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2016 (6) TMI 740 - GUJARAT HIGH COURT

2016 (6) TMI 740 - GUJARAT HIGH COURT - TMI - Reopening of assessment - eligibility of deduction under section 80IA - Held that:- The entire issue was examined by AO during the original assessment proceedings. We may recall, during scrutiny assessment, the Assessing Officer raised several queries calling upon the assessee to satisfy him regarding the same. One direction was to submit complete note on deduction claimed under Section 80IA and to show how the company satisfied the provisions of the .....

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t ₹ 0.80 per kg. Thus, the assessee in the process of substantiating its claim for deduction under section 80IA of the Act, pointed out the price for transferring generated electricity by one division to another. Such working out included the cost of production of steam and the cost at which it was charged to the consuming unit. - It was only after verifying such details that the Assessing Officer in the order of assessment dated 31.10.2012, made no alteration in the petitioner's claim .....

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itioner under section 80IA was minutely scrutinized by the Assessing Officer in the original assessment proceedings. As long as the claim was examined and no additions made, it would not be open for the Assessing Officer to reopen the assessment on the premise that in the original assessment, no reasons were recorded for not disturbing the claim. - Decided in favour of assessee - Special Civil Application No. 86, 87, 88 of 2016 - Dated:- 8-6-2016 - Akil Kureshi And A. J. Shastri, JJ. For the Pet .....

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16 pertains to assessment year 2008-09 and the notice for reopening was issued beyond the period of 4 years from the end of relevant assessment year. Special Civil Application No.87 of 2016 pertains to the assessment year 2009-10. Here also notice has been issued beyond period of 4 years. Special Civil Application No.88 of 2016 pertains to the assessment year 2010-11 and the notice for reopening has been issued within a period of 4 years from the end of relevant assessment year. 3. Material fact .....

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tiny. During scrutiny assessment, the Assessing Officer examined various issues including the claim of the petitioner of deduction under section 80IA of the Act. Under a communication dated 22.11.2010, the Assessing Officer called upon the petitioner to supply various details, which included the following: 3.8 Please submit the complete note on deduction claimed U/s. 80IA and how your company is satisfying the provisions of section 80IA. 5. In response to such communication, the petitioner repli .....

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al Steam Generation Kgs 154614651 2 Steam to Process Kgs 107678291 3 Steam Power Plant Kgs 46936360 4 Fuel Consumed (Lignite) Kgs 38118207 5 Stem/Fuel Ratio a1/a3 4.06 Total Power Generated Units 14889700 Power Plant Consumption Units 3032648 Power to Process Units 11857052 B Expenses Incurred Total Rs / Kg 1 Lignite & Coal ₹ 88141936 0.57 2 Maintenance Expenses ₹ 8359355 0.05 3 Salaries & Wages ₹ 3730681 0.02 4 Interest ₹ 2321120 0.02 5 Depreciation ₹ 11149 .....

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y assessment by passing an order dated 31.12.2010, in which, he noted as under: 4. The assessee had claimed that the captive power plant is a separate industrial undertaking in terms of provision of 80IA. He has submitted the separate Balance Sheet and Profit and Lass Account of Power Plant Division along with auditor report in form No. 10CCB for claim of deduction u/s. 80IA. All the accounts of Assessee Company for separate divisions are consolidated and the final balance sheet and P & L Ac .....

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owances on the petitioner's claim of deduction under section 80IA on any count, though he did not record any findings in this respect. 8. To reopen such assessment, the respondent Assessing Officer issued notice dated 20.06.2014. He supplied the reasons recorded by him to issue the notice which read as under: The assessee has claimed deduction u/s. 80IA of ₹ 2,93,61,164/in respect of Captive Power Plant of the assessee. During the course of assessment proceedings for A.Y. 201112 it was .....

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ity and is not brought to market for sale and purchase. It is not capable of being transported to a distant place because it could lose it's potential heat. Moreover, because of huge requirement of compressor power for transportation and capital cost of equipment like compressor, piping etc. it is uneconomical to transport it to a nearby location as the steam is of low pressure and density. Thus, it is clear that the steam is not marketable commodity and thus does not have any market value. .....

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l for textile process house. The assessee purchases coal/lignite from which steam is generated and is used in process house. Similarly in the case of captive power plant also coal/lignite was bought and was used for production of steam which was being sent to process house. Since the steam cannot be purchased from outside market if the assessee has to use steam he has to generate it thus market rate of steam for the purpose of calculating deduction u/s. 80IA of the Act has to be taken as cost of .....

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m sale of steam. In view of the detailed reasoning cited above, I have reasons to believe that income of ₹ 64,60,697/has escaped assessment within the meaning of provisions of sec.147 of the Act as wrong deduction u/s. 80IA of the Act has been allowed to the assessed. 9. The petitioner under communication dated 05.10.2015 raised objections before the Assessing Officer contending inter alia that the entire claim was accepted by the Assessing Officer after due scrutiny and verification of th .....

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of the petitioner for deduction under Section 80IA of the Act was examined during the original assessment. Additionally, in two cases, the notices have been issued beyond four years from the end of relevant assessment year without there being any element of failure on the part of the assessee to disclose truly and fully all material facts. Counsel relied on the decision of full bench of Delhi High Court in case of Commissioner of Incometax v. Usha International Ltd., reported in 2012 348 ITR 48 .....

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ial profit of the assessee was derived from the sale of steam and not by generation of electricity. In the opinion of the Assessing Officer, the price for sale of steam was taken arbitrarily. The steam not being a traded commodity, its market price cannot be determined. He further recorded that the scrutiny of records shows that the cost of generation of steam was ₹ 0.74/kg whereas, sale price was taken at ₹ 0.80/kg whereby, the assessee derived profit of ₹ 64.60 lacs (rounded .....

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uring the original assessment proceedings. We may recall, during scrutiny assessment, the Assessing Officer raised several queries calling upon the assessee to satisfy him regarding the same. One direction was to submit complete note on deduction claimed under Section 80IA and to show how the company satisfied the provisions of the said section. In response to such query, the petitioner gave detail work out of its claim of deduction under section 80IA of the Act from generation of power. The ass .....

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g generated electricity by one division to another. Such working out included the cost of production of steam and the cost at which it was charged to the consuming unit. 13. It was only after verifying such details that the Assessing Officer in the order of assessment dated 31.10.2012, made no alteration in the petitioner's claim of deduction under section 80IA of the Act. He disallowed certain part of the petitioner's claim for depreciation, but no disallowance was made on the claim for .....

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licited the petitioner's response. Being satisfied about the claim of deduction, final order of assessment was passed. It may be that the Assessing Officer did not record his reasons for not making any additions. This however, would not be material. As long as the claim was examined and no additions made, it would not be open for the Assessing Officer to reopen the assessment on the premise that in the original assessment, no reasons were recorded for not disturbing the claim. A Division Ben .....

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what manner such claim should be treated in the final order of assessment, is an issue on which the assessee would have no control whatsoever. Whether the Assessing Officer allows such a claim, rejects such a claim or partially allows and partially rejects the claim, are all options available with the Assessing Officer, over which the assessee beyond trying to persuade the Assessing Officer, would have no control whatsoever. Therefore, while framing the assessment, allowing the claim fully or p .....

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r of complex claims, voluminous material, numerous exemptions and deductions. If the Assessing Officer is burdened with the responsibility of giving reasons for several claims so made and accepted by him, it would even otherwise cast an unreasonable expectation which within the short frame of time available under law would be too much to expect him to carry. Irrespective of this, in a given case, if the Assessing Officer on his own for reasons best known to him, chooses not to assign reasons for .....

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s complete. Merely because he chooses not to assign his reasons in the assessment order would not alter this position. It may be a nonreasoned order but not of acceptance of a claim without formation of opinion. Any other view would give arbitrary powers to the Assessing Officer. 43. We are, therefore, of the opinion that in a situation where the Assessing Officer during scrutiny assessment, notices a claim of exemption, deduction or such like made by the assessee, having some prima facie doubt .....

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bservations we must add one caveat. There may be cases where the Assessing Officer does not and may not raise any written query but still the Assessing Officer in the first round/ original proceedings may have examined the subject matter, claim etc, because the aspect or question may be too apparent and obvious. To hold that the assessing officer in the first round did not examine the question or subject matter and form an opinion, would be contrary and opposed to normal human conduct. Such case .....

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