G.D. Agrawal, VP

In this appeal by the Revenue, following grounds are raised:-

1. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in quashing the ex-parte assessment u/s. 144/ 147 of the IT Act, 1961 made by the Assessing Officer.

2. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of Rs. 21,87,500/- made by the Assessing Officer on account of disallowance of depreciation.

At the time of hearing before us, the learned DR sought for an adjournment. However, it was stated by the learned counsel for the assessee that the only issue in this appeal is against the disallowance of depreciation which is covered in favour of the assessee by the decision of ITAT for AY 2005-06. In fact, in AY 2005-06, the Assessing Officer disallowed the depreciation for the first time on the basis of which the assessment of the year under appeal was reopened. In view of the above, the Revenues request for adjournment was refused.

2. The facts of the case are that for the year under consideration, the original assessment was completed on 17.03.2006 at an income of `61,04,266/-. Thereafter, the assessment was reopened under Section 148 vide notice dated 30.03.2010. The assessment under Section 147 was completed vide order dated 26.11.2010 at an income of `72,30,238/- in which depreciation amounting to `21,87,500/- was disallowed. The CIT(A) cancelled the reopening of assessment as well as also directed the Assessing Officer to allow depreciation. The Revenue, aggrieved with the order of learned CIT(A), is in appeal before us.

3. We have heard both the sides and perused the material placed before us. The assessment year under consideration is 2003-04. The original assessment was completed under Section 143(3) vide order dated 17.03.2006. The case was reopened vide notice dated 30.03.2010. Thus, admittedly, the reopening was after more than four years from the end of the relevant assessment year and original assessment was completed under Section 143(3). On these facts, proviso to Section 147 would be squarely applicable. Honble Jurisdictional High Court in the case of CIT Vs. SIL Investments Ltd.-2010-TIOL-327-HC-DEL-IT considered the identical situation and held as under:-

4. We have heard the counsel for the Revenue and have also examined the orders passed by the authorities below. It is clear that for invoking the proviso to Section 147 beyond the period of four years, there must be failure on the part of the assessee to either make a return under Section 139 or in response to a notice under Section 147/ 148 or to disclose fully and truly all material facts necessary for the assessment for that assessment year. Insofar as the filing of the return is concerned, that is not in dispute and, therefore, the focus is entirely on whether the assessee had failed to disclose fully and truly all material facts necessary for the assessment. The Tribunal, on an examination of the material on record, concluded that all the relevant facts were available on record and that it could not be said that at the time when the assessee filed the return, he had failed to disclose fully and truly all material facts necessary for the assessment because the amendment which was introduced retrospectively was not there at all. The Tribunal also observed, and in our view rightly so, that the law cannot contemplate the performance of an impossible act. It was not expected of the assessee to foresee or forecast a future amendment which was to be brought into effect retrospectively. Therefore, the Tribunal has rightly concluded that the proviso to Section 147 could not be invoked merely because there was an amendment in the future which was introduced retrospectively and covered the period in question. The Tribunal has correctly appreciated the law and applied the same to the undisputed facts. We see no reason to interfere with the impugned order as no substantial question of law arises for our consideration. However, we make it clear that we have only examined the jurisdictional issue qua validity of the Section 147 proceedings and have not examined the merits of the matter.

4. The ratio of above decision would be squarely applicable to the facts of the case, because assessment was reopened after more than four years from the end of relevant assessment year, original assessment was completed under Section 143(3) and there was no failure on the part of the assessee to disclose relevant material fact during original assessment proceedings.

5. So far as disallowance of depreciation is concerned, we find that this claim of the assessee has already been considered by the ITAT in assessees own case for AY 2005-06 wherein the ITAT allowed the assessees claim of depreciation. The relevant finding of the ITAT reads as under:-

7. We have considered the rival contentions and found from the record that during the AY 2002-03, the assessee has paid Rs. 1 crore for acquisition of business and commercial rights under clause 1(B) of the agreement dated 25.9.2001 executed with Universal Restaurants Pvt. Ltd. for the purchase of two running restaurants operating under the trade name of Pizza Hut. Universal Restaurants Pvt. Ltd. were granted franchise for the use of Pizza Hut by the license granted to them by the franchise owner M/s. Tricon Restaurants (India) Ltd., (formerly Pepsi Co Restaurants International (India) Ltd.)--a Pepsi international concern. The assessee was granted claim of depreciation in AY 2002-03, 03-04 & 2004-05. We found that payment so made by the assessee was in respect of business and commercial rights and towards consideration for market development and creating product awareness among customers. Accordingly, the AO was not justified in declining the claim of depreciation by treating the same as mere goodwill without having any commercial or business rights. The CIT(A) allowed assessees claim of depreciation on the amount so paid by observing that goodwill if at all is attached to the trademark "Pizza Hut" the use of which is available to the assessee company only for a period of seven years, and there was no goodwill attached to the name of the seller company which can be said to have been acquired by the assessee company. There is no infirmity in the order of CIT(A) for allowing claim of depreciation u/s. 32(1)(ii) of the IT Act.

6. It was also pointed out by the learned counsel that the Revenues appeal against the order of ITAT for AY 2005-06 was also dismissed by the Honble Jurisdictional High Court vide order dated 18th April, 2011 holding that no substantial question of law arises.

7. In view of above, we find no justification to interfere with the order of the CIT(A). The same is upheld. In the result, the appeal of the Revenue is dismissed.

Decision pronounced in the open Court on 27th July, 2012.