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Income Tax Appellate Tribunal, DELHI BENCHES: ‘G’, NEW DELHI
Before: SHRI N.K.SAINI & SMT. BEENA A PILLAI
ORDER
PER BEENA PILLAI, JUDICIAL MEMBER
The present appeal has been filed by assessee against the order dated 21/01/13 passed by Ld. CIT (A)-10, New Delhi for assessment year 2003-04 on the following grounds of appeal:
1. On the facts and circumstances of the case, Ld.CIT(A) has erred in confirming reopening of assessment on the basis of observation of the audit party, after expiry of four years, as the original assessment was completed u/s 143(3) and there is no finding by the AO that there was any failure, on the part of the appellant, to disclose fully and truly all material facts necessary for its assessment.
2. On the facts and circumstances of the case, Ld.CIT(A) has erred in confirming addition of renovation expenses on leased premises, amounting to Rs.60,40,428/- by treating it as capital expenditure. Moreover, the details were on records, at the time of assessment u/s 143(3), hence the addition has been made on change of opinion.
Brief facts of the case are as under: The assessee filed its return of income for the year under consideration on 23/11/03 declaring total income of Rs. 2, 09,94/-. Subsequently the assessment was completed on 28/11/06 under section 143 (3) of the Act by making an addition of Rs.1,78,55,104/-in the hands of assessee. Thereafter Ld. AO initiated proceedings under section 154 of the Act as according to Ld. AO there were certain irregular allowances regarding depreciation and incorrect allowance of capital expenditure claimed by assessee. Assessing officer called for detailed information vide notice dated 04/09/2006. As the proceedings under section 154 of the Act were pending, Ld. AO on 05/10/10 issued notice under section 148 of the Act reopening the assessment by recording the reasons as under: “Perusal of records reveals that assessee has claimed renovation expenses (renovation of Delhi & Mumbai Office) as revenue expenditure by including it in repair & maintenance expenses. which is not admissible u/s 32. The mistake resulted in underassessment 2 of income of Rs.6040428/- involving tax effect of Rs.3024555/- including interest u/s 234B. Secondly, the company had claimed depreciation of Rs. 8004712/- as per Income tax (under the head computer) in the computation of income, However, allowable depreciation works out to Rs.87830/- instead of Rs. 210792/- . Thus, as excess depreciation of Rs. 122962/- was claimed and allowed to assessee. The mistake resulted in underassessment of income by Rs. 122962/- involving tax effect of Rs. 45188/-. Therefore I have reasons to believe that an amount of Rs. 6162390/- has escaped assessment.” 2.1. Ld. AO completed the reassessment proceedings by making addition in the hands of assessee as under: Ässessed income u/s Rs.1,78,55,104 143(3) dt. 28.2.2006 Add: 60,40,428 As capital expenditure as discussed Excess depreciation 1.22.962 disallowed Total disallowance 61,63,390 61,63,390 Assessed income 2,40,18,494 2.2. Aggrieved by the order of Ld. AO, assessee preferred appeal before Ld. CIT (A). Before Ld. CIT (A) assessee had raised objections regarding validity of reassessment proceedings which was dismissed by Ld. CIT (A). Insofar as the merits of the additions were concerned, the Ld. CIT (A) after considering the submissions advanced by assessee upheld the nature of expenditure being capital but allowed depreciation on such assets. 2.3. Aggrieved by the order of Ld. CIT (A) assessee is in appeal before us now.
Ground No. 1 raised by assessee is in respect of the legal plea raised regarding the validity of reassessment proceeding. Ld. AR submitted that the reopening of assessment is after expiry of 4 years as the original assessment was completed under section 143 (3). It was submitted that Assessing Officer had not set out a case of assessee where there was any failure on the part of assessee to disclose fully and truly all material facts necessary for its assessment. The Ld.AR drew attention to the submissions made by assessee in the rectification proceedings wherein the assessing officer has initiated the rectification of assessment on the very issue which was the basis of addition and the reassessment proceedings. He submitted that the claim of expenditure being revenue in nature was sufficiently substantiated by assessee in the rectification proceedings as well as the original assessment proceedings. He submitted that assessing officer was satisfied with the submissions made by assessee and therefore no additions were made in the hands of assessee in the rectification proceedings. Ld. AR submitted that it is a change of opinion and therefore the reopening proceedings must be quashed and set-aside as the same has been initiated on the basis of an audit objection which is very much apparent from the approval taken by Ld. AO under section 151 (1) of the act for reopening the case.
3.1. Ld. AR placed reliance upon the decisions of Coordinate Bench in assessee’s own case for assessment year 2002-03 wherein the reopening has been quashed and set-aside as there was no fresh material that was available to initiate the reassessment proceedings. 3.2. On the contrary Ld. DR placed reliance upon the authorities below and submitted that reopening was done in accordance with law on the issue of audit objections.
We have heard the rival submissions advanced by both the sides in the light of the records placed before us. 4.1. Ground No. 1 raised by assessee challenging the validity of reopening of assessment. It has been submitted by Ld.AR that there was no tangible material for forming reasons to believe that income has escaped assessment. Further it is observed that the notice under section 148 has been issued on 08/03/10 which is much beyond 4 years and therefore it is incumbent upon the revenue authorities to show that there was no true and full disclosure of all material facts necessary for the assessment during the original assessment proceedings. In our considered opinion 1st proviso to section 147 of the Act would be squarely applicable to the facts of the present case as even in the reasons recorded for reopening of the assessment there is no mention regarding any failure on behalf of assessee disclosing full and true material facts. 4.2. In fact the reasons recorded reveals that the information regarding the claim of renovation expenses being revenue in nature has been revealed from the records itself. Further after the original assessment was completed assessing officer has initiated rectification proceedings on the same issue of excess claim of revenue expenditure on account of renovation(placed at page 84-85 of paper book). Thus in our considered view there is no fresh material available on record with Ld. AO to initiate the reassessment proceedings. Thus reasons to believe does not form any tangible material which Ld. AO come across after completion of original assessment. Respectfully following the decision of Hon’ble Supreme Court in the case of Kelvinator India Ltd. reported in 320 ITR 561, we hold the reopening of assessment to be bad in law, thereby quashing the notice issued under section 148 of the act dated 08/03/10. 4.3. Accordingly ground No. 1 raised by assessee stands allowed. 4.4. As the legal issue raised by assessee in ground No. 1 is allowed in favour of assessee and against revenue, we are not inclined to discuss the other proposition regarding addition on merits raised by assessee. 4.5. Accordingly the grounds of appeal raised by assessee stands allowed. In the result appeal filed by assessee stands allowed. Order pronounced in the open court on 27.02.2018. Sd/- Sd/- (N.K.SAINI) (BEENA PILLAI) Accountant Member Judicial Member Dated: 27th Feb., 2018. • mv