Appeal Details
Counselvise Citation
[2011] 134 COUNSELVISE.COM (IT) 5389 (ITAT-CHANDIGARH)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 1 month(s) 11 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
21-06-2011
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
22-03-2011
Assessment Year
2005-2006
Appeal Filed On
10-05-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 523/CHD/2010 ASSESSMENT YEAR: 2005-06 M/S PATIALA DISTILLERS & VS. THE ACIT, MANUFACTURES LTD., CIRCLE, PATIALA PATIALA PAN NO. NO. AAACP8584H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHOK MALIK RESPONDENT BY: SHRI N.K.SAINI ORDER PER SUSHMA CHOWLA, JM THE APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A), PATIALA DATED 18.3.2010 RELATING TO ASSESSMENT YEAR 2005-06 AGAINST THE ORDER PASSED UNDER SECTION 143(3) / 147 OF THE I.T. ACT, 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL:- 1. THE LD. CIT(A) HAS GROSSLY ERRED ON FACTS OF THE CA SE AND IN LAW IN UPHOLDING THAT THE REASSESSMENT PROCEEDINGS U/S 147 BY THE ASSESSING OFFICER IS VAL ID. 2. THE LD. CIT(A) HAS GROSSLY ERRED ON THE FACTS OF TH E CASE AND IN LAW IN UPHOLDING THE DISALLOWANCE OF TH E DEPRECIATION OF RS. 7,42,942/- ON BIO-COMPOSITE PLA NT WHICH WAS PUT TO USE DURING THE YEAR UNDER ASSESSMENT. 2 3. THE FIRST ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST THE RE- ASSESSMENT PROCEEDINGS INITIATED U/S 147 OF THE INC OME TAX ACT. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAD FILED RETURN OF INCOME DECLARING LOSS OF RS. 2.04 CRORES. ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME TAX ACT ON A TOT AL INCOME OF RS. 1.13 CRORES, WHICH WAS REDUCED TO THE RETURNED LOSS BY T HE CIT(A). THE ASSESSING OFFICER SUBSEQUENTLY ON THE PERUSAL OF TH E DEPRECIATION CHART FOUND THE ASSESSEE TO HAVE CLAIMED DEPRECIATION @ 8 0% OF EFFLUENT TREATMENT PLANT TOTALING RS. 13,86,964/-. THE ASSE SSING OFFICER NOTED THAT THE SAID EFFLUENT TREATMENT PLANT WAS NOT PUT TO USE AS THE AUDITOR IN HIS AUDIT REPORT DATED 8.8.2005 HAS SPECIFICALLY GI VEN A NOTE ON BEHALF OF THE DIRECTORS THAT MAJOR WORK OF BIO DE-COMPOSITE W ORK HAD BEEN COMPLETED AND SHORTLY THE SAID PLANT WOULD BE COMMI SSIONED TO ACHIEVE ZERO POLLUTION NORMS AS PER THE DIRECTIONS OF THE P OLLUTION CONTROL BOARD. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE CLAI M OF DEPRECIATION WAS WRONGLY ALLOWED TO THE ASSESSEE. FURTHER, DEPRECIA TION ON ELECTRIC INSTALLMENTS WAS CLAIMED @ 25% THOUGH IT WAS ADMISS IBLE @ 15%. THE ASSESSING OFFICER AFTER RECORDING REASONS FOR REOPE NING U/S 147 OF THE ACT, ISSUED NOTICE U/S 148 OF THE ACT ON 27.3.2009. THE ASSESSEE RAISED OBJECTIONS TO THE REOPENING OF ASSESSMENT AND IT WA S EXPLAINED THAT COMPLETE DETAILS IN RESPECT OF ADDITIONS TO THE EFF LUENT TREATMENT PLANT WERE FURNISHED IN THE ORIGINAL ASSESSMENT PROCEEDIN GS AND FURTHER THE WORD COMMISSIONED IN THE DIRECTORS REPORT WAS EXP LAINED TO BE IN RESPECT OF ACHIEVING ZERO DISCHARGE. FURTHER, CLAI M OF THE ASSESSEE WAS THAT THE ASSESSING OFFICER HAD VERIFIED THE FACTS A ND AFTER GOING THROUGH THE REPORT OF THE DIRECTORS HAD ALLOWED THE DEPRECI ATION AND HENCE THERE WAS NO JUSTIFICATION IN REOPENING THE ASSESSMENT U/ S 147 /148 OF THE ACT. 3 THE OBJECTIONS FILED BY THE ASSESSEE AGAINST REOPEN ING OF THE ASSESSMENT WERE REJECTED. THE ASSESSING OFFICER VIDE LETTER DA TED 18.11.2009 INFORMED THE ASSESSEE THAT THE ASSESSING OFFICER WH O COMPLETED THE ORIGINAL ASSESSMENT PROCEEDINGS HAD NOT LOOKED INTO THE ISSUES IN RESPECT OF THE ASSETS (EFFLUENT TREATMENT PLANT) ADDED DURI NG THE YEAR, AS ALSO THE DIRECTORS REPORT DATED 8.8.2005, AS EVIDENT FROM RE CORDS AS NO PROOF REGARDING PUT TO USE OF THE SAID ASSET WAS FILED DU RING THE COURSE OF ASSESSMENT PROCEEDINGS. IT WAS FURTHER OBSERVED I N THE SAID LETTER OF ASSESSEE THAT MERE MENTIONING THE ASSETS IN THE DEPRECIATION CHA RT AND STATING THAT ALL THE PRIMARY FACTS WERE DISCLOSED B Y THE ASSESSEE DO NOT ENTAIL THE ASSESSEE FOR CLAIM OF DEPRECIATION. THE SECOND OBJECTION OF THE ASSESSEE WAS THAT NOTICE U/S 154 OF THE ACT WAS ISSUED ON THE SUBJECT BY THE ASSESSING OFFICER AFTER THE PASSING OF THE O RDER U/S 143(3) OF THE ACT, AGAINST WHICH REPLY WAS FILED BY THE ASSESSEE AND THE ISSUE WAS PENDING AND NO ACTION COULD BE TAKEN UNDER SECTION 147/148 OF THE ACT. IT WAS INTIMATED BY THE SUCCESSOR ASSESSING OFFICER TH AT SAID APPEAL WAS DISPOSED ON 20.3.2009 VIDE ORDER PASSED U/S 154 OF THE ACT BY DROPPING THE PROCEEDINGS AND THEREAFTER THE NOTICE U/S 148 O F THE ACT WAS ISSUED ON 27.3.2009. THUS, THE OBJECTIONS RAISED BY THE AS SESSEE TO THE INITIATION OF ASSESSMENT PROCEEDINGS WERE DISPOSED OFF AND THE ASSESSEE WAS SHOW CAUSED TO SUBSTANTIATE ITS CLAIM IN RESPECT OF DEPR ECIATION ON THE ASSETS. THE REPLY OF THE ASSESSEE IN THIS REGARD IS INCORPO RATED IN PARA 3 AT PAGE 3 OF THE ASSESSMENT ORDER. FURTHER, IN RESPECT OF IT S CLAIM, THE ASSESSEE FURNISHED A LETTER DATED 4.1.2005 FROM M/S CREST BI O TECH (P) LTD IN WHICH A REPORT REGARDING BIO COMPOSING PLANT WAS GI VEN. THE ASSESSING OFFICER ADMITTED THAT FIRST STAGE OF EFFLUENT TREAT MENT PLANT HAD BEEN COMPLETED I.E. METHANE PHASE DIGESTER FOR WHICH DEP RECIATION WAS ALLOWED @ 80% WHEREAS THE DISPUTE WAS REGARDING THE SECOND PHASE OF 4 PLANT I.E BIO COMPOSITING UNDER THE HEAD EFFLUENT T REATMENT PLAN. IN THE ABSENCE OF THE ASSESSEE PRODUCING ANY PROOF REGARDI NG COMMUNICATION IN THE MATTER, MADE TO THE PUNJAB POLLUTION CONTROL B OARD, ON THE DIRECTIONS OF WHICH THE ASSESSEE HAD TO COMMISSION THE SAID PL ANT, THE CLAIM WAS HELD TO BE NOT PROVED. FURTHER, NO EVIDENCE BEING LED BY THE ASSESSEE THAT THE PLANT HAD ALREADY BEEN COMMISSIONED DURING THE YEAR UNDER CONSIDERATION OR WAS PUT TO USE BY THE END OF THE P REVIOUS YEAR, THE ASSESSING OFFICER HELD THE ASSESSEE NOT TO HAVE SUB STANTIATED ITS CLAIM OF DEPRECIATION ON BIO COMPOSITING PLANT. HENCE, THE C LAIM OF DEPRECIATION AT RS. 13,86,964/- WAS DISALLOWED AND ADDED TO THE TOT AL INCOME OF THE ASSESSEE. FURTHER, THE ASSESSING OFFICER ALLOWED T HE CLAIM OF DEPRECIATION ON FURNITURE AND FITTINGS @ 10% AS AGA INST THE CLAIM OF DEPRECIATION @ 15%. WITH REGARD TO THE DEPRECIATIO N ON ELECTRIC INSTALLATION WHERE THE ASSESSEE HAD CLAIMED DEPRECI ATION @ 25%, THE ASSESSEE FILED THE DETAILED DEPRECIATION CHART IN T HIS REGARD AND THE ASSESSING OFFICER HELD THE ASSESSEE TO HAVE CLAIMED EXCESS DEPRECIATION ON ELECTRIC FITTINGS OF RS. 10,48,432/- AND HENCE E XCESS DEPRECIATION OF 10% CLAIMED BY THE ASSESSEE WAS DISALLOWED AND WAS ADDED TO THE INCOME OF THE ASSESSEE. 5. IN APPEAL, THE CIT(A) IN VIEW OF THE EXPLANATION (1) TO SECTION 147 OF THE ACT OBSERVED THAT THE PRODUCTION OF BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD, WITH DUE DILIGENCE B EEN DISCOVERED BY THE ASSESSING OFFICER WOULD NOT NECESSARILY AMOUNT TO D ISCLOSURE WITHIN THE FOREGOING PROVISO TO THE SECTION. THE CIT(A) FURTH ER HELD THAT AS THE ISSUE ON WHICH NOTICE U/S 148 WAS ISSUED WAS NOT CO NTEMPLATED BY THE ASSESSING OFFICER, THERE WAS NO MERIT IN THE ARGUME NTS OF THE ASSESSEE THAT THE REOPENING WAS BAD. THE CIT(A) HELD THE AS SESSING OFFICER TO BE 5 WELL JUSTIFIED IN REOPENING THE ISSUE BEING ESCAPED ASSESSMENT. HE FURTHER OBSERVED THAT POWER TO REOPEN ASSESSMENT W AS MUCH WIDER UNDER THE AMENDED PROVISIONS OF THE ACT AND COULD BE EXER CISED EVEN AFTER THE ASSESSEE HAD FULLY AND TRULY DISCLOSED ALL THE MATE RIAL FACTS, IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE DELHI HIGH COURT IN BAWA ABHEY SINGH V DCIT [(2001) 117 TAXMAN 12 (DELHI)]. THE MERE DISCL OSURE OF FACTS BY THE ASSESSEE WAS NOT HELD TO BE FULL AND TRUE DISCL OSURE, AS THE REASONS RECORDED BY THE ASSESSING OFFICER WERE SPECIFIC AND RAISED ON MATERIAL AVAILABLE ON RECORD, WHICH WAS NEVER ADJUDICATED UP ON BY THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT PROCEEDINGS. TH E ISSUE ON WHICH THE CASE WAS REOPENED COULD NOT BE HELD TO BE CHANGE O F OPINION BY THE ASSESSING OFFICER. IN VIEW THEREOF, THE CIT(A) HEL D THAT THE REOPENING OF THE ASSESSMENT U/S 147/148 OF THE ACT WAS JUSTIFIED . THE CIT(A) FURTHER NOTED THAT THE ASSESSEE HAD CLAIMED 50% OF THE DEPR ECIATION ON THE EFFLUENT TREATMENT PLANT AS A DEDUCTION AS THE PLAN T WAS PUT TO USE AFTER 30 TH SEPTEMBER . IN VIEW THEREOF, THE DISALLOWANCE ON A CCOUNT OF DEPRECIATION WAS RESTRICTED TO RS. 7,42,554/-. 6. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT AFT ER THE COMPLETION OF THE ORIGINAL ASSESSMENT NOTICE U/S 154 OF THE ACT W AS ISSUED ON 12.11.2008 IN RESPECT OF THE CLAIM OF DEPRECIATION MADE BY THE ASSESSEE. FURTHER, SECOND NOTICE U/S 154 WAS ISSUED ON THE BA SIS OF THE AUDIT OBJECTIONS RAISED IN THE CASE OF THE ASSESSEE. THE SAID PROCEEDINGS U/S 154 OF THE ACT ARE ALLEGED TO BE DROPPED ON 20.3.20 09, HOWEVER, THE SAID ORDER WAS SERVED UPON THE ASSESSEE ON 18.11.2009. THE LD. AR FOR THE ASSESSEE FURTHER POINTED OUT THAT THE NOTICE FOR RE -OPENING OF THE ASSESSMENT U/S 148 OF THE ACT DATED 27.3.2009 WAS RECEIVED BY THE ASSESSEE ON 28.3.2009. THE CONTENTION OF THE LD. AR WAS THAT PROCEEDINGS 6 UNDER SECTION 154 WERE PENDING ON THE DATE WHEN NOT ICE UNDER SECTION 148 OF WAS ISSUED. EVEN ORDER U/S 154 OF THE ACT WAS C OMMUNICATED TO THE ASSESSEE MUCH AFTER THE DATE OF REOPENING BY THE AS SESSING OFFICER. THE LD. AR FAIRLY ADMITTED THAT NO QUERIES WERE RAISED BY THE ASSESSING OFFICER IN RESPECT OF THE CLAIM OF DEPRECIATION IN THE ORIGINAL ASSESSMENT PROCEEDINGS AND ALSO THAT THE NOTICE U/S 148 OF THE ACT HAD BEEN ISSUED TO THE ASSESSEE WITHIN THE PERIOD OF RECKONING I.E. 4 YEARS FROM THE END OF THE YEAR IN WHICH THE ORIGINAL ASSESSMENT WAS MADE . THE LD. DR FOR THE REVENUE POINTED OUT THAT THE REASONS FOR REOPENING THE ASSESSMENT WERE TWO FOLDS I.E. DEPRECIATION ON THE EFFLUENT TREATME NT PLANT AND DEPRECIATION ON THE ELECTRIC FITTINGS. THE LD. DR FURTHER SUBMITTED THAT THE CIT(A) HAD ALREADY ALLOWED RELIEF OF 50% OF DE PRECIATION TO THE ASSESSEE AND PLACING RELIANCE ON THE ORDER OF THE A UTHORITIES BELOW, IT WAS STRESSED THAT THE REOPENING OF THE RE-ASSESSMENT PR OCEEDINGS IN THE PRESENT CASE WAS WARRANTED. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD/ THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SECTION 143 (3) OF THE ACT. THEREAFTER REASONS WERE RECORDED FOR REOPENING THE ASSESSMENT WHICH ARE AS UNDER : 27.3.2009 - THE CASE WAS COMPLETED U/S 143(3) ON 15.11.2007 AT AN INCOME OF RS. 1,13,70,635/- AS AGA INST RETURNED INCOME / LOSS OF RS. 2,04,98,700/-. ON PE RUSAL OF THE DEPRECIATION CHART IT IS FOUND THAT THE ASSESSE E HAS CLAIMED DEPRECIATION @ 80% ON EFFLUENT TREATMENT PL ANT TO THE TUNE OF RS. 13,86,964/-, EVEN THOUGH THE SAME W AS NOT PUT TO USE IN AS MUCH AS THE AUDITOR IN HIS AUDIT REPOR T DATED 8.8.2006 HAS SPECIFICALLY GIVEN A NOTE ON BEHALF OF THE DIRECTORS THAT THE MAJOR WORK OF BIO-DECOMPOSITE WO RK HAS 7 BEEN COMPLETED AND SHORTLY IT WILL BE COMMISSIONED TO ACHIEVE FURTHER ZERO POLLUTION NORMS AS DIRECTED BY THE POLLUTION CONTROL BOARD, AS PER PARA (8) OF THE DIR ECTORS REPORT. THUS, THE CLAIM OF DEPRECIATION HAS WRONGL Y BEEN MADE ON THIS ITEM RESULTING IN UNDERASSESSMENT BY R S. 13,86,964/- AS MENTIONED SUPRA. SIMILARLY, DEPRECI ATION ON ELECTRIC INSTALLATION OF RS. 10,48,432/- INSTALLED IN ADMINISTRATIVE OFFICE ON 18/ / 2004 INSTEAD OF 15 % ADMISSIBLE UNDER THE ___FURNITURE & FITTING, THUS EXCESS CLAIM OF DEPRECIATION WAS MADE OF RS. 1,04,843/-. T HIS ALSO RESULTED IN UNDERASSESSMENT. THEREFORE, I HAVE REASON TO BELIEF THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE INCOME TAX ACT, 1961. ISSUE NO TICE US/ 148. ACIT 27.03.09- NOTICE U/S 148 ISSUED ACIT 8. THEREAFTER PROCEEDINGS WERE COMPLETED UNDER SECT ION 143(3) R.W.S. 148 OF THE ACT. THE ISSUE RAISED IN THE PRESENT AP PEAL IS AGAINST THE VALIDITY OF RE-ASSESSMENT PROCEEDINGS INITIATED UND ER SECTION 147/148 OF THE ACT AND THE CONSEQUENT ORDER PASSED UNDER SECTI ON 143(3) OF THE ACT. 9. UNDER THE PROVISIONS OF SECTION 147 OF THE ACT, THE PRECONDITION FOR ASSUMING JURISDICTION UNDER THE AFORESAID SECTION I S THAT AT THE TIME OF ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT THERE MUST BE A RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FO RMED A REASONABLE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. THE PRE REQUISITE FOR INITIATING THE RE-ASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT IS THE EXISTENCE OF MATERIAL WHICH CAN FORM THE BASIS OF THE BELIEF, THAT THE 8 INCOME HAD ESCAPED ASSESSMENT. THE MATERIAL MUST E XIST ON THE RECORD OF ASSESSING OFFICER FOR THE FORMATION OF BELIEF AND R EASONS FOR SUCH BELIEF SHOULD HAVE A NEXUS TO THE MATERIAL. 10. THE HON'BLE SUPREME COURT IN RAYMOND WOOLEN MIL LS VS. ITO [(1999) 236 ITR 34 (SC)] HELD THAT WHAT IS REQUIRED TO BE SEEN IN A CASE SUCH AS THIS IS WHETHER PRIMA FACIE THERE WAS SOME MATERIAL BEFORE THE ASSESSING OFFICER ON THE BASIS OF WHICH HE COULD REOPEN THE CASE OF THE ASSESSEE. THE SUFFICIENCY OR CORRE CTNESS OF THE MATERIAL IS NOT TO BE CONSIDERED BECAUSE IT IS OPEN TO THE ASSESSEE TO PROVE THAT THE FACTS ASSUMED BY THE ASSESSING OFFIC ER IN THE NOTICE WERE ERRONEOUS. 11. THE HON'BLE SUPREME COURT IN CIT VS. M/S KELVIN ATOR OF INDIA LTD. {320 ITR 561 (SC)} HELD AS UNDER:- ON GOING THROUGH THE CHANGES, QUOTED ABOVE, MADE T O SECTION 147 OF THE ACT, WE FIND THAT, PRIOR TO THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, REOPENING COULD BE DONE UNDER THE ABOVE TWO CONDITIONS AND FULFILMENT OF THE SAID CONDITIONS ALONE CONFERRED JURISDICTION ON THE ASSESSING OFFICER TO MAKE A BACK ASSESSMENT, BUT I N SECTION 147 OF THE ACT (WITH EFFECT FROM 1ST APRIL , 1989), THEY ARE GIVEN A GO-BY AND ONLY ONE CONDITIO N HAS REMAINED, VIZ., THAT WHERE THE ASSESSING OFFIC ER HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSME NT, CONFERS JURISDICTION TO REOPEN THE ASSESSMENT. THEREFORE, POST-1ST APRIL, 1989, POWER TO REOPEN IS MUCH WIDER. HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS 'REASON TO BELIEVE' FA ILING WHICH, WE ARE AFRAID, SECTION 147 WOULD GIVE ARBITR ARY POWERS TO THE ASSESSING OFFICER TO REOPEN ASSESSME NTS ON THE BASIS OF 'MERE CHANGE OF OPINION', WHICH CA NNOT BE PER SE REASON TO REOPEN. WE MUST ALSO KEEP IN M IND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW A ND POWER TO REASSESS. THE ASSESSING OFFICER HAS NO PO WER TO REVIEW ; HE HAS THE POWER TO REASSESS. BUT REASSESSMENT HAS TO BE BASED ON FULFILMENT OF CERTA IN PRECONDITIONS AND IF THE CONCEPT OF 'CHANGE OF OPIN ION' IS REMOVED, AS CONTENDED ON BEHALF OF THE DEPARTMEN T, 9 THEN, IN THE GARB OF REOPENING THE ASSESSMENT, REV IEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF 'CHANGE OF OPINION' AS AN IN-BUILT TEST TO CHECK AB USE OF POWER BY THE ASSESSING OFFICER. HENCE, AFTER 1ST A PRIL, 1989, THE ASSESSING OFFICER HAS POWER TO REOPEN, PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO TH E CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. OUR VIEW GETS SUPPORT FRO M THE CHANGES MADE TO SECTION 147 OF THE ACT, AS QUOTED HEREINABOVE. UNDER THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, PARLIAMENT NOT ONLY DELETED THE WORDS 'REASON TO BELIEVE' BUT ALSO INSERTED THE WORD 'OPI NION' IN SECTION 147 OF THE ACT. HOWEVER, ON RECEIPT OF REPRESENTATIONS FROM THE COMPANIES AGAINST OMISSIO N OF THE WORDS 'REASON TO BELIEVE', PARLIAMENT REINTRODU CED THE SAID EXPRESSION AND DELETED THE WORD 'OPINION' ON THE GROUND THAT IT WOULD VEST ARBITRARY POWERS IN THE ASSESSING OFFICER. WE QUOTE HEREINBELOW THE RELEVA NT PORTION OF CIRCULAR NO. 549 DATED OCTOBER 31, 1989 ([1990] 182 ITR (ST.) 1, 29), WHICH READS AS FOLLOW S : '7.2 AMENDMENT MADE BY THE AMENDING ACT, 1989, TO REINTRODUCE THE EXPRESSION `REASON TO BELIEVE' IN SECTION 147.-A NUMBER OF REPRESENTATIONS WERE RECEIVED AGAINST THE OMISSION OF THE WORDS `REASON TO BELIEVE' FROM SECTION 147 AND THEIR SUBSTITUTION BY THE `OPINION' OF THE ASSESSING OFFICER. IT WAS POINTED OUT THAT THE MEANING OF THE EXPRESSION, `REASON TO BELIEVE' HAD BEEN EXPLAINED IN A NUMBER OF COURT RULINGS IN THE PAST AND WAS WELL SETTLED AND ITS OMISSION FROM SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO REOPEN PAST ASSESSMENTS ON MERE CHANGE OF OPINION. TO ALLAY THESE FEARS, THE AMENDING ACT, 1989, HAS AGAIN AMENDED SECTION 147 TO REINTRODUCE THE EXPRESSION `HAS REASON TO BELIEVE' IN PLACE OF THE WORDS `FOR REASONS TO BE RECORDED BY HIM IN WRITING, IS OF THE OPINION'. OTHER PROVISIONS OF THE NEW SECTION 147, HOWEVER, REMAIN THE SAME .' 12. THE APEX COURT HAD LAID DOWN THE PROPOSITION IN CIT VS. M/S KELVINATOR OF INDIA LTD (SUPRA) THAT THOUGH POST AM ENDMENT BY DIRECT TAX LAWS AMENDMENT ACT, 1987 W.E.F. IST APRI L, 1989, POWER TO REOPEN WAS MUCH WIDER BUT THE SECTION 147 DOES N OT GIVE ARBITRARY POWER TO THE ASSESSING OFFICER TO REOPEN THE ASSESS MENT ON MERE 10 CHANGE OF OPINION. THE HON'BLE SUPREME COURT FUR THER HELD THAT THERE WAS CONCEPTUAL DIFFERENCE BETWEEN POWER TO R EVIEW AND POWER TO REASSESS. IT WAS THUS HELD THE ASSESSING OFFICER HAS NO POWER TO REVIEW; HE HAS THE POWER TO REASSESS BUT R EASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CERTAIN PRE CONDITION S . THE HON'BLE SUPREME COURT CONCLUDED BY HOLDING THAT THE ASSESSING OFFICER HAS POWER TO REOPEN, PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. 13. COMING TO THE FACTS OF THE PRESENT CASE WE FIND THAT THE ASSESSEE HAD MADE ADDITION TO THE TUNE OF RS.34,67, 411/- AND CLAIMED DEPRECIATION @ 80% ON EFFLUENT TREATMENT PL ANT TO THE TUNE OF RS.14,85,107/- (NOT RS.13,86,964/- AS MENTIONED IN THE ASSESSMENT ORDER) ON ACCOUNT OF BIO COMPOSING WORK . IN THE DIRECTORS REPORT, IT WAS SUBMITTED BY THE DIRECTOR THAT MAJOR WORK ON BIO-COMPOSITE WORK HAD BEEN COMPLETED AND SHORTL Y IT WOULD BE COMMISSIONED TO ACHIEVE FURTHER ZERO POLLUTION NORM S AS DIRECTED BY THE POLLUTION CONTROL BOARD. THE SAID NOTE AT PARA VIII OF THE DIRECTORS REPORT WAS FURNISHED ALONGWITH THE AUDIT REPORT OF THE C.A. ANNEXED TO THE RETURN OF INCOME FILED BY THE A SSESSEE. THE CLAIM OF THE ASSESSEE IN THIS REGARD IS THAT THE BI O-COMPOSITE PLANT WAS ONE OF THE STAGES IN ACHIEVING ZERO DISCHARGE, WHICH IS A ONGOING PROCESS, WHICH INVOLVES VARIOUS STAGES AND TECHNOLOGIES FOR ACHIEVEMENT OF THE SAME. THE PLANT WAS STATED TO H AVE PUT TO USE IN DECEMBER, 2004 AND HENCE, THE CLAIM OF DEPRECIATION . THE EXPLANATION OF THE ASSESSEE AND THE OBJECTION OF TH E ASSESSEE TO REOPENING OF ASSESSMENT UNDER SECTION 148 OF THE AC T FILED BEFORE 11 THE ASSESSING OFFICER AND PLACED AT PAGES 7 TO 9 OF THE PAPER BOOK ALONGWITH REPLY OF THE ASSESSING OFFICER TO THE OBJ ECTIONS FILED AGAINST THE REOPENING OF THE ASSESSMENT UNDER SECTI ON 148 OF THE ACT DATED 18.11.2009 ARE PLACED AT PAGES 10 & 11 OF THE PAPER BOOK. THE DEPRECIATION CHART FOR THE YEAR UNDER CONSIDERA TION IS PLACED AT PAGE 12 OF THE PAPER BOOK. THE PLEA OF THE ASSESSE E IS THAT THE ABOVE-SAID EVIDENCE WAS AVAILABLE WITH THE ASSESSIN G OFFICER WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3) OF T HE ACT. 14. ADMITTEDLY, DURING THE COURSE OF ASSESSMENT PR OCEEDINGS NO QUERIES WERE RAISED BY THE ASSESSING OFFICER IN RES PECT OF THE CLAIM OF DEPRECIATION ON THE ADDITION TO THE ASSETS. THE LEARNED A.R. FAIRLY ADMITTED TO THE SAID FACT DURING THE COURSE OF HEARING OF THE PRESENT APPEAL. WHILE ALLOWING THE CLAIM OF THE AS SESSEE IT IS THE DUTY OF THE ASSESSING OFFICER TO TAKE ON RECORD ALL THE EVIDENCES AND SUPPORTS IN CONNECTION WITH A PARTICULAR CLAIM MADE BY THE ASSESSEE. THE ASSESSEE IN ITS FINANCIAL STATEMENT HAD DECLARE D THE ADDITION TO THE FIXED ASSETS ON WHICH DEPRECIATION WAS CLAIMED AND ON THE OTHER SIDE IN THE DIRECTORS REPORT DATED 8.8.2005, IT WA S INTIMATED THAT THE MAJOR WORK OF BIO COMPOSITE HAD BEEN COMPLETED AND SHORTLY THE PLANT WOULD BE COMMISSIONED TO ACHIEVE ZERO POLLUTI ON NORMS AS PER THE DIRECTIONS OF THE POLLUTION CONTROL BOARD. THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT PROCEEDINGS FAILED TO CO NSIDER THE ABOVESAID REPORT OF THE DIRECTOR AND HAD ALLOWED TH E DEPRECIATION ON BIO COMPOSITE UNIT WITHOUT ADDRESSING THE ISSUE OF ALLOWABILITY OF DEPRECIATION ON SAID UNIT, WHICH HAD NOT ACHIEVED Z ERO POLLUTION, AS PER THE NORMS OF THE POLLUTION CONTROL BOARD. IN T HE ABSENCE OF ANY ENQUIRY MADE BY THE ASSESSING OFFICER IN RESPECT OF THE ADDITION TO 12 THE FIXED ASSETS AND WHETHER THE SAME WERE PUT TO U SE, MERELY BECAUSE THE ASSETS WERE DECLARED IN THE DEPRECIATIO N CHART, DOES NOT ESTABLISH THE OPINION BEING FORMED BY THE ASSESSING OFFICER. ONCE NO OPINION HAD BEEN FORMED BY THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT PROCEEDINGS, WE FIND NO MERIT IN THE CLA IM OF THE ASSESSEE THAT IN THE RE-ASSESSMENT PROCEEDINGS THER E WAS CHANGE OF OPINION BY THE ASSESSING OFFICER. AS FAR AS THE FI RST PHASE OF THE AFFLUENT TREATMENT PLANT IS CONCERNED THE SAME HAD BEEN PUT TO USE AND THE DEPRECIATION HAS BEEN CORRECTLY ALLOWED ON THE SAME. HOWEVER, IN RESPECT OF BIO COMPOSITE UNIT, A NOTE I N THE DIRECTORS REPORT DATED 8.8.2005 HAD A BEARING AND IN THE ABSE NCE OF ANY ENQUIRY BEING MADE BY THE ASSESSING OFFICER, WE UPH OLD THE REOPENING OF ASSESSMENT UNDER SECTION 147/148 OF TH E ACT AS ON THE DATE OF INITIATING THE RE-ASSESSMENT PROCEEDINGS, T HE ASSESSING OFFICER IS TO COME TO PRIMA FACIE BELIEF OF ESCAPEM ENT OF INCOME. 15. NOW COMING TO THE CLAIM OF THE ASSESSEE IN RESP ECT OF DEPRECIATION ON BIO COMPOSITE UNIT. WE FIND THAT T HE ASSESSEE IS ESTABLISHING THE SAID UNIT AS PER THE NORMS PRESCRI BED BY THE POLLUTION CONTROL BOARD. THE ASSESSEE HAS FAILED T O FURNISH ON RECORD ANY EVIDENCE TO PROVE THAT IT HAD COMMISSION ED THE SAID UNIT DURING THE YEAR UNDER CONSIDERATION OR THE SAID UNI T WAS PUT TO USE BEFORE THE END OF THE PREVIOUS YEAR. NO COMMUNICAT ION TO THE POLLUTION CONTROL BOARD OF HAVING COMMISSIONED THE BIO COMPOSITE UNIT AND HAVING ACHIEVED THE ZERO DISCHARGE HAS BEE N FURNISHED EITHER DURING THE ASSESSMENT OR THE APPELLATE PROCE EDINGS BY THE ASSESSEE TO ESTABLISH ITS CLAIM OF HAVING PUT TO US E THE SAID UNIT. IN THE ABSENCE OF THE SAME, WE ARE IN CONFORMITY WITH THE ORDER OF THE 13 CIT(A) IN NOT ALLOWING THE CLAIM OF DEPRECIATION ON THE SAID BIO COMPOSITE UNIT, WHICH IS STILL IN THE PROCESS OF BE ING SET UP. ACCORDINGLY WE CONFIRM THE ORDER OF THE CIT(A) IN D ISALLOWING THE DEPRECIATION OF RS.7,42,554/-. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF JUNE, 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOW LA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 21 ST JUNE, 2011 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH
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