9911796707
TMI Blog2018 (11) TMI 1237X X X X Extracts X X X X X X X X Extracts X X X X ..... has erred in confirming the same. 3. The learned Assessing Officer failed to appreciate that 3.1 the under lying bas i s adopted in the f i r s t year (A.Y. 1995- 96) for apportioning income between new unit and other than new unit was the proportion of the capacity of the new unit in the total capacity as reflected through the Gross Block of Fixed Assets of the Company as a whole and Gross Block of Fixed Assets of the new unit. 3.2 as there being no variation in the capacity of the new unit as well as in total capaci ty, the bas i s adopted in the f i r s t year has been fol lowed in subsequent years i .e. A.Y. 1996-97 to 1999- 2000 and that the revenue has not disturbed the same. 3.3 there is no variation in the capacity of the new unit as well as in total capacity in the year under appeal as compared to the first year and therefore the apportionment of total income for the purpose of the deduction u/s 80IB has been rightly done on the basis of the same as ratio as followed in earlier five years. 3.4 considering the matrix of the factual background, it cannot be said that income has escaped assessment and that too on account of fai lure of the as ses see to di s close ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Capacity Expansion Project (hereinafter referred to as CEP) on 21.12.1994 comprising Crude Distillation Unit (CDU-II) with a refining capacity of 3 Million Metric Tons Per Annum (hereinafter referred to as MMTPA ) which was increased to a total refining capacity of 7.5 MMTPA. During 1995-96 the assessee first time claimed deduction under section 80IA @ 30% of the profits from the CEP. As per the assessee due to certain complexity of operations involved it was not possible to determine separately and independently the profit of CEP and therefore a mechanism namely administered price mechanism was adopted to determine the profit by applying the ratio of GBFA relating to CEP to the GBFA of the assessee (KRL) as a whole. Pertinent to state that the method adopted was accepted by the Revenue in the assessment and reassessment proceeding for determining the quantum of deduction under section 80IA of the Act. The said ratio was worked out at 0.3611 by taking GBFA of CEP at Rs. 30063 lakhs and that of KRL as a whole at Rs. 83259 lakhs and accordingly the profit of the assessee was apportioned and deduction was claimed u/s 80IA of the Act which was allowed by the Revenue in the assessment/r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct before the Ld. CIT(A) who dismissed the jurisdictional ground raised by the assessee after considering the submissions and contentions made by the assessee which has been incorporated in para 3 of the appellate order by observing and holding as under: "4. I do not agree with the submission of the authorized representative. I agree with the finding of the A.O. that deduction u/s. 80IA/80IB is required to be amended in accordance with the additions to the fixed assets. It is not correct to say that the ratio of deduction u/s. 80IA/80IB has to be re-determined by excluding the common facilities from both the units. I agree with the finding of the A.O. that when the ratio of deduction u/s. 80IA/80IB was fixed in initial assessment year no such apportionment of common facility was done. 5. I do not agree with the authorized representative that the A.O. is not justified in reopening the assessment as per amended provision of section 147 if the A.O. is having reasonab1e belief that any income has escaped assessment then he is empowered to reopen the assessment. In this case the A.O. has noted that the assessee company was allowed excessive deduction u/s. 801A/80IB without looking i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the following decisions: * Hindustan Lever Ltd. v/s. ITO (2004) 268 ITR 332 (SC) * National Bank for Agriculture and Rural Development (2014) 224 Taxman 190 (Bombay) * Tao Publishing (P.) Ltd. v/s. DCIT (2015) 370 ITR 135 * Betts India (P.) Ltd. v/s. DCIT (2015) 235 Taxman 77 (Bombay) * Bhavesh Developers v/s. AO (2010) 188 Taxman 123 (Bom). * Purity Techtextiles Pvt Ltd v ACIT (2010) 325 ITR 459 (Bom.) Lastly the Ld. A.R. stated that the issue proposed to be raked up in the reassessment proceeding has been examined during the course of original assessment which was specifically raised by the AO during those proceedings and replied by the assessee vide letter dated 30.01.2003 by submitting that it was a consistent practice to apportion the taxable business income in the ratio of GBFA of new industrial unit (CEP) to total GBFA of KRL for arriving at the profit of the CEP for the purpose of section 80IA of the Act. It was further stated that DHDS (Dehydro Diesel Desulphurization Unit) project added during the financial year 1999-2000 as a common facility for both the crude units i.e. existing unit as well as CEP unit as the purpose of this project is to reduce the sul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was rightly reopened after following the due procedure as laid down in the Act in order to bring to tax the income which has escaped due to wrong apportionment of profit to CEP out of total profit of (KRL)Kochi Refinery Ltd. on the basis of GBFA calculated in 1995-96 even in the current assessment year in gross disregard of the fact that a substantial amount of additions were made in the fixed assets over the years and the said GBFA was not revised. The Ld. D.R. contended that reassessment was validly initiated after recording the reason under section 148(2) of the Act and forming a belief that income has escaped assessment owing to application of wrong ratio of GBFA. The Ld. D.R. submitted that the assessee has failed to disclose truly and materially all the facts in the assessment proceedings and thus the argument of the assessee that it could not have re-opened the assessment after six years carried no weight and has to be dismissed. The Ld. D.R. further argued that even if the fact that ratio of GBFA has been examined by the AO in the original assessment proceedings but a wrong appreciation of facts by the AO would not debar the Revenue from reopening of assessment to tax the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of additions of fixed assets stood examined in the original assessment proceedings. Upon a query raised by the AO, the assessee specifically replied the same vide letter dated 30.01.2003 explaining the reasons why the said ratio was not revised even after the additions to the fixed assets. A perusal of the said letter reveals that accordingly to the assessee it is a consistent practice to apportion the taxable business income in the ratio of GBFA of the new industrial undertaking i.e. CEP to the total GBFA of the assessee i.e. KRL for calculating the profit of CEP unit for claiming deduction under section 80IA/80IB of the Act. It was also clarified in the said letter that the DHDS project (Dehydro Diesel Desulphurization Unit) which represented additions to fixed assets was a common facility for both the units new as well as the old one as the project was intended to reduce the sulphur content in the diesel oil and was intended to meet the pollution control requirements. The assessee also submitted that since the capacity of CEP new unit is 3 MMTPA against the capacity of existing new unit of 4.5 MMTPA, the apportionment of GBFA of DHDS based on capacity of crude units would not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rded for re-opening the assessment were not the issues which were examined and considered by the AO at the time of passing assessment order.Like wise the other decisions relied by the revenue are also not relevant in the present facts. So far as the non disposal of objections filed by the assessee against the reopening of assessment is concerned the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Pvt. Ltd. vs. ITO (supra) has clearly held that the disposal of objection filed by the assessee against the reopening of assessment proceeding have to be disposed of by the AO by way of passing a speaking order. Further, the Hon'ble Bombay High Court in the case of KSS Petron Pvt. Ltd. vs. ACIT (supra) has held that the reassessment order framed without disposing of the objections filed by the assessee by a speaking order would render the reassessment order to be bad in law. Similar view has been held by the Hon'ble Delhi High Court in the case of CIT vs. Tupperware India Pvt. Ltd. (supra). So on the ground of non disposal of objection the reassessment as framed by the AO is also bad in law and has to be quashed. We also find merit in the contentions of the assessee that there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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