TMI Blog2018 (2) TMI 1910X X X X Extracts X X X X X X X X Extracts X X X X ..... of assets; and in response to that assessee has filed a detailed reply which has already been incorporated above. CIT (A) too has given this finding that this precise issue which has been raised by the AO in the reasons recorded has been dealt by the AO in the original round of assessment proceedings. Thus, on the present facts it cannot be held that there is any failure on part of the assessee to disclose fully and truly all material facts relevant for the assessment and without ascribing any such failure on part of the assessee, the reopening u/s 147 is clearly barred by limitation. It is a well settled proposition of law as laid down in the aforesaid judgments as relied upon by the Ld. Counsel that if there is no allegation in the reasons recorded that assessee has failed to disclose fully and truly all material facts necessary for assessment, then action u/s 147 after the expiry of four years from the end of the relevant assessment year is unsustainable. - Decided against revenue. - ITA No.:- 907/Del/2015 Assessment Year: 2005-06 - - - Dated:- 28-2-2018 - Shri Amit Shukla, Judicial Member And Shri Prashant Maharishi, Accountant Member Department by: Shri Amit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 91,44,563. On examination of the file and documents placed on the record, it is seen that the assessee company has leased some assets including plant and machinery to other company. It receives the rental income w.r.t. those assets and charges depreciation on those assets in the profit and loss account. During the year under consideration, substantial assets were de-leased and certain machineries were removed from the lease which resulted in reduction of income from rent of these assets. However, depreciation was charged on full value of the assets leased. Therefore, the proportionate amount of depreciation should have been disallowed. Further, full depreciation was charged and allowed on newly acquired assets though these were used for less that 180 days. Such a claim was of ₹ 1,46,23,965. Therefore, I have reasons to believe that income to this extent has escaped assessment within the meaning of section 147. Notice under section 148 is therefore required to be issued. 3. The assessee against the said reopening, raised detailed objections before the AO vide letter dated 27.8.2012, which has been disposed of by the AO vide order sheet dated 7.8.2012. Thereafter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 143(3), the AO has not specifically recorded in the reasons the finding that income had escaped assessment as a result of the appellant 'not making full and true disclosure of material facts' in the return of income . In view of the above, following the decision of Hon'ble Delhi High Court in the case of Rural Electrification Corporation Ltd. vs. CIT (supra) reopening of assessment is held to be bad in law. 5. Before us the Ld. DR strongly relying upon the order of the AO submitted that, AO was justified not only reopening the case u/s 147, but also has disallowed the depreciation on the ground that leased assets were not used for the entire year and lease rental income was shown only for one month in respect of the lease out assets as per the agreement dated 1.3.2005 and assessee could not give details of deleased assets. 6. On the other hand, Ld. Counsel for the assessee narrating the entire facts submitted that, firstly, no failure has been ascribed by the AO in the reasons recorded and he has relied upon the same material facts which have been examined by the AO during the course of original assessment proceedings u/s 143(3). Therefore, within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,571/-. During the year under consideration the rental income earnings of the company has reduced from ₹ 150,92,383/- to ₹ 81,37,941/-. The rental income is reduced due to certain assets being de-leased particularly those pertaining to the Braun production. Hence there is reduction in lease income. Detail of agreement wise lease rental Income received from has already been submitted with our submissions dated November 28,2008along with copies of the debit notes for some of the periods. Though certain assets related to Braun were de-leased, but the assessee company also leased out certain assets and executed following agreements. Oral B category 1. Agreement dated 01-07-2004 for manufacture of Tooth brushes. 2. Agreement dated 01-03-2005 for manufacture of Tooth brushes. Braun category 1. Agreement dated 01-03-2005 for manufacture of Shaver brush We are attaching the following documentary evidences for your reference and co-relation. 1. Confirmation of lease rental from M/S. Rialto Enterprises Pvt. Ltd. -Refer Exhibit' 1'. 2. Updated Equipment Lease agreement dated March 01, 2005 in respect of Braun assets on lease (Your good self ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ements have commenced from 01-03-2005, therefore the lease rental income earned is less as compared with the claim of depreciation as per the Income tax Act. The depreciation claimed as per the provision of the Income tax Act, on plant and machinery and moulds is at @ 25% / 12.5% and 40% / 20%. Assets Rate of Depreciation More than 180 days Less than 180 days Total Additions Depreciation on assets acquired for more than 180 days Depreciation on assets acquired for less than 180 days Depreciation on additions made Plant and Machinery 25% 9,486,844 14,327,449 23,814,293 2,371,711 1,790,931 4,162,642 Moulds 40% 23,806,857 3,807,707 6,614,564 1,122,743 761,541 1,884,284 Total 12,293,701 18,135,156 30,428,857 3,49 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 143(3). The reasons recorded for reopening the assessment has already been incorporated above. From a bare perusal of the same, it can be seen that AO is referring to the same documents which were placed on record during the course of original proceedings and from there he derives the inference that proportionate amount of depreciation should have been disallowed because certain assets were de-leased which has resulted into reduction of income from rent of these assets and depreciation of assets has been used for less than 180 days. First of all, we find that the issue of depreciation on plant and machinery was specifically asked and enquired upon by the AO in the original assessment proceedings including the rental income received from lease of assets; and in response to that assessee has filed a detailed reply which has already been incorporated above. Ld. CIT (A) too has given this finding that this precise issue which has been raised by the AO in the reasons recorded has been dealt by the AO in the original round of assessment proceedings. Thus, on the present facts it cannot be held that there is any failure on part of the assessee to disclose fully and truly all materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the objections were liable to be quashed. (3) BLB Limited vs. ACIT, [2012] 343 ITR 129 (Del) Held, allowing the petition, that assessee had disclosed fully and truly all material facts relevant for the assessment. The reasons recorded did not disclose or state that there was failure or omission to disclose fully and truly all material facts. There was no indication and it was not alleged that there was some material or information available on record when reasons to reopen were recorded, to show that the assessee had concealed or had not disclosed fully and truly all material facts. In the original assessment proceedings the Assessing Officer had considered and examined whether or not the non-compete fee payment was of capital or revenue nature. The Assessing Officer accepted the stand of the assessee and treated the non-compete fee as a revenue expenditure. The reassessment proceedings could not, therefore, be initiated on the ground that the Assessing Officer was wrong and had misapplied and wrongly understood the law/legal position. 8. Accordingly, we do not find any reason to deviate from the finding and the conclusion drawn by the Ld. CIT(A) that the reassessm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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