RITESH K.AGARWAL,MUMBAI vs. ACIT, CIRCLE- 3(1)(2), MUMBAI

In grounds no.1 and 2, the assessee has challenged the validity of re–opening of assessment under section 147 of the Income Tax Act, 1961 (for short "the Act").

Brief facts are, the assessee, an individual, is engaged in the business of manufacturing of plastic packing material. For the assessment year under dispute, the assessee filed his return of income on 4th September 2009, declaring total income of ` 6,35,372. During the course of survey conducted under section 133A of the Act in assessee’s business premises, it was found that the assessee has not claimed additional depreciation under section 32(1)(iia) of the Act during the period wherein he was eligible for deduction under section 80IC / 80IB / 80IA of the Act. Whereas, he started claiming additional depreciation thereafter. It was found that additional depreciation allowable to the assessee for the impugned assessment year was to the tune of ` 77,67,405. On the basis of the aforesaid information, the Assessing Officer re–opened the assessment under section 147 of the Act. During the assessment proceedings, the Assessing Officer called upon the assessee to explain why additional depreciation on new plant and machinery should not be computed and allowed in the impugned assessment year. In response, it was submitted by the assessee that additional depreciation being in the nature of an incentive can be claimed by the assessee at his own option. The Assessing Officer, however, did not accept the submissions of the assessee and proceeded to compute additional depreciation for the year under consideration at ` 68,49,775, and also allowed the same while computing the income. However, he reduced the deduction claimed

The learned Authorised Representative submitted, the re– opening of the assessment has been made solely for the reason of allowing additional depreciation to the assessee. Therefore, the re– opening is not for the benefit of the Department but for the benefit of the assessee. He submitted, ultimately the Assessing Officer has allowed the additional depreciation and has determined the income at the same figure which was returned by the assessee in the return of income. Therefore, virtually, there is no escapement of income requiring re–assessment. In support of such submissions, the learned Authorised Representative relied upon the following decisions:–

The learned Departmental Representative submitted, though, learned Commissioner (Appeals) has dealt with various other aspects of reopening, however, he has not specifically dealt with the aforesaid submissions of the assessee. Therefore, the issue may be restored back to his file for fresh adjudication.

We have considered rival submissions and perused the material on record. Undisputedly, the assessee has filed the return of income for the impugned assessment year offering the income of ` 6,35,372. The Assessing Officer has also completed the assessment determining the income at the very same figure. Therefore, there is no variation to the income returned by the assessee. Consequently, there is no extra tax demand by virtue of the assessment order. Further, it is evident, the Assessing Officer has re–opened the assessment only for the reason that the assessee has not claimed additional depreciation in the year under consideration. In our view, non–claiming of additional depreciation does not result in escapement of income. Rather, the assessee has deprived himself of a particular benefit provided under the statute. We fail to understand how this can lead to escapement of income. This view of ours gets further strengthened as ultimately the 5 Shri Ritesh K. Agarwal Assessing Officer has determined the total income at the very same figure at which the assessee has filed the return of income. Therefore, it is proved beyond any shred of doubt that there is no escapement of income whatsoever to lead the Assessing Officer to form a belief that re–opening of assessment has to be made on account of escapement of income. It is trite law that the provision of section 147 of the Act is enshrined in the statute to enable the Revenue to assessee the income which has escaped assessment, thereby, the tax due on such income has not been paid by the assessee. Whereas, in the present case, it is the reverse. By re–opening the assessment, the Assessing Officer wants to confer certain benefit which the assessee at his own choice has not availed. This, in our view, cannot be the intent and purpose for which provisions of section 147 of the Act is provided in the statute. Therefore, in our considered opinion, the re–opening of assessment under section 147 of the Act in the present case has to be declared as invalid. Accordingly, we do so and quash the assessment order passed for the impugned assessment year. These grounds are allowed.

In view of our decision in the aforesaid legal grounds, the issue raised on merits in ground no.3, has become redundant, hence, not required to be decided at this stage. However, the issue is left open for adjudication if it arises in any other assessment year in future.

In the result, appeal is allowed as indicated above. Order pronounced in the open Court on 07.02.2020