The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has quashed the reopening under Section 147 of the Income Tax Act 1961 holding that reopening after 4 years in the absence of tangible material would amount to change of opinion only.
The assessee, Indo Colchem Pvt. Ltd was a Private Limited Company engaged in manufacturing of Dyes and Dye intermediates. For the Assessment Year 2010-11, the assessee filed its Return of Income declaring total income. Regular assessment under Section 143(3) of the Income Tax Act was completed assessing the total income.
Thereafter the case was reopened under Section 148 of the Income Tax Act on account of excess claim of additional depreciation for Fluidized Bed Furnace which was utilised to generate hot air by heat treatment and not for manufacture of article or things, thus not eligible for additional depreciation.
During the reassessment proceedings, the assessee was asked to furnish the user manual of the machine to substantiate its claim of additional depreciation and technical details of the machinery. However, the assessee sought time to produce the User Manual, however failed to produce the same. Therefore, the Assessing Officer passed an ex-parte assessment order disallowing the claim of additional depreciation.
Nitin Mehta appearing for the assessee submitted that the reopening of assessment itself was bad in law since the same was reopened beyond four years period and there was no failure on the part of the assessee in disclosing claim of additional depreciation by the assessee.
He further submitted that there was no omission on the part of the assessee in disclosing the income before the authority. Therefore there was no escapement of income in reopening the
assessment beyond four years period and relied upon the Supreme Court judgement in the case of Parshuram Pottery Works Co. Ltd. Vs. ITO
Ashok Kumar Suthar appearing for the revenue supported the orders passed by the Lower Authorities.
The two-member Bench of Waseem Ahmed, (Accountant Member) and T.R. Senthil Kumar, (Judicial Member) observed that the reasons recorded by the Assessing Officer had not showed that any new tangible material available on record and there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of assessment, when the same was reopened after four years period.
The Bench further examined applicability of the Apex Court judgement rendered in the case of CIT Vs. Kelvinator of India Ltd. wherein it was categorically held that the Assessing Officer had no power to review his assessment order, but had only the power to reassess, provided there was “tangible material” on record that there is escapement of income from assessment.
The Bench allowed the appeal filed by the assessee holding that in the absence of tangible material, reopening of assessment after four years period amounted to “change of opinion” only.
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