TMI Blog2013 (11) TMI 198X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 after four years from the end of the relevant assessment year - an assessment under section 143(3) was made earlier, the proviso to section 147 mandates that the reopening can be done only by the reason of failure on the part of assessee to disclose fully and truly all material facts necessary for assessment for that assessment year - Decided against Revenue. Deduction u/s 80IA - Assessee claimed deduction under section 80IA on self-utilized electricity produced in various generating units by taking the cost of sale at which it was procuring from various Electricity Boards and a note was accordingly left in the records - Held that:- There was no need to adjudicate the issue on merits by the CIT(A) once the reopening of the assessment itself was considered bad in law - The profit eligible for deduction under section 80IA had been rightly computed and allowed taking into account the market value of such goods as contemplated in section 80lA of the Act - The assessee has also objected to the re-opening of the assessment on the ground that the re-opening was done only on mere change of opinion – Following the Judgement of CIT, Delhi vs. Kelvinator of India Ltd. [2010 (1) TMI 11 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80A(6) clearly has defined market value means the price the goods/services would fetch if these were sold by the unit/undertaking in the open market subject to statutory regulations, if any and assessee had clearly violated this section. 4. The appellant prays that the order of the learned CIT (A) on the above ground be set aside and that of AO restored . ITA No.6745/Mum/2011, (AY 2004-05) Assessee Grounds 1. The learned CIT (A)-LTU, Mumbai (hereinafter referred to as CIT (A) erred in not adjudicating on the following grounds of appeal No.2(1) and 2(b) of the appellant, by holding that since re-assessment has been annulled and appellant succeeds on the preliminary issue itself it is not considered necessary to go into the other grounds of appeals relating to the merits of appellants claim under section 80IA etc. 2(a). AO erred in computing the deduction under section 80IA at Rs.29,45,45,004 as against Rs.292,75,56,313 claimed by the appellant, in respect of power generating undertakings by restricting the deduction to 16% return on capital base following circular issued by the Regulatory Authorities. The appellant submits that the deduction under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DCIT 308 ITR 195 (Bom) The Assessing Officer did not find the objections raised by the assessee tenable. The reason given by the AO was that the income chargeable to tax had escaped assessment, for the year under consideration in view of the failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Reliance in this regard was placed by the AO on the following decisions:- i) Dr. Amin Pathology Laboratory 252 ITR 673 (Bom) ii) Praful Chunilal Patel/Vasant Chunilal Patel 236 ITR 832 (Guj.) iii) Rakesh Agarwal 225 ITR 496 It was further stated by the AO that various decisions had held that mere filing of all details or mentioning something in the return of income does not alone amount to the fact that it should be deemed to have been considered by the AO. The assessee failed to disclose in its return of income that the power transferred to non 80IA units was at price more than the tariff fixed by the Regulatory Authorities and the same was not allowable as this inflates the profits eligible for deduction u/s 80IA. Accordingly, the AO had the reason to believe based on solid evidence that excess deduction to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lectricity to avail higher 80IA deduction than admissible. Revenue Audit had worked out the excess profit for the A.Y. 2004-05 from the power plants. Vide his letter dt.06/08/2007 (the Assessing Officer had furnished his reply on the said audit query wherein he had clearly stated that the audit objection was not acceptable. He had also categorically reiterated that the profit eligible for deduction under section 80IA had been rightly computed and allowed taking into account the market value of such goods as contemplated in section 80lA of the Act. He had also stated that section 80IA deduction has been claimed by RIL by taking into account the market value of goods on the date of the transfer. The AO hast however, gone on to re-open the assessment u/s 147 adopting the reasons given by the Revenue Audit Party in support of the query raised by it, inspite of the fact that he did not himself agree with the said reasons. Under the facts and circumstances of the case, the decision of the Hon'ble jurisdictional High Court in the case of IL FS Investment Managers Ltd. vs. CIT (298 ITR 32) is squarely applicable. In the said decision, the Hon'ble Bombay High Court has held as follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Managers Ltd. vs. ITO 298 ITR 32(Bom) and the observations of Hon'ble Rajasthan High Court in the case of CIT vs. Shree Rajasthan Syntex Ltd 313 ITR 231 on the ratio of borrowed satisfaction" and approved I confirmed by the Hon'ble Supreme Court, as stated above, I am of the opinion that the issue of notice uls.1471148 of the I. T. Act in the present case based upon observations of the audit party to which the AO did not agree to is clearly in violation of the above two decisions and more particularly the decision of the Hon'ble Jurisdictional High Court in IL and FS Investment Managers Ltd. Vs ITO 298 ITR 32 (Bom) and which is binding upon all authorities subordinate to the Hon'ble High Court and is therefore, not valid in law and is therefore quashed and the consequential reassessment so made is annulled." The facts and circumstances of the case for the A.Y. 2004-05 being identical, I have no reasons to disagree with the decision of the Ld. CIT(A), which would also apply to the facts of the A.Y. 2004-05. I, therefore, in view of the binding decision of the Hon'ble jurisdictional High Court, hold that the re-opening of assessment for the A.Y. 2004-05 u/s 147 and issue of not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the framing of the earlier assessment or the same is merely a change of opinion on the part of the Assessing Officer. It will be useful to reproduce the reasons recorded by the Assessing Officer for reopening the assessment u/s 147 of the I.T. Act, 1961 which is as follows:- "Reasons for reopening under section 148 1. Assessee company filed return of income on 01/11/2004 declaring total income of Rs.898,19,32,151/- under normal provisions of the Income Tax Act, 1961 and book profit of Rs. 4264,14,81,346/- u/s 115J8. Order u/s 143(3) was passed on 27/11/2006 assessing the total income of Rs. 16,46,57,20,196/- under normal provisions of the Income Tax Act 1961 and book profit of Rs. 5748,58,77,147/- u/s 115J8. Thereafter order u/s 250 dt. 29/01/2009 was passed to give effect to CIT(A) order dt. 31/10/2008 and total income was revised at Rs.1060,60,50,316/- under normal provisions of the Income Tax Act 1961 and book profit of Rs.5428,02,97,561/- u/s 115JB. 2. Sub-section (10) to 80IA provides that where it appears to AO that owing to the close connection between assessee carrying on the eligible business to which this section applies and any other person, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Capital base 16% return on capital base 80IA deduction claimed by assessee Excess deduction claimed by assessee u/s 80IA GTG1PG 6,67,64,153 1,06,82,264 38,62,84,451 37,56,02,187 GTG2PG 14,94,89,585 2,39,18,334 18,79,38,426 16,40,20,092 GTGAHD 21,96,29,982 3,51,40,797 14,63,32,788 11,11,91,991 CPP III/IV 40,41,19,289 6,46,59,086 104,30,98,240 97,84,39,154 CPP V 19,45,18,197 3,11,22,912 32,06,25,859 28,95,02,947 CPP VI 21,54,86,481 3,44,77,837 37,98,08,864 34,53,31,027 STG 61,52,73,587 9,84,43,774 46,34,67,685 36,50,23,911 Total 186,52,81,275 29,84,45,004 292,75,56,313 262,91,11,309 This has resulted in excess profit being exhibited for the purpose of claiming deduction to the extent of Rs.262.29 crores. Assessee faded to disclose in its return of income that the pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the re-assessment proceedings were initiated merely on a change of opinion on the same set of facts. In his reply, to the Revenue Audit Party, the Assessing Officer has very categorically stated that "the power generating eligible undertaking of RIL has transferred the electricity at the rate which is well comparable at the rate which the electricity board sells to an industrial undertaking for its consumption. Under the circumstances the profit eligible for deduction under section 80IA has been rightly computed and allowed taking into account the market value of such goods as contemplated in section 80IA of the Act' . This clearly shows that the AO had examined the issue and applied his mind to the same. In the case of Kelvinator of India 256 ITR 1 (Delhi) (FB), it has been held that once an assessment has been completed u/s 143(3) of the I.T. Act, 1961, a presumption can be raised that such an order has been passed on application of mind. The Full Bench of the Hon'ble Delhi High Court in its judgment has taken a clear view that re-opening of assessment u/s 147 merely because there is a change of opinion cannot be allowed. The order of the Full Bench of the Hon'ble Delhi High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat income had escaped assessment. In the case of Asian Paints Ltd. (supra), the question was whether the Assessing Officer could take recourse to the provisions of section1 47 for his own failure to apply his mind to the material which, according to him, is relevant and which was available on record. Hon'ble Bombay High Court, after considering the judgment of the Full Bench of Hon'ble Delhi High Court in the case of Kelvinator of India Ltd., has observed as follows:- 9. It is clear from the observations made above that the Full Bench of the Delhi High Court has taken a view that in a situation where according to the AO he failed to apply his mind to the relevant material in making the assessment order, he cannot take advantage of his own wrong and reopen the assessment by taking recourse to the provisions of s. 147. We find ourself in respectful agreement with the view taken by the Full Bench of the Delhi High Court. 10. It is further to be seen that the legislature has not conferred power on the AO to review its own order. Therefore, the power under s. 147 cannot be used to review the order. In the present case, though the AO has used the phrase "reason to bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not satisfied, it was for him to examine the issue further, both on facts and in law. It is not for the assessee to instruct the Assessing Officer on matters of law and, it is not the duty of the assessee to guide the AO as to how he should examine the facts. Even if it is assumed that the AO has drawn an erroneous inference, a mere change of opinion with regard to that inference would not justify reopening of the assessment. The Hon'ble Supreme Court in the case of Kelvinator of India Ltd. (supra) has held that the Assessing Officer has no power to review, he has the power to reassess. After 1/4/1989, Assessing Officer has power to reopen, provided there is 'tangible material' to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. However, as stated earlier, absence of tangible material is clearly visible. Only an opinion has been expressed in the reasons recorded that the assessee has so arranged his affairs so as to show extraordinary profits for the purpose of claiming higher deduction u/s 80IA. However, no tangible material has been brought on record to justify, even prima facie, suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosure of material facts and relied on the decision in the case of General Insurance Corporation of India vs. DCIT 342 ITR 27 (Bom) and Aventis Pharma Ltd. Vs Assistant Commissioner of Income-tax (Bom) 323 ITR 570 for the proposition that on the same material it has to be considered as change of opinion. It also submitted that as seen from the reasons recorded for reopening the assessment, AO based his information on the material placed on record and there was no failure on the part of assessee to disclose any material. Since AO has already examined the issue and allowed deduction under section 80IA originally after discussion, the present opinion of AO has to be considered as a change of opinion. It was further contended that the reopening was based on audit objection and AO himself has not accepted the audit objection and reported that there is no merit in the objection itself. Since the audit did not agree with the opinion, it cannot be considered that AO has reasons to believe that income has escaped assessment. He relied on the decision of the Hon'ble Bombay High Court in the case of IL and FS Investment Managers Ltd. Vs Income-tax Officer (Bom), 298 ITR 32 and the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which it can be sold to others in the open market. For that he relied on the Regulatory Authority instructions to arrive at 16% yield on a capital basis. This issue requires detailed examination which can be done in the relevant assessment year. There is no need to give findings on that issue as re-assessment was annulled. Therefore, we are of the opinion that there is no need to adjudicate the issue on merits by the CIT(A) once the reopening of the assessment itself is considered bad in law. Consequently, the relevant grounds raised by the Revenue and assessee are treated as academic in nature and are accordingly dismissed. 8. In the result both the appeals by assessee (ITA No.6745/Mum/2011) and the Revenue (ITA No.6627/Mum/2011) are dismissed. ITA No. 4864/Mum/2010 ITA No. 4729/Mum/2010, (AY2003-04) ITA No.6627/Mum/2011 ITA No. 6743/Mum/2011, (AY2005-06) 9. In these appeals, the issues are common. The reasons for reopening being the same, except that the proceedings were initiated within four years from the end of the assessment year. In view of this, even though the principles laid down in the above appeals with reference to reopening beyond four years of the relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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