IMPORTANT POINT
Reopening of assessments under Section 147 requires tangible evidence of income escapement, not just a change of opinion.

ORDER :

BHARGAV D. KARIA, J.

1. This appeal is filed under Section 260A of the Income Tax Act, 1961 (for short “the Act”) by the Appellant-Revenue proposing the following substantial questions of law arising out from the order dated 20.10.2023 passed by the Income Tax Appellate Tribunal (for short “the Tribunal”), Ahmedabad in ITA No.1229/Ahd/2017 for the Assessment Year 2008-09.

“A. Whether on the facts and circumstances of the case and in law, the Ld. Appellate Tribunal was justified in holding that reopening of assessment under section 147 is only change of opinion and hence bad in law, without appreciating that the issue-in-hand was neither examined by the assessing officer during original assessment proceedings nor the assessing officer had formed any opinion on the issue?"

B. "Whether on facts and circumstances of the case and in law the Ld. Appellate Tribunal was justified in holding reopening u/s 147 of the Act as invalid without appreciating the observations of the Apex Court in the case of TechSpan India (P.) Ltd. [2018] 92 taxmann.com 361 (SC), wherein it has been held that before interfering with proposed re-opening of assessment on ground that same is based only on a change of opinion, Court ought to verify whether assessment earlier made has either expressly or by necessary implication expressed an opinion on a matter which is basis of alleged escapement of income that was taxable; if assessment order is non-speaking, cryptic or perfunctory in nature, it may be difficult to attribute to Assessing Officer any opinion on questions that are raised in proposed re-assessment proceedings?"

2. The Assessing Officer reopened the assessment by recording the following reasons under Section 147 of the Act.

"(a) In this case, the assessee has filed the return of income for A.?. 2008-09 on 26.09.2008 declaring loss of Rs.67,90,429/-. The case was selected for scrutiny assessment and the income was assessed at a loss of Rs.61,61,237/u/s 143(3) of the I.T. Act. The income was assessed at Rs.1,80,342/ u/s 115JB.

(b) It is observed from records of the assessee that the assessee has claimed additional depreciation on the Spare Parts @ 20% and @ 10% in respect of Rs.34,32,284/- upto September 2007 and of Rs.8,76,119/- after September 2007 (totalling to Rs.43,08,403/-) for machines which were already installed. As these are Spare Parts of a machine and cannot be themselves classified as a machine, additional depreciation could not be allowed. Thus, the additional depreciation on machinery spares of Plant & Machinery which was already acquired and installed earlier cannot be allowed.

(c) In view of the above facts, I have reason to believe that in this case income chargeable to tax in respect of Rs.7,74,069/- has escaped assessment for the AY 2008-09 within the meaning of clause (c) of Explanation 2 of section 147 of the Act"

3. The Assessing Officer in the reassessment order made an addition disallowing Rs.7,74,069/- towards the depreciation and reduced returned loss.

4. The CIT (Appeals) allowed the Appeal filed by the Assessee holding that the reasons recorded for reopening the assessment by the Assessing Officer are based upon the information from the profit and loss account unavailable on record and accordingly, the reassessment proceedings are not tenable. The CIT(Appeals) has observed as under:-

“5. I have considered the facts of the case, the submission of the appellant and the AO's observations. In this case, the original return of income had been selected for scrutiny assessment u/s.143(3) of the Act. Subsequently, the assessment has been reopened after a period of more than four years from the end of the assessment year. Under such circumstances, the onus was on the AO to demonstrate in his reasons recorded for reopening of the assessment that the income had escaped assessment on account of failure on the part of the appellant to disclose fully and truly all material facts for the purpose of making assessment. In this regard, it is