A simple change in opinion is insufficient to justify reconsidering an assessment under Section 148
Fact and Issue of the case
The assessee has filed this appeal challenging the order dated10.08.2022, passed by Ld.CIT(A),National Faceless Appeal Centre(NFAC), Delhi and it relates to the AY 2013-14. The Assessee is aggrieved by the decision of Ld.CIT(A) in dismissing the appeal of the Assessee under wrong impression that the Assessee has settled the dispute under Vivad se Vishwas scheme. The Assessee has also raised a legal ground challenging the re-opening of the assessment u/s 148 of the Act. Accordingly, he prayed the legal ground may kindly be heard and the adjudicated by the bench. The assessment for the year under the consideration was originally completed by the Assessing Officer u/s 143(3) of the Act on 18.06.2016. In the return of income the Assessee had claimed software expanses of 2.61 crore, as revenue expenditure. The Assessing Officer held that the software expanses are capital in nature and the accordingly, disallowed the above said claim. However, the Assessing Officer allowed depreciation thereon@ 60%, which amounted to Rs.1.57 crore. The Assessee had challenged the above said disallowance by filing appeal before Ld.CIT(A). In fact, the Assessee had settled above said dispute under VSV scheme.
The Assessing Officer re-opened the assessment by issuing notice u/s 148 of the Act on 09.03.2020, that is after expiry of four years from the end of the present assessment year. The reason for re-opening is that the depreciation on software expenses should have been allowed @ 25% instead of 60% in the original assessment order and it has resulted in excess of allowance of depreciation resulting in escapement of income.The Ld. AR submitted that the Assessing Officer completed the reassessment by disallowing excess depreciation of Rs. 91.71 lacs.
the Assessing Officer has examined the issue of allowing depreciation on software at the time of original assessment proceedings and he has taken the conscious decision to allow depreciation @ 60%. The re-assessment proceeding has been initiated only to restrict the rate of depreciation to 25%, which is mere change of opinion. Accordingly, the Ld AR contended that the Assessing Officer was not justified in re-opening the assessment on mere change of opinion. In support of this contention the Ld.AR placed reliance on the decision rendered by Hon’ble High Court of Bombay in the case of Indian Energy Exchange Ltd vs. ACIT. Accordingly, the assessee prayed the impugned re- opening assessment order may be held as bad.
Observation of the Tribunal
The Tribunal has rival contentions and perused the record. We notice that the only reason for reopening of assessment is to revise the rate of depreciation allowable on the software capitalized by the AO. As noticed earlier, the AO had allowed depreciation @ 60% in the original assessment proceedings and the reopening of assessment was done only to restrict the rate of depreciation to 25%. The question is whether the decision of AO to revise the depreciation can be said to be mere change of opinion. If the answer is Yes, then the reopening of assessment is liable to be quashed. If the answer is No, then the reopening of assessment is justified.
The tribunal notice that an identical issue has been examined by the jurisdictional Bombay High Court in the case of Indian Energy Exchange Ltd (supra). In this case also, the AO reopened the assessment to restrict the depreciation rate to 25% as against 60% originally allowed on software. Facts being identical, following the above said decision of the jurisdictional High Court, we hold that the assessing officer has reopened the assessment of the year under consideration on mere change of opinion only and the same is not permitted under the law.
Accordingly, the tribunal hold that the reopening of assessment is bad in law and accordingly the impugned assessment order is liable to be quashed. Accordingly, we quash the orders passed by the tax authorities.
The tribunal ruled in favour of the assessee and held that officer has reopened the assessment of the year under consideration on mere change of opinion only and the same is not permitted under the law.