on record. As the Ld. D.R. has not brought any material before us to controvert the above said finding of the Ld. CIT(A), we are unable to accept the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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