TMI Blog2021 (3) TMI 889X X X X Extracts X X X X X X X X Extracts X X X X ..... ided by the company along with IOCCD, he further noticed that the assessee company had claimed deduction on profit on sale of electricity and steam in respect of some of the units as referred in the reasons. While framing the assessment order under Section 143(3), had raised the issue of deduction and in response to issue No. (37), the assessee company had furnished all the details / information along with the complete working of profit and gains eligible for the claim and after considering all the primary materials, disclosed by the assessee company, the erstwhile Assessing Officer assigned cogent reasons and discussed the issue at length and disallowed the claim of deduction to the extent of ₹ 3,65,25,860/- out of total claim of ₹ 23,37,65,504/- stating that deduction is available only in relation to profits and gain derived from the generation of powers. Now on the same set of facts and materials, the Assessing Officer formed the belief about the escapement of assessment which is nothing but mere a change of opinion on the facts which were already before the Assessing Officer while making the first assessment on which conscious application of mind is reflected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued along with detail questionnaire. The assessee company had submitted the explanation about justification of the deduction under Section 80IA and also furnished Form No. 10CCB in respect of all Power Generation Unit being the report of CA, as required under Section 7 of the 80IA of the Act. The Assessing Officer passed a detailed scrutiny order under Section 143(3), wherein, he disallowed ₹ 3,65,25,780/- from the total claim made under Section 80IA of ₹ 23,37,65,504/- for generation of power consumed by other units. The assessee company preferred an appeal against the assessment order including the disallowance of ₹ 3,65,25,860/-. The Appellate Authority i.e. the Commissioner of Income Tax (Appeals), allowed the Appeal and delete the addition of ₹ 3,65,25,860/-, which was disallowed by the Assessing Officer out of total deduction claimed by the assessee Company under Section 80IA of the Act. 2.4 The notice dated 30.06.2018 under Section 148 of the Act was issued and at the request of assessee company, the reasons recorded have been furnished, which reads thus : REASONS RECORDED In connection to above referred subject, it is stated that noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22,90,06,474 It was observed from the unitwise details provided along with Form 10CCB, that the assessee had claimed deduction on profit on sale of electricity and steam both in respect of following units: Units Power Steam Total Percentage Proportion Power iii total Sale (%) Percentage Proportion of Steam in total sale (%) Profit claimed Eligible for units as per Form 10CCB Profit Allowable for claim u/s 80IA (excluding Proportionate proportion of steam) Excess Allowed Gas Turbine Power Generation undertaking 287283588 96989683 384273271 74.76 25.24 4109629 30723621 10372588 Gas based Power Generation undertaking Vareli 17414167 16885627 191027094 91.16 8.84 568918 518629 50289 Rolls RoveI Gas Power Generation Underta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduct and not a final product saleable in open market. The assessee is also not selling the same in open market, but to its other units and hence had captive usage of the same. The quantitative details of the actual generation and subsequent verification of the correctness of the captive usage was not available on record. Thus, by doing so, the eligible unit of the assessee company on one hand was claiming 100% deduction u/s. 80IA on sale of steam, on the other hand the other non eligible units decrease their profits by the amount of steam purchased by them from assessee company. Hence, it is a clear case of Tax evasion by misinterpreting the Act. In view of the above, the deduction u/s. 80IA(4)(iv) claimed on sale of steam is required to be disallowed. As per Form 10CCB the assessee company was eligible to claim deduction u/s.80IA of ₹ 22,90,06,474/as against this the assesse had claimed deduction u/s. 80IA to the tune of ₹ 23,37,65,504 resulting into excess claim to the extent of ₹ 47,59,030/. The assessee had charged the transfer value of ₹ 4.80 per unit at the time of transferring the same to its other unit claiming the same as market value ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 3,85,08,872/- and the tax effect thereon comes to ₹ 1,73.96,691/- . viii) In view of the above written fact that it is clear that the assessee has not disclosed true income for A.Y. 2011-12 and the assessee has under assessed his income to the extent of ₹ 3,85,08,872/- and the case attract provisions of explanation 1 of section 147 of the Act. Since 4 years from the end of the relevant year has expired in this case, the requirement to initiate proceedings u/s. 147 of the Act are reason to believe that income for the year under consideration has escaped assessment because of failure on part of the assessee to disclose fully and truly all material fact necessary for his assessment for the assessment year under consideration. I have carefully considered the assessment records and have noted that assessee has not fully and truly disclosed his income. Hence it is a fit case for issuing notice u/s.148. It is evident from the above discussion that in this case, the issue under consideration were never examined by the AO during the course of regular assessment / reassessment. This fact is corroborated from the contents of notices issued by the AO u/s.143(3) proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 years two conditions are required to be fulfilled namely (i) there must be a reason to believe that income or profit or gain chargeable to tax had escaped assessment and (ii) The Assessing Officer must have reason to believe that such an escapement or underassessment was occasioned either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. The learned counsel further submitted that in the present case, both the conditions do not exists and therefore, reopening is unjustified and uncalled for, as company had fully and truly disclosed all the material facts necessary for assessment and the then Assessing Officer made detailed inquiry into the issue and partly allowed the major portion of claim under Section 80IA made by the Company in respect of captive power generation unit. 5.2 It was vehemently contended that the present reassessment proceedings initiated is mere a change of opinion on the part of the Assessing officer. In this regard, it was pointed out that the then Assessing Officer had issued notice under Section 142 (1) of the Act for the original assessment made under Section 143(3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als on record, the only question that falls for our consideration is whether the revenue is justified in reopening the assessment for the year A.Y. 2011-12. 10. It is a settled law that in order to assume jurisdiction under Section 147, where the assessment has been made under Section 143(3), two conditions are required to be satisfied. (a) The Assessing officer must have reason to believe that the income chargeable to tax have escaped assessment (b) Such escapement occurred by reason of failure on the part of the assessee either (a) to make a return of income under Section 139 or in response to the notice issued under sub-section (1) of Section 142 or section 148 or (b) to disclose fully and truly all the material facts necessary for his assessment for that purpose. 11. The writ applicant has challenged the reopening proceeding substantially on the grounds that (i) the proceedings initiated is mere a change of opinion on the part of the Assessing Office as the issue already decided in the previous assessment order and (ii) no case can be reopened on account of the reasons recorded by the Assessing Officer which are subject matter of any appeal, reference or revision. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act was passed, disallowing the deduction to the extent of ₹ 3,65,25,780/- from the total claim made under Section 80IA of ₹ 23,37,65,405/-. The order was challenged before the CIT (Appeals) and same was allowed by deleting the addition of ₹ 3,65,25,860/-. Thereafter, the Assessing Officer has issued impugned notice dated 30.06.2018. 15. The revenue has sought to reopen the assessment mainly on the ground that the assessee company had claimed deduction on profit on sale of electricity and steam both in respect of their different units, as a result, the deduction under Section 80IA(4)(iv) claimed on sale of steam is required to be disallowed and same facts having not been fully and truly disclosed by the assessee. 16. We have heard the learned counsel appearing for the parties at length and perused the materials on record. 17. Before adverting to the issues raised by both the parties, it would be useful to refer the original assessment order framed under Section 143 of the Act, vide order dated 30.03.2014, wherein, the issue of excess claim of deduction was dealt with at length in para- 4 of the order. The relevant portion reads thus: Para4 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the generation of the steam is only a raw material, which is used by the power plant to rotate the turbines and hence, steam generation is only an intermediate product and not a final product saleable in the open market and therefore, deduction claimed on sale of steam is required to be disallowed to the extent of ₹ 3,85,08,872/- for which, the company has not disclosed true income and the same issue was never examined by the then Assessing Officer during the course of regular assessment. 19. In the background of the aforesaid facts, we have examined all the material facts as well as reasons recorded for reopening of the assessment for the year under consideration. We are of the opinion that the impugned action on the part of the respondent to issue Notice is without authority of law mainly on the ground of change of opinion and the claim under Section 80IA in respect of time usage charge component is still pending for disposal before the Second Appellate Authority. Therefore, we are of the firm view that the impugned notice as well as the proceeding are required to be quashed and set aside for the following reasons: (i) The then Assessing Officer while framing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of appellant to disclose fully and truly all material facts. He could not, thereafter, take recourse to section 170A to remedy the error resulting from his own oversight. (c) In the decision of this Court in case of VXL India Capital Ltd Vs. Asst. CIT (1995) 215 ITR 295, wherein, it was held that the scope of Section 147 of the Act is not for reviewing its earlier order sou-motu, irrespective of there being any material to come to a different conclusion apart from just having second thoughts about the inferences drawn earlier. (d) In Sayaji Hotels Ltd Vs. ITO, (2011) 339 ITR 499 (Gujarat), it was held that it was only a case of successor AO holding a different opinion as regard the computation of book profit then, that of the AO who framed the original assessment. The reopening was, therefore, based on mere a change of opinion, and as such could not be sustained. (e) In Amrit Feeds Ltd Vs. ACIT (2011) 51 BRT 315 (cal.), wherein, it was held that if the AO had questioned the entitlement of assessee to deduction under 80IB in the assessment in question, it was their mistake. All the information regarding the alleged manufacturing process was before them. After the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowed the claim made under Section 80IA of the Act. (iii) In the present case previous assessment order dated 30.03.2014 was challenged before the CIT (Appeals) with respect to dis-allowance of claim under Section 80IA of the Act. The first Appellate Authority vide order dated 06.07.2015, deleted the addition of ₹ 3,65,25,680/- which was disallowed by the Assessing Officer, out of total deduction claimed by the assessee under Section 80IA of the Act. In this context, we may refer to the 3rd proviso to Section 147 of the Act, which is reproduced as under : 147. Income escaping assessment : Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matter of any appeal, reference or revision, which is chargeable to tax and has escaped assess From the aforesaid proviso, it can be seen that the AO may assess or reassess such income, which is chargeable to tax and has escape assessment, other than the income involving matters which are the subject matters of any appeal, reference or revision. It implies that the reassessment proceedings under Section 147 of the Act cannot be resorte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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