TMI Blog2018 (5) TMI 1434X X X X Extracts X X X X X X X X Extracts X X X X ..... I AND MR. B.N. KARIA, JJ. R/SPECIAL CIVIL APPLICATION No. 23185 of 2017 For The Petitioner : Mr JP Shah, Sr Advocate with Mr Manish J Shah For The Respondent : DS AFF.Not Filed (N), Mr Varun K.Patel Notice Not Recd Back COMMON JUDGMENT ( PER : HONOURABLE Mr. JUSTICE AKIL KURESHI) These petitions are filed by the same assessee challenging respective notices for reopening of assessment. Three of these petitions ie., Special Civil Applications No. 22717 of 2017; 22730 of 2017 and 23181 of 2017 concern such notices which have been issued beyond the period of four years from the end of relevant assessment year. Rest of the petitions involve notices which have been issued within four years. Since facts are very similar, we may record those stated in Special Civil Application No. 22717 of 2017. The petitioner is Madhya Gujarat Vij Company Limited, a company wholly owned by the Government of Gujarat. For the Assessment Year 2010- 2011, the petitioner e-return of income on 14th October 2010 showing nil income after set off of brought forward losses under normal computation and income of ₹ 32.11 Crore [rounded off] for the MAT provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordingly, the Assessing Officer added ₹ 26,41,88,950/= [5% of ₹ 52837.79 lakhs] to the total income under normal provision. The said addition under normal provision was confirmed by CIT [A] in the case of Dakshin Gujarat Vij Corporation Limited in earlier years, wherein, it was held that 15% grant was required to be offered for the profit and loss account out of every year end balance. As per Explanation [1] below Section 115JB [2], the Book Profit to be computed from the net profit as shown in the P L Account. Further, as per AS-12 Accounting for Government Grants : (a) the grant can be reduced from the gross value of the asset and depreciation charge will automatically stand reduced to lower cost recognized; or (b) the grant be treated as deferred income and periodically a part of this income to be recognized in the P L Account in the same proportion as the depreciation. It is noticed that the assessee itself has offered 10% of the subsidy grant as revenue receipt for computation of Book Profit under Section 115JB. However, as per Explanation (1) below, Section 115JB (2) and AS-12 Accounting for Government Grant s the balance amount of ₹ 26,41,88, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded was in invalid. In view of the judgment of Supreme Court in the case of Apollo Tyres Limited v. Commissioner of Income Tax, reported in [2002] 255 ITR 273, no adjustments in the assessee s computation of book profit can be made while computing the assessee s income for the purpose of Section 115JB of the Act. Counsel for the petitioner relied on the judgment of Division Bench of this Court in the case of Radhawami Salt Works v. Assistant Commissioner of Income-Tax Anr., reported in [2018] 400 ITR 249 [Guj] in which, on the ground of merger, notice of reopening of the assessment was quashed. Counsel also relied on the judgment of Kerala High Court in the case of Kerala State Electricity Board v. Deputy Commissioner of Incometax, reported in [2010] 329 ITR 91 [Ker] in which, it was held that the provisions of Section 115JB would not apply to the Electricity Board or similar bodies which are totally owned by the Government. On the other hand, learned counsel Shri Varun K Patel for the Department opposed the petition contending that the Assessing Officer recorded proper reasons. The assessee, as per the accounting standards, had to offer 15% of the Government grant by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the original assessment, the Assessing Officer was acutely conscious of the petitioner s treatment of such Government grants and subsidies for the purpose of its tax liability. This was therefore clearly not a case where there was any failure on the part of the assessee to disclose truly and fully, all material facts necessary for assessment. Thus, all notices which have been issued beyond the period of four years need to be set-aside only on this ground. Adverting to rest of the cases where notices have been issued within a period of four years and also as an additional ground pressed into service in the cases where notices have been issued beyond the period of four years, we may examine the assessee s contention of Assessing Officer recking up a scrutinized issue. During the original assessment proceedings, the Assessing Officer had issue a notice dated 31st August 2012 calling upon the petitioner to supply various details. Relevant details being the following : [ 1] Please furnish the complete details of Deferred Government Grants, Subsidies Contributions of ₹ 437554.08 lacs [Schedule 4]. Whether the same has been credited in P L Account. [ 9] Please ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Less : 10% of [A] + [B] Credited to P L A/c. As other income 5283.71 Balance as on 31.03.2010 47554.08 [ 9] Please furnish complete details of Government Grants Capital [deferred amount 10% written back] of ₹ 3577.41 Lacs and Consumer Contribution [deferred amount 10% written back] of ₹ 1706.30 Lacs shown under the head Other Income at Schedule 19 : The details of Government Grants and Consumer Contribution is given in Point No. 1. 10% of the year-end balance [before writing off 10%] of such amounts has been credited to P L Account. [ 23] Please furnish the working of Book Profit according to the provisions of Section 115JB of the Income-tax Act, 1916. Details of working of Book Profit is attached herewith as Annexure-R. After such exchange of correspondence, the Assessing Officer passed an order of assessment on 10th December 2012. In such order, regarding Government grants, subsidies and contributions, he made the following observations : The reply of the assessee was duly considered but not found tenable. No justification has been furnished by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(A). In view of the above discussion, further 5% of ₹ 52837.79 lacs, total Year End Balance of Subsidies Grants is treated as income of the assessee for the period under consideration. Accordingly, an amount of ₹ 26,41,88,950/- is added to the total income of the assessee. He finally worked out the assessee s book profit under Section 115JB of the Act at ₹ 32.11 Crores. It can thus be seen that the Assessing Officer was of the opinion that instead of 10% of the government subsidy, 15% thereof should be reflected in the assessee s books of account. He accordingly made such additions in the normal computation of assessee s income. While the Assessing Officer was so examining the assessee s treatment to the Government grants and subsidies, he simultaneously also examined the assessee s computation of Book-profit under Section 115JB of the Act. Both issues were thus clearly interconnected and were not possible for consideration separately. The fact that the Assessing Officer did not make any similar upward revision of the assessee s book profit under Section 115JB of the Act, that too without citing the reasons, would not mean that he had not examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siderable hardship and uncertainty. It is precisely for this reason that even while recognizing such powers, in special requirements of the statute, certain safeguards are provided by the statute which are zealously guarded by the courts. Interpreting such statutory provisions courts upon courts have held that an assessment previously framed cannot be reopened on a mere change of opinion. It is stated that power to reopening cannot be equated with review. 42. Bearing in mind these conflicting interests, if we revert back to central issue in debate, it can hardly be disputed that once the Assessing Officer notices a certain claim made by the assessee in the return filed, has some doubt about eligibility of such a claim and therefore, raises queries, extracts response from the assessee, thereafter in 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 Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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