TMI Blog2016 (12) TMI 1858X X X X Extracts X X X X X X X X Extracts X X X X ..... uction u/s 80IA available to the Mithapur power plant - HELD THAT:- Perusal of reasons recorded by the AO reveals that as per belief of the AO, deduction u/s 80IA available to the Mithapur power plant of the assessee was wrongly determined in the original assessment proceedings completed u/s 143(3) on 10-01-2005 for impugned assessment year i.e. AY 2002-03. As noted by us on the basis of information provided by both the parties to us that the year before us, i.e. A.Y 2002-03 is the second year of claiming the benefit of deduction u/s 80-IA on the income of new power plant located at Mithapur. The deduction was claimed for the first time in the year AY 2001-02. The assessment order was framed u/s 143(3) for AY 2001-02 vide order dated 29-03-2004 wherein the claim of the assessee was examined in detail and thereafter only the benefit of deduction was allowed after re-computing the same as was allowable to the assessee. It is clear that requisite material was obtained by the AO which was duly considered and only thereafter, the benefit of deduction was allowed to the assessee as was available in the assessment order passed u/s 143(3). Under these circumstances, it is not legally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... session of AO on the basis of which the AO has reason to believe that proceedings U/S 147 were held to be valid without appreciating that explanation 1 of section 147 makes it clear that production before the Assessing Officer of books of account or other evidence from which material evidence could with due diligence have been discovered by the AO will not necessarily amount to disclosure. 2. On the facts and in the circumstances of the case and in law, the ld.CIT(A) erred in holding that the re-assessment proceedings was invalid on account of change of opinion without appreciating that the income has escaped assessment on account of wrong claims made by the assessee. 3. For these and other grounds that may be urged at the time of hearing, the decision of the CIT(A) may be set aside and that of the AO be restored. 2. The solitary ground raised in this appeal is whether Ld. CIT(A) is justified in holding that reopening of the impugned assessment u/s 147 was invalid in the eyes of law. 3. During the course of hearing before us, the Ld. DR relied upon the order of the AO, whereas the Ld. Senior Counsel reiterated his submissions made before the Ld. CIT(A) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter obtaining approval from CIT-2, Mumbai as per the provisions of section 151 of the Income Tax Act, 1961. 6. The assessee, in response to the aforesaid notice filed its objections vide its letter dated 16-09-2009 for reopening of the case, which was disposed of by the Ld. AO, vide his interim order dated 16-10-2009, wherein he rejected the objections and went ahead with the framing of the re-assessment order. The assessee contested the re-assessment order in appeal before the Ld. CIT(A) wherein challenge was made to the jurisdiction of the AO in reopening of the impugned assessment and also on the merits of the additions / disallowances made by the AO in the reassessment order. Ld. CIT(A) considered both the aspects but decided the appeal on the issue on the jurisdiction of reopening. It was noted by him that reopening of the assessment done by the AO was not in accordance with law on at least two grounds, viz. there was no failure on the part of the assessee in disclosing material facts and the reopening was based upon the change of opinion. Thus, taking into account both these aspects, the reopening was held to be invalid and consequently the re-assessment order was qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le business) was claimed on the new power plant at Mithapur which, started generating power with effect from 11th May, 1995. During the course of assessment proceedings, the appellant further revised its claim to 100% of the profits of eligible business. The AO has observed in the assessment order for assessment year 2001-02 that the relevant working of the 80IA claim on the new power plant was filed along with the revised return of income. It is also observed by the AO in the assessment order that during the course of assessment proceedings, the assessee vide letter dated March 12, 2004, furnished detailed submissions and all factual information in relation to the said claim. The AO granted the deduction of ₹ 4,12,00,000/- (being 100% of the profits of the eligible business),after making certain adjustments. 6.4 Similarly, during the current year also, the claim of deduction under section 80lA was made by the appellant through revised return filed on 28.03.2003 at ₹ 10,84,80,000/- (being 30% of the profits of eligible business). Here also, it is observed by the AO in the assessment order that the relevant working of the 80lA claim on the new power plant was filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax recoverable by assessee from State Electricity Boards. As regards first reason, it was held that the assessee had already disclosed fully and truly the entire process of manufacture and generation of electricity by gas turbine unit as well as by steam turbine unit and hence the reopening on this ground was invalid. As regards second ground, it was apparent that total tax payable by the assessee as per its method of grossing up of rate of tax as well as department's proposed method of grossing up of income was same. Hence, there was no escapement of income. It was thus held that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment and the impugned notice issued under section 148 after expiry of four years from end of relevant assessment year was not sustainable. 6.7 In the case of Purity Techtextile Private Limited (supra) cited by the appellant, the AO reopened the assessment of AY 200304, which was earlier completed under section 143(3), on the ground that the plan of building in which assessee operates was sanctioned way back in 1988 and the same premises were earlier used by some other party. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee's claim of deduction u/s. 80HHC on export of trading goods was examined in original assessment proceedings u/s. 143(3) for AY 1992-93, it was held by the Hon'ble High Court that subsequent re-opening on 30.03.1999 where A.O sought to reconsider the said claim u/s. 80HHC on export of trading goods was invalid as it was based on change of opinion and there was nothing to show that there was failure on the part of the assessee to disclose material facts. In the case of Bhanji Lavji, 79 ITR 582 (SC), Hon'ble Supreme Court held that when in original assessment, all primary facts were disclosed, the Assessing Officer could not seek to reassess the assessee on the ground of failure to disclose fully and truly all material facts necessary for assessment. The decisions of Bombay High Court in the cases of Asteroids Trading and Investments P Ltd, 308 ITR 190 (Bom), Siemens Information Systems Ltd, 295 ITR 333 (Bom) and Asian Paints Ltd, 308 ITR 195 (Bom) are also on similar lines where proceedings u/s 147 have been held to be invalid because reopening was based on mere change of opinion . In these decisions, the decision of Hon'ble Delhi High Court (Full Bench), in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f notice u/s 148 of the Act which was issued beyond 4 years from the end of the relevant assessment year. Since in the case of the appellant also, notice u/s 148 has been issued beyond 4 years, the Assessing Officer was also liable to demonstrate that the income has escaped assessment by reason of appellant's failure to disclose fully and truly all material facts. But, he has failed to do so. In fact, it is evident that the appellant had disclosed all the facts on the said issue during original assessment proceedings and the Assessing Officer had also considered the same before finalising the assessment u/s 143(3) of the Act. 6.13 From the above decisions, it is amply clear that in the cases where the issue has been already considered by the Assessing Officer during original assessment proceedings, the assessment cannot be re-opened u/s 147 on the basis of the reason that some aspect of the same issue has remained to be considered. Such cases are nothing but cases of change of opinion . That is so because if the issue has been considered during original assessment proceedings, it has to be presumed that all aspects pertaining to the said issue have been considered. Hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us that re-assessment has been held to be invalid by the Ld. CIT(A) on two grounds as stated above. Thus, we shall deal with both the grounds, one by one, as under:- I. Reasons have been recorded by the AO without there being any failure on the part of the assessee in disclosing all material facts: 8. We have examined the aforesaid aspect of the matter. It is noted that provisions of section 147 have been brought on the statute so as to enable the AO to bring to tax any income that may have escaped assessment. But, these extraordinary powers have been given to the AO with certain safeguards. Since reopening of an already concluded assessment pierces the very concept of finality of litigation which is basic thread of our constitution, therefore these provisions have been drafted in a very careful manner. Thus, these powers can be exercised by an AO strictly in accordance with law only as contained in sections 147 to 151 of the Act read with other applicable provisions of the Act. If case of an assessee falls within the situations as stipulated in these sections, only then, its case can be reopened by an AO that too after complying with the conditions as have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(3), is found to be clearly missing here. So much so, even in the re-assessment proceedings, the AO has nowhere been able to show anything from which it could be inferred that there was any failure on the part of the assessee in disclosing fully and truly all material facts necessary for the assessment of the assessee. 11. It is also noted by us that during the course of re-assessment proceedings, the assessee filed its detailed objections vide its letter dated 16-09-2009. These objections were disposed of by the AO vide his interim order dated 16-10-2009. It is noted by us that in the objection disposal order also, the AO nowhere commented or clarified the objection raised by the assessee in this regard. For the sake of ready reference, conclusive part of the said interim order is reproduced below:- 5.0 A plain reading of the assessee's submission Quoted shows that the assessee has nothing to object on merit. The assessee has been only raising objections on the manner in which, and the framing of questions in notice dated 4.09.09. The assessee has further contended that the issues raised in the notice referred to in para 3.3 has been dealt with by CIT in exerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs. It is noted that that failure of the assessee of disclosure of material facts is a condition precedent as stipulated in the proviso to section 147 to enable the AO to exercise his powers u/s 147. The Explanation will certainly not obviate this jurisdictional condition. Thus, if the meaning and scope of Explanation 1 is understood and applied in the manner as Revenue is asking us to do by way of this ground, then it will obviously amount to making first proviso to section 147 as otiose and redundant, which in our opinion cannot be the intention of the legislature. 14. The powers u/s 147 granted upon the AOs by the legislature are undoubtedly wide, but these powers are certainly not plenary. These powers are subject to certain fetters in the form of jurisdictional conditions which are mandatorily to be complied with for ensuring the exercising of these powers in justified and fair manner and to avoid harassment to the taxpayers as may be caused because of reopening of the cases in undeserving cases in a callous manner. 15. Therefore, in our considered opinion, before taking shelter of Explanation 1 to section 147, it is mandatory on the part of the AO to comply with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant assessment years. This Court in the case of IPCA Laboratories Ltd. (supra) and in the case of Bhor Industries (supra) has held that notice for reopening of the assessment cannot be issued after a period of 4 years unless the escapement of income is on account of failure on the part of the assessee to disclose fully and truly all material facts. It has been further held that the Explanation to s. 147 of the IT Act has to be r/w s. 148 of the IT Act in its entirety. In the light of the aforesaid decisions, in the present case, there being no failure on the part of the assessee to disclose fully and truly all material facts, the impugned notices issued beyond the period of 4 years from the end of the relevant assessment years, are liable to be held to have been issued in contravention of the provision of the IT Act. 17. Similarly, in the case of Hindustan Lever Ltd vs R.B. Wadekar 268 ITR 332 (Bom) it has been emphasized by the Hon ble Bombay High Court that reasons recorded by the AO must contain the finding with regard to the alleged failure on the part of the assessee to disclose fully and truly all material facts. It has also been observed by the Hon ble High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced. 21. Having recorded our finding that the impugned notice itself is beyond the period of four years from the end of the asst. yr. 1996-97 and does not comply with the requirements of proviso to s. 147 of the Act, the AO had no jurisdiction to reopen the assessment proceedings which were concluded on the basis of assessment under s. 143(3) of the Act. On this short count alone the impugned notice is liable to be quashed and set aside. 18. Similarly, in the case of Lok Housing Construction Ltd vs DCIT 348 ITR 338 (Bom) it was held by the Hon ble jurisdictional High Court that a jurisdictional condition precedent for reopening of the cases where first proviso to section 147 is applicable, is that there must be failure on the part of the assessee to fully and truly disclose all material facts necessary for the assessment for the impugned assessment year. Relevant part of the observations of the said judgment is reproduced below:- The reopening of the assessment in the present case is beyond the period of four years of the end of the relevant assessment year. In such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lid on this ground. II. Reopening is based upon change of opinion of the AO. 20. It has also been held by Ld. CIT(A) that Reasons recorded are invalid in the eyes of law because these have been recorded on the basis of change of opinion of the AO. 21. We have examined this aspect also in detail on law as well as on facts. The legal requirement is that the reopening is not permissible to reappraise or review the same material which has been taken into consideration while framing the original assessment order. The scope of reopening as prescribed u/s 147 is confined to bring to tax the income escaped. The law in this regard has been explained in detail by Hon'ble Supreme Court also, time and again. In the case of CIT vs Kelvinator India Ltd 320 ITR 561 (SC), it has been held by Hon'ble Supreme Court that undoubtedly, after 1st April, 1989, power to reopen the assessment as prescribed u/s 147 is much wider. However, mere change of opinion cannot per se operate reasons to reopen an already concluded assessment. In other words, the AO has power to re-assess but no power to review. Thus, if the concept of change of opinion is removed, as in sometimes do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the course of assessment proceedings of AY 2000-01 also. However, it did not pursue the claim in AY. 2000-01 and is now claiming the same in AY 2001-02. Hence, this claim is being made by the assessee for the first time in the assessment year under reference i.e. in AY 2001-02. In its letter, the assessee further submitted that as per the provisions of Section 80IA as applicable to the year under reference, it is entitled to a deduction @ 100% of the profits of the power plant as against 30% of the profits as claimed in the return of income - A. Y. 2001-02 being the first assessment year during which the 80lA claim is made. On perusal of the said claim, I am in agreement that the conditions stipulated for entitlement of deduction under Section 80IA have been fully complied with and hence the assessee is entitled for deduction u/s 80-IA on the new Power plant at Mithapur @ 100% of the profits of the new power plant. As per the requirements of Section 80IA, the assessee will now be required to continue to claim 80IA deduction on this plant for the next 9 consecutive assessment years. However, it is noticed that while computing the deduction u/s 80IA on the new power pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r was allowed by observing as under:- 12. Claim for deduction u/s 80IA on new Power Plant of Mithapur:- 12. In the Revised Return of Income filed on 28-3-2003, the assessee had claimed deduction of ₹ 10,84,80,000/- (being 30% of the profits of' eligible business) on its new power plant at Mithapur which started generating power with effect from 11th May' 1995 . The relevant working of the 80lA claim on the new power plant was filed alongwith the revised return of income. 12.2 During the course of assessment proceedings, the assessee revised its claim u/s 80lA on the power plant from 30% to 100%. Vide letter dated December 23, 2004 the assessee furnished detailed submissions alongwith the audited accounts of the power plant duly certified by the Chartered Accountant. As per audited accounts, the 80lA claim worked out to ₹ 38,72,93, 719/- (being 100% of the profits gains of the power plant). 12.3 In its letter, the assessee further submitted that as per the provisions of Section 80IA as applicable to the year under reference, it is entitled to a deduction @ 100% of the profits of the power plant as against 30% of the profits as claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals are being dismissed ex parte. However, the Court directs the Revenue through the Principal Chief Commissioner of Income Tax (Pr CIT) to issue instructions to the AOs to strictly adhere to the law explained in various decisions of the Supreme Court and the High Court in regard to Sections 147/148 of the Act and make it mandatory for them to ensure that an order for reopening of an assessment clearly records the compliance with each of the legal requirements. Secondly, the AOs must be directed to strictly comply with the law explained by the Supreme Court in GKN Driveshafts (India) Lid v. Income Tax Officer (2003) 259 ITR 19 (SC) as regards the disposal of the objections raised by the Assessee to the reopening of the assessment. 28. We believe that concerned Chief Commissioners have already taken requisite steps under guidance from the CBDT to formulate and issue the requisite set of instructions to the AO so as to enable the AOs to reopen the cases only in desired and deserving cases so as to build up the faith of the taxpayers on the working of Income-tax department which will, in turn, increase voluntary compliance by the taxpayers. 29. With the aforesaid dir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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