TMI Blog2012 (12) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... D. AGRAWAL AND SHRI I.P. BANSAL, JJ. Appellant by : Sh. H.L. Dhiyana, CIT(DR) Respondent by : S/Shri Jitendra Sanghavi Surender Kumar, CA ORDER PER BENCH: All these appeals are filed by the revenue and are directed against two separate orders dated 10.12.2010 and 25.11.10 passed by the CIT(A) for each assessee in respect of assessment years 2003-04 and 2004-05 respectively. 2. In all these appeals revenue has raised common issue. Grounds of appeal in all the four appeals are also identical and read as under: - 1. The ld. CIT(A) has erred on facts and in law in annulling the order u/s 143(3)/147 of the I.T. Act while holding invalid the reopening u/s 147, ignoring that where transaction itself, on the basis of subsequent information is found to be bogus transaction, mere disclosure of that transaction at time of original assessment proceedings cannot be said to be a disclosure of the true and full facts in the case and ITO would have jurisdiction to reopen concluded assessment in such a case. Reliance is placed on the decision of the Hon ble Supreme Court in Phool Chand Bajrang Lal vs. ITO (1993) 203 ITR 456 (SC); Bawa Abhai Singh vs. DCIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ognized 1/3rd of the total receipt in the nature of revenue receipt, hence entire receipts are chargeable to tax being revenue receipt. Accordingly, a sum of Rs. 6,82,00,000/- is added to the income of the assessee and the loss of the assessee is reduced to Rs. 162,11,09,994/- against the assessed loss of Rs. 168,93,09,994/- assessed as per original assessment order dated 28.03.2006. 6. The assessee objected to the reassessment proceeding on the ground that during the course of original assessment proceedings, vide annexure 2 annexed to letter dated 19.12.2005, the assessee had filed a detailed note on service line deposits received by the assessee from its customers which were accounted for as income over the period of three years. The said reply was duly considered by the AO and it was discussed with him and the AO was convinced with the submissions made by the assessee. Therefore, no addition was made in the original assessment order framed u/s 143(3) and subsequent issue of notice u/s 148 is based on change of opinion . It was claimed that the initiation of reassessment proceedings is also barred by limitation as the same is after the expiry of four years from the end of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eness the factual aspect in respect of all the present appeals is described as below:- ITA No. 488/Del/2011 10. Copy of reasons recorded for reopening of assessment is placed at page 24 of the paper book and it will be relevant to reproduce the same. M/s BSES Yamuna Power Limited A.Y. 2003-04 Reasons for reopening the case U/s 147/148 of the I.T. Act, 1961 Return of income in this case was filed on 2/12/2003 declaring loss of Rs. 1689482456/-. The return was processed u/s 143(1) on 11/03/2004. The scrutiny assessment completed u/s 143(3) on 29/12/2006 at loss of 1689309994/-. On perusal of the assessment record of the assessee following discrepancies have come to the notice; That during the year the assessee company received a sum of Rs. 10.23 crores from customers as Security Line Deposits which has been reflected in the liability side of the B/S under the head Loan Advances. Out of this security deposits a sum of Rs. 3.41 crores, as 1/3rd of the total amount, was transferred to P L Account as revenue receipt and a balance sum of Rs. 6.82 crores has been shown as liability. The whole of the security line deposits are in fact not a liability of the company but are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers for the required electrification of new lines/areas in their locality. 1. For electrifying the areas/locality, the assessee company has to incur huge expenses which are normally in the nature of capital expenses. In fact, as per Electricity (Supply) Act, 1948, service line deposits received from the customers is not the income but is in the nature of capital receipt to meet out the huge capital expenditure for electrifying the areas/locality. 2. In fact the Service Line Deposits received from the customers are required to be reduced in the corresponding capitalization of assets for electrifying the concerned areas. Accordingly, service line deposits received cannot be treated as revenue income. The most appropriate method of accounting of service line deposits is to account for the same under the head current liabilities and deduct the same against the capital expenditure incurred there against, the same should be the treatment for tax purpose, i.e. Depreciation should be allowed against the net fixed asset cost (i.e. net of service line deposit). 3. In the cases of non electrified areas it takes a lot of time spreading from 2 to 3 years in its electrification. After pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring loss of Rs. 140154360/-. Subsequently the return was revised on 30/03/2000. The return was processed u/s 143(1) on 29/12/2006. The scrutiny assessment completed u/s 143(3) on 29/12/2006 at loss of Rs. 187430602/-. On perusal of the assessment record of the assessee following discrepancies have come to the notice; That the assessee company claimed and was allowed depreciation on energy meters @ 80% under the head plant and machinery instead of correct rate of 25%. It is pertinent to mention here that excess depreciation claimed on account of energy meter has also been disallowed in the A.Y. 2005-06. It was held in the assessment order for A.Y. 2005-06 that Energy Meters installed by the company are mostly mechanical meters used for measuring electrical consumption and are not energy saving devises. It is only the energy meters which have inherent quality of saving energy which quality for higher depreciation of 80% as envisaged in the clause 8(ix) of plant and machinery depreciation schedule of IT Rules. Since the facts are similar in this assessment year also, hence I have reason to believe that the assessee has claimed higher depreciation or energy meters to which he wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M placed at page 41 is as under: - Annexure-M Note on Claiming Depreciation on Energy Meters @ 80% The assessee company is claiming depreciation @ 80% on Energy Meters under Clause (III) (Machinery Plant) 8(ix) of Part A to the Rates of Depreciation in the Appendix to the Income Tax Rules applicable for the A.Y. 2004-05, (Enclosed relevant documentary proof Specification/PO s of Energy Meter-Annexure M(1), M(2), M(3), M(4). ITA No. 487/Del/2011 20. The original assessment in this case is framed vide order dated 29.12.2006 at a loss of Rs. 21,91,09,259/- passed u/s 143(3) of the Act. 21. Copy of reasons recorded for reopening is filed at page 110 of the paper book. The reasons are identical as are in ITA No. 489 and for the sake of brevity the same are not being reproduced. The escapement which has been pointed out in the reasons is a sum of Rs. 37,07,38,484/- on account of difference in depreciation on energy meters and a sum of Rs. 15,73,00,000/- on account of security line deposits and total escaped income is computed in the reasons at Rs. 55,86,09,523/-. Copies of queries raised by the AO vide letter dated 09.12.2006 is placed at pages 140, 141 of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that the service line deposits received from the consumers are accounted for as income over three years period. Please explain why the same should not be accounted in the current year itself since the assessee company has received the receipts in the current year. 27. The reply of the above questionnaire is letter dated 20.12.2005 copy of which is placed at pages 49 to 51 of the paper book. The reply to the aforementioned query was given vide Sl. No. 2 which read as under: - 2. Note on the services line deposits received from the customer and accounted for as income over 3 years period. (Annexure-2). 28. The copy of annexure 2 is filed at pages 24 to 26 of the paper book which is almost the same as was given in respect of other years. 29. Thus, it is clear from the above facts that queries on the issues on which reassessment proceedings have been initiated were raised during the course of original assessment proceedings and the replies were also given by the assessee with regard to those queries. 30. Ld. DR after narrating the above facts pleaded that ld. CIT(A) while quashing the initiation of reassessment proceedings has failed to consider Explanation 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court have upheld the validity of initiation of reassessment proceeding with the following observations in our view, the reopening of the assessment is fully justified on the facts and circumstances of the case. ii) M/s Dalmia P. Ltd. vs. CIT Writ Petition (Civil) No. 6205 of 2010 order dt. 26th Sept., 2011: In this case, on facts, it was found that the Assessing Officer required the assessee to submit details in respect of sundry creditors amounting to ₹ 1,66,37,402/- and despite various queries raised by the Assessing Officer during the course of original assessment proceedings, the assessee submitted details or confirmations only to the extent of ₹ 1,13,53,344/- and it was held by Hon ble High Court that in respect of sundry creditors regarding which no details or confirmations were filed the reopening was valid. iii) M/s Oriental Insurance Co. Ltd. vs. ACIT ITA No. 3910/Del/2007 order at 22nd July, 2011: To contend that in a case when an assessment order was passed u/s 143(3) a general presumption cannot be raised that such an order was passed after an application of mind and in absence of any discussion the case will not fall within the scope of change ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven by the ld. CIT(A) and his order should be set aside and that of AO be restored. 32. On the other hand, it was submitted by ld. AR that it has been shown that during the course of original assessment proceedings, the queries were raised by the AO and replies were given by the assessee. He submitted that non discussion of the issues in the assessment order cannot be viewed against the assessee. He submitted that according to well established law even when the concept of change of opinion stands obliterated w.e.f. 1st April, 1989 i.e. after substantiation of sec. 147 of the Act by Direct Tax Laws Amendment Act, 1987, the concept will prevail as if the said concept is removed, it would vest arbitrary powers in the Assessing Officer. Reference was made to the decision of Hon ble Supreme Court in the case of CIT vs. Kelvinator of India 320 ITR 561. It was submitted that in the said case the Hon ble Supreme Court had also decided departmental appeal in the case of CIT vs. Eicher Ltd. 294 ITR 310 (Del) and the departmental appeal was dismissed which means that the decision of Hon ble Delhi High Court in the case of CIT vs. Eicher Ltd. was upheld. He submitted that in the case of CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eged that any fact or factual detail was embedded in the evidence/books of account which the AO could have uncovered but had failed to do so. The letter written by the assessee dated 10.01.2006, spelt out and in categorical terms had stated truly and fully the material facts. Noting remained to be discovered or unearthed. Thus, it was held that the jurisdiction preconditions required for reopening of the assessment order was not satisfied. ii) M/s Atma Ram Properties P. Ltd. vs. DCIT decision dated 11.11.2011 2011-TIOL-824-HC-Delhi-IT a copy placed at pages 6 to 17 of the paper book. In this case, the Hon ble High Court has discussed the scope of Explanation 1 to sec. 147 and it has been held that in a case where the AO did not examine and gone into the question that whether or not provisions of sec. 2(22)(e) were attracted to the assessee s case can be a valid ground for initiation of reassessment proceedings and it was found that AO at the time of original assessment proceedings had gone into the question of loans and advances from the sister concern. Figures and details were furnished and given along with an annexure which had particulars like opening and closing balance sheet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer that these are bogus transactions, therefore, the issue raised by the revenue by stating these transactions as bogus transactions is misconceived. Ld. AR submitted that the case laws relied upon by ld. DR are distinguishable on facts hence cannot be applied to the facts of the present case. 35. In the rejoinder it was submitted by the ld. DR that it has already been pointed out by him that there is no discussion in the assessment order on the issues on which the reassessment proceedings have been initiated. He submitted that AO did not apply his mind. He submitted that assessee itself had accepted the nature of the receipt as revenue as 1/3rd of the receipts was declared by the assessee as revenue receipt and no reason was submitted that why 2/3rd portion of the receipt was left to be considered as revenue receipt. The subsequent decision of Hon ble Supreme Court in the case of Honda Siel should be applied. 36. We have carefully considered the rival submissions in the light of material placed before us. It is the case of the revenue that though the queries were raised by the AO in support of the issues which are subject matter of reassessment and replies were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent appeal is concerned, we find that the assessee had placed all the material before the AO and where there was a doubt, even that was clarified by the assessee in its letter dated November 8, 1995. If the AO, while passing the original assessment order, chose not to give any finding in this regard, that cannot give him or his successor in office a reason to reopen the assessment of the assessee or to contend that because the facts were not considered in the assessment order, a full and true disclosure was not made. Since the facts were before the AO at the time of framing the original assessment, and later a different view was taken by him or his successor on the same facts, it clearly amounts to a change of opinion. This cannot form the basis for permitting the AO or his successor to reopen the assessment of the assessee. In sum and substance, this was the decision rendered by the Tribunal and we do not find any fault in the view taken. Consequently, we are of the view that since the case is one of a mere change of opinion that does not justify the AO s reopening the assessment of the assessee. 37. Therefore, according to the decision of jurisdiction High Court mandate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke its colour from the questions involved in the case in which it is rendered and while applying the decision to a later case, the courts must carefully consider the principle laid down by the decision of the court and not to pick out words and sentences from the judgment, diverse from the context of the questions under consideration by the court, to support their reasoning and reference in this regard can be made to the decision of Hon ble Supreme Court in the case of CIT vs. Sun Engineering Works P. Ltd , 198 ITR 297 (SC). Therefore, the context in which the decision in the case of Honda Siel Power Products Ltd. vs. ACIT was rendered are entirely different from the context of the present case. Similarly, the other cases are relied upon by the ld. AR are not applicable to the facts of the present case. We are bound by the decision of jurisdictional High Court in the case of CIT vs. Eicher Motors (supra) which is fully applicable to the facts of the case of the assessee. Therefore, we find no infirmity in the order of the CIT(A) vide which it has been held that initiation of reassessment proceeding is based merely on change of opinion . 39. For ITA No. 488 we found that the init ..... X X X X Extracts X X X X X X X X Extracts X X X X
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