Principle of consistency applicable to determine whether for 148 income has escaped assessment or not

In the present case, the Court finds that the reasons for reopening the assessment for AYs 2008- 09 and 2009- 10 proceeded on the basis that the Assesse had failed to make a full and true disclosure of material facts concerning the claim for depreciation. This cannot be accepted for the simple reason that there was a history of litigation around such claim beginning in AY 2006- 07. The mere fact that the incumbent AO dealing with the returns of the Assesse was different from the AO who dealt with there for the AYs 2006- 07 and 2007- 08 will not excuse the AO from examining the history of the case.

On its part, it was not necessary for the Assessee to enclose a copy of the Business Transfer Agreement (BTA) every year and explain the basis for the claim of depreciation. In any event, the assessments for AYs 2008- 09 and 2009- 10 were completed under Section 143 (3). There was no fresh material to disclose. On this aspect, there was no change in the circumstances. Therefore, there was no failure by the Assessee to make a full and true disclosure of all material facts relevant to the assessment.

Manchanda sought to emphasize that each AY was different and, therefore, the AO was not obliged to look into the previous records. The Court is unable to agree with this approach of the AO. If the AO was seeking to invoke Section 148 of the Act for AYs 2008- 09 to 2010- 11 it was incumbent on him to ascertain the status of the identical claim in the earlier AYs. After all he was seeking to reopen an assessment only on the aspect of the claim of depreciation. On this very aspect the Revenue had for AY 2006­- 07 taken the matter up to the ITAT and the matter had been remanded to the AO. For AY 2007- 08, the CIT (A)’s order allowing the claim had attained finality. These facts could not have escaped the attention of the AO. In any event, there was no fresh material that the AO came across to warrant reopening of the assessments for AYs 2008- 09 and 2009-10. The plea that the AO inadvertently allowed the claim for depreciation for AYs 2008-09, 2009-10 and 2010-11 cannot in the circumstances be accepted.

The Supreme Court in Commissioner of Income tax Vs. Kelvinator of India Ltd. (supra) while affirming the decision of the full Bench of this Court on the interpretation of Section 147 of the Act observed thus:

“…However, one needs to give a schematic interpretation to the words “reason to believe”failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of “mere change of opinion”, which cannot be per se reason to re-open. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review he has the power to re-assess. Bur re-assessment has to be based on fulfillment of certain pre- condition and if the concept of “change of opinion”is re-opening the assessment, review would take place. One must treat the concept of “change of opinion”as an in –built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, provided there is “tangible material”to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief…”

In the present case, the tangible material that the AO came across for the AYs in question that warranted the reopening of the assessments is not clear from the ‘reasons to believe’ recorded by the AO. The reasons merely record the fact that HML had borne the costs and expenses including professional fee and, therefore, the capitalization of those expenses to the various block of assets was not allowable under Section 43(1) of the Act. After recording the above statement, the AO adds: ³1 have reason to believe that due to failure on the part of the assesse to disclose all the material facts truly or fully, income of Rs.7,16,299 have escaped assessment.’ This does not satisfy the requirement of law that the reasons to believe should, where the reopening is after the expiry of four years from the end of the FY, specifically state in what manner there was a failure by the Assessee to make a full and true disclosure of material facts. That, again, will have to be preceded by spelling out the tangible fresh material that led the AO to come to that conclusion. None of this is found in the reasons to believe recorded by the AO in the case on hand. The necessity for tangible material to be present to trigger the reopening was emphasized in Commissioner of Income tax v. Orient Craft Ltd. (supra).

The repeated assertion by Mr. Manchanda that the claim for depreciation for AYs 2006- 07 and 2007- 08 was disallowed by the AO is not entirely It overlooks the history of the litigation around the claims for those AYs with both ending in the Assessee ultimately succeeding on the point after the remand to the AO by the ITAT for AY 2006- 07 and the level of the CIT (A) for AY 2007- 08. Mr. Manchanda has also not been able to counter the submission that for AYs 2011- 12 and 2012- 13 the same claim for depreciation has been allowed.

For all of the aforementioned reasons, the writ petitions are allowed and the notices dated 31st March, 2015 and the consequential orders dated 11th January, 2016 passed by the AO disposing of the Petitioner‟s objections are hereby set aside. No order as to costs.