10 June 2024


Income Tax Appellate Tribunal

Deputy Commissioner of Income Tax, Mumbai vs. Morries Energy Ltd., Mumbai



Direct Taxation

In the absence of any new tangible material, the case could not be reopened on mere change of opinion

The material facts are that, the assessee being resident corporate assessee stated to be engaged in power generation, real estate, securities etc. was subjected to reassessment proceedings for the year under consideration and an assessment was framed under Section 143(3) of Income Tax Act, 1961 (IT Act) read with Section 147 of Act. The return of income was already scrutinized under Section 143(3) vide order. However, the case was reopened vide notice under Section 148 of IT Act. The reason to trigger reassessment was that, the assessee claimed depreciation of 100% on windmill having capacity of 1.25 mw which was so eligible only if the windmill was put to use for more than 180 days during the relevant previous year. Since the windmill was put to use for less than 180 days, the assessee was not eligible to claim the depreciation and accordingly, there was excess depreciation claim for Rs.125.69 Lacs.

The assessee while opposing the reassessment proceedings, submitted that the windmill was out to use for more than 180 days and the claim was rightly made and allowed. This aspect was already examined by Learned AO during scrutiny assessment proceedings under Section 143(3) of IT Act and the claim was allowed with due application of mind. However, rejecting the same and after appreciating assessee's documentary evidences, AO opined that, the assessee was entitled to 50% rate of depreciation only on these assets. Accordingly, the assessed loss was reduced with the alleged excess claim.

The Learned CIT(A) appreciated the details & evidences furnished by the assessee with respect to depreciation claim during original assessment proceedings under Section 143(3) of IT Act. Learned CIT(A) concurred that the claim was duly verified during original assessment proceedings. Further, Ld. AO was not in possession of any new material to conclude that the income had escaped assessment. The whole basis of formation of belief was only existing record as available with Learned AO. Therefore, reopening of assessment on mere change of opinion could not be held to be justified. Accordingly, the reopening was held to be invalid. Aggrieved, the revenue is in further appeal.

The original return of income stood scrutinized under Section 143(3) of IT Act wherein assesse' claim of depreciation was duly examined by Learned AO. The claim was allowed after due application of mind. The requisite documents and details were already furnished by the assessee during original assessment proceedings. However, subsequently, on the basis of existing material as available on record, Learned AO formed an opinion of escapement of income which was nothing but mere change of opinion. There was no new tangible material which would demonstrate any escapement of income in the hands of the assessee. This being so, the ratio of the decision of Hon'ble Apex Court in Kelvinator of India Ltd. that, in the absence of any new tangible material, the case could not be reopened on mere change of opinion was squarely applicable to the facts of the case and Learned CIT(A) was justified in declaring the reassessment proceedings as invalid. Appeal dismissed.

Tags : Escapement Income Reassessment Legality

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