Viramgam Mahesana Project Limited Vs ACIT (ITAT Delhi)
No Second Innings for dropped Audit Objection -Borrowed Satisfaction backfires – Change of Opinion not permissible – Reopening held invalid by ITAT Delhi
Delhi ITAT has quashed a reassessment initiated solely on the basis of a previously dropped audit objection, holding that the action amounted to a mere change of opinion & was thus invalid. Assessee, Viramgam Mahesana Project Ltd., was set up as a Special Purpose Vehicle for converting the Viramgam–Mahesana meter gauge railway track into broad gauge on a Build–Own–Transfer basis under an agreement dated 23.05.2003 with Indian Railways. In the original assessment completed u/s 143(3) on 23.12.2008, AO had specifically examined the depreciation claim on the railway track & allowed it after due verification of submissions & supporting records.
Later, the Revenue Audit objected to the claim, drawing a parallel to road BOT projects where ownership remains with the Government. AO disagreed, clarified that the project was Build–Own–Transfer, confirmed ownership with evidence, & the audit objection was dropped. Despite this, AO reopened the assessment on 30.03.2011 by issuing notice u/s 148, relying on the same audit reasoning, & subsequently disallowed depreciation of ₹13.34 crore.
Assessee argued that the reopening was impermissible as it was based on a change of opinion, with the AO having earlier accepted ownership & allowed depreciation on the same facts. It was further contended that the reasons for reopening were a verbatim reproduction of the audit note, indicating borrowed satisfaction & even contained glaring factual errors, such as claiming access charges receivable at ₹79,695 crore twice a year when the actual receipts were only ₹16.16 crore. Additionally, Assessee submitted that its detailed objections to the reopening were never disposed of through a speaking order, in violation of the Supreme Court ruling in GKN Driveshaft (259 ITR 19).
