The assessee company had filed return for relevant AY. The assessment was completed u/s 143(3) of Act. It was noticed from the records that the allowable depreciation on building as per Income Tax Act was Rs. 4,92,729. It was noticed that the building which was shown as business asset in the depreciation schedule was partly used for let out and partly used for business purpose. The assessee in its computation had deducted Rs.1.73 lakhs from total depreciation as proportionate depreciation on building in respect of let out portion of such building. It was further noticed by AO that the assessee debited Rs. 44.45 lakhs in its Profit and Loss account under the head repairs to building and the entire amount of such expense was claimed as business expenses. As the house was partly used for let out and partly for business, the proportionate expenses on repairs was required to be disallowed u/s 38 of the Act. However, no such disallowance was made in the assessment. The AO noted that if the same formula as adopted by the assessee while computing disallowance of depreciation in respect of let out portion of such building was taken into account, the amount of disallowance u/s 38 came to Rs.15.51 lakhs. Thus, as per AO, there was an excess allowance of business expenses to the extent of Rs.15.51 lakhs which resulted in an underassessment of business income. Therefore, the assessee was issued notice u/s 148 of the Act. The assessee submitted before the AO that the depreciation on building was allowable as a business expenditure u/s 32(1)(i) of the Act. It was further submitted by assessee that since the expenditure had been incurred by the assessee for the purpose of building/premises used by assessee for business or profession, there was no question of disallowance of expenditure u/s 38 of the Act. However, the AO rejected the contention of the assessee and made addition to the tune of Rs.15,51,000/-. On appeal, CIT(A) upheld the view taken by the AO. Aggrieved assessee filed appeal before Tribunal.

Tribunal held that,

++ the AO has passed the reassessment order under section 147/143(3) the Act dated 30-12-2011, disallowing the proportionate of depreciation expenses on building in respect of let out portion such building to the tune of Rs.15,51,000/- on the contention that the building was partly let out and partly used for business. CIT(A) did not give detailed finding about validity of reopening of the assessment U/s 147 of the Act except to say that the AO had already discussed the issue while passing the order stating therein that there was an excess allowance of business expenditure which resulted in underassessment of business income and therefore confirmed the order passed by the AO. In order to initiate the reassessment proceedings, the notice under section 148 of the Act should be issued to the assessee. It is well settled law that initiation of reassessment proceedings under section 147 of the Act without issuing notice under section 148 of the Act is void ab initio;

++ assessee had filed its return of income on 31-10-2007 and revised the same on 30-03-2009. The audited Accounts and Tax Audit Report had been filed along with the Return of Income, and the same were available on record before the AO at the time of original assessment. Further, the computation of Total Income clearly stating the proportionate disallowance of depreciation has also been filed before the AO. On perusal of the same it could be seen that all the information and details on the basis of which the AO has reasons to believe that income has escaped assessment were duly submitted in the course of the assessment proceedings and were available before the AO at the time of completion of assessment proceedings under section 143(3) of the Act. The AO has merely reviewed the same set of documents and concluded that that there was escapement of tax which is not tenable;

++ the reasons for reopening of assessment was not provided to the assessee. Apart from this the AO has reopened the assessment completed under section 143(3) of Act on the basis of objection raised by audit party. Thus, the AO has not applied his mind independently to arrive at the conclusion as to whether he had reasons to believe that income of the assessee was escaped from tax in the assessment for the relevant year .Therefore, considering the entirety of facts and circumstances of the case, and the material on record, it is difficult to uphold the stand of the assessing officer for reopening the assessment U/s 147/148 of the Act, therefore, reassessment order passed by the assessing officer under section 147 of the Act was cancelled. In the result, the appeal filed by the assessee is allowed.

(See 2019-TIOL-366-ITAT-KOL)