TMI Blog2021 (11) TMI 372X X X X Extracts X X X X X X X X Extracts X X X X ..... on 42 of the Act becomes irrelevant. It is for the reason that the AO being one of the authority under the Income Tax Act has examined the issue and allowed the deduction to the assessee. Thus the view was formed by the AO. Subsequently changing the opinion on the same issue by issuing a notice under section 147 of the Act will amount to review of the order passed under section 143(3). There is no power granted to the AO under the statute to review the order in the garb of initiating the proceedings under section 147 of the Act. Accordingly we hold that, there will not be any difference whether the proceedings were initiated within 4 years or beyond the 4 years as far as change of opinion is concerned. Admittedly, the production sharing contract was not available before the AO during the assessment proceedings under section 143(3) of the Act which was necessary to reach to the conclusion whether the assessee was entitled for the deduction under section 42 of the Act. But the AO without having such contract in his hands has allowed the deduction under section 42 of the Act after conducting the necessary verification which has already been discussed in the preceding paragraph. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the Ld.CIT(A) dated 29/05/2015 arsing in the matter of assessment order passed u/s.143(3) of the Income Tax Act, 1961 (here-in-after referred to as the Act ) relevant to the Assessment Year 2006-2007. The assessee is also in appeal against the order of the Ld.CIT(A) dated 29/05/2015 arsing in the matter of assessment order passed u/s.143(3) r.w.s 147 of the Income Tax Act, 1961 (here-in-after referred to as the Act ) relevant to the Assessment Year 2004- 2005. 2. First we take appeal of the assessee bearing ITA No.2388/Ahd/2015 for A.Y. 2004-05 for the purpose of adjudication. The assessee has raised the following grounds of appeal: Your Appellant being dissatisfied with the order passed by the Commissioner of Income Tax (Appeals)-13, Ahmedabad, (hereinafter referred to as CIT(A) u/s 250 of the Income Tax Act ( 'the Act ), presents this appeal against the same on the following amongst other grounds of appeal which are without prejudice to each other. 1. The order passed by the learned CIT(A) upholding the reassessment is bad in law and requires to be quashed. It is submitted that it be so held now. 2. The learned CIT(A) erred in upholding the reassessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for the deduction to the assessee under the provisions of section 42 of the Act. 4.2 Based on the above reasons the AO initiated the proceedings under section 147 of the Act by issuing a show cause notice under section 148 of the Act dated 1st May 2008. 4.3 The assessee vide letter dated 11th June 2008 objected on the initiation of proceedings under section 147 of the Act by contending that the AO during the assessment proceedings under section 143(3) of the Act has sought clarification vide notice dated 9th May 2006 issued under section 142(1) of the Act with respect to the deduction claimed by it (the assessee) under section 42 of the Act. In response to such notice it has made a reply dated 26th of September 2006 justifying its claim for the deduction under section 42 of the Act. 4.4 In view of the above the assessee contended that the AO during the assessment proceedings under section 143(3) of the Act has formed opinion with respect to the deduction claimed by the assessee under section 42 of the Act which was subsequently allowed. Thus, the initiation of the proceedings under section 148 of the Act is based on the change of opinion which is not permitted under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O during the assessment proceedings have made enquiries by issuing notice under section 142(1) of the Act dated 9th May 2006 with respect to the deduction claimed under section 42 of the Act. The relevant enquiries raised by the AO during the assessment proceedings are placed on pages 5 to 6 of the paper book. The queries raised by the AO were duly answered by the assessee as vide letter dated 26th May 2006 evident from the details placed on pages 9 to 13 of the paper book. Thus the AO during the assessment proceedings under section 143(3) of the Act has formed the opinion with respect to the deduction claimed under section 42 of the Act. Accordingly, it was contended by the assessee that initiation of present proceedings under section 147 of the Act is based on the change of opinion which is unwarranted under the provisions of law. 8. On the contrary, the learned DR contended that the production sharing contract between the assessee and the Government of India which is the basis for allowing the deduction under section 42 of the Act was not available before the AO during the assessment proceedings. As per the learned DR the production sharing contract was the basis of deciding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the concept of 'change of opinion' as an in-built test to check abuse of power by the Assessing Officer. 9.2 In the light of the above discussion, we have to see whether any opinion was formed by the AO during the assessment proceedings under section 143(3) of the Act. For this purpose, we refer the notice issued by the AO under section 142(1) of the Act dated 9th May 2006 raising the following questions relating to the deduction claimed under section 42 of the Act. Please refer to the Statement of Total Income attached with your ROI. Please justify your claim of deduction u/s.42 and explain how it is admissible. 9.3 The above queries were answered by the assessee in the manner as detailed below: During- the year under consideration we have spent ₹ 4,24,67,907 on the exploration activities and the same was claimed as deduction in the return of income filed in accordance with provisions of Section 42 of the Income Tax Act,, 1961. A specific note was appended to (he return of income. The same is reproduced hereunder for your goodself s ready reference: 3. stated above assessee company is extracting oil as per the agreement ''with Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act will amount to review of the order passed under section 143(3) of the Act. Such, proposition is not warranted under the Act as held by the Hon ble courts as discussed above. 9.5 It is a fact on record that the proceedings in the present case were initiated within the period of 4 years but the same cannot alter the principles laid down by the Hon ble courts. In other words, there is no power granted to the AO under the statute to review the order in the garb of initiating the proceedings under section 147 of the Act. Accordingly we hold that, there will not be any difference whether the proceedings were initiated within 4 years or beyond the 4 years as far as change of opinion is concerned. 9.6 On perusal of the assessment order framed under section 143(3) of the Act, it is not discernible whether AO has applied his mind with respect to the deduction claimed by the assessee under the provisions of section 42 of the Act. The order of the AO under section 143(3) of the Act silent on this aspect. Thus the question arises whether the AO has formed any opinion during the assessment proceedings with respect to the deduction claimed by the assessee under section 42 of the Act. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the fact that the AO has taken some view after the application of mind. That application of mind whether right or wrong cannot be subject matter of dispute in the proceedings initiated under section 147 of the Act. 9.9 In the light of the above discussion, we are not impressed with the finding of the authorities below on this technical issue. Accordingly, we set aside the finding of the learned CIT (A) by holding that the assessment framed under section 147 read with section 143(3) of the Act is bad in law. Hence the ground of appeal of the assessee is allowed. 9.10 As the preliminary issue has been decided in favour of the assessee by quashing the proceedings initiated under section 147 of the Act, we are not inclined to decide the issues on merit. As such, the issues raised on merit become infructuous. Thus the grounds of appeal of the assessee are dismissed. 9.11 In the result appeal of the assessee is partly allowed. Coming to the ITA No. 2298AHD/2015 of Revenue pertaining to AY 2006- 07 10. The Revenue has raised following grounds of appeal 1) The Id. CIT(A) has erred in law and on facts of the case in directing the Assessing Officer to allow the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny particular well. iii. There were not maintained separate bank accounts for each well. iv. There was the single contract with the Government of India for production sharing of the material produced. v. There were not maintained separate stock registers, opening stock inventory or closing stock inventory for each well. vi. There was not separate excise and sales tax registration numbers for each well. 12.3 In addition to the above, the AO also observed that the audit report wasn t filed by the assessee along with the return of income but the same was filed dated 26 December 2007 during the assessment proceedings. 12.4 In view of the above, the AO held that the assessee is not an industrial undertaking which is eligible for deduction under section 80IB(9) of the Act. Accordingly, the AO disallowed the claim of the assessee. 13. Aggrieved assessee filed an appeal before the Learned CIT (A) who allowed the appeal of the assessee. 14. Being aggrieved by the order of the learned CIT (A), the Revenue is in appeal before us. 15. The learned DR before us vehemently supported the order of the AO. 16. On the contrary, the learned AR before us vehemently support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inserted after clause (iii) of sub-section (9) of section 80-IB by the Finance (No. 2) Act, 2009, w.e.f. 1-4-2010: (iv) is engaged in commercial production of natural gas in blocks licensed under the VIII Round of bidding for award of exploration contracts (hereafter referred to as NELP-VIII ) under the New Exploration Licencing Policy announced by the Government of India vide Resolution No. O-19018/22/95-ONG.DO.VL, dated 10th February, 1999 and begins commercial production of natural gas on or after the 1st day of April, 2009; (v) is engaged in commercial production of natural gas in blocks licensed under the IV Round of bidding for award of exploration contracts for Coal Bed Methane blocks and begins commercial production of natural gas on or after the 1st day of April, 2009. Explanation.-For the purposes of claiming deduction under this sub-section, all blocks licensed under a single contract, which has been awarded under the New Exploration Licencing Policy announced by the Government of India vide Resolution No. O-19018/22/95-ONG.DO.VL, dated 10th February, 1999 or has been awarded in pursuance of any law for the time being in force or has been awarded by Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 17.1. In view of the above, we hold that each well maintained by the assessee represents the separate undertaking and therefore the profit of each undertaking is eligible for deduction under section 80 IB(9) of the Act. 17.2. Regarding the question No. 3, we note that such explanation has been held as unconstitutional by the Hon ble Gujarat High Court in the case of Niko Resources Limited Vs. Union of India reported in 374 ITR 369. The relevant extract of the order is reproduced as under: 62. For the reasons given above, we are of the considered opinion that the amendment made in Section 80-IB(9) by adding an Explanation was not clarificatory, declaratory, curative or made small repair in the Act, but on the contrary takes away the accrued and vested right of the Petitioner which had matured after the judgments of ITAT, therefore, the Explanation added by Finance (No.2) 2009 was a substantive law. We have no hesitation to hold that the Explanation added to Section 80-IB(9) by Finance Act (No.2) of 2009 is clearly unconstitutional, violative of Article 14 of the Constitution of India and is liable to be struck down. Before parting, it is very pertinent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supra). Hence the ground of appeal of the Revenue is allowed for statistical purposes. 18. In the result appeal of the Revenue is allowed for statistical purposes Coming to the ITA No. 2389/AHD/2015 of assessee pertaining to AYs 2006-07 19. The assessee has raised following grounds of appeal: Your Appellant being dissatisfied with the order passed by the Commissioner of Income Tax (Appeals)-13. Ahmedabad. (hereinafter referred to as CIT(A)) u/s 250 of the Income Tax Act ( the Act ), presents this appeal against the same on the following amongst other grounds of appeal which are without prejudice to each other. 1. The order passed by the learned CIT(A) is erroneous and contrary to the provisions of law facts of the case and therefore needs to be suitably modified. It is submitted that it be so held now. 2. The Learned CIT(A) has erred in holding oil well as part of the building within the extended meaning of the term building given in the Appendix 1 to the Income Tax Rules and hence confirming the depreciation allowance at 10% instead of 60% as per Entry III(8)(xii) of Appendix I to the Income Tax Rules 1962 on Oil wells used as Plant machinery in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The relevant extract of the order is reproduced as under: 23. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset we find that the Hon ble Gujarat High Court in case of Niko Resources Ltd. reported in 88 taxmann.com 691 has held that the oil wells are Plant Machineries and not part of building. The relevant portion of the judgment is reproduced here under: 5. We have heard learned Counsel appearing for the respective parties. In light of the decision of the Hon'ble Supreme Court in the case of Scientific Engg. House (P.) Ltd. (supra), we are of the view that the reasoning which was adopted by the Tribunal holding that the well would not form a part of the plant and machinery for drilling of oil is not possible. In that view of the matter, the view taken by CIT (Appeals) is restored and the findings of the Tribunal are reversed. Hence, the issue raised in this Appeal is answered in favour of the assessee and against the Department. The Appeal stands disposed of accordingly. 23.1. As the facts in the case on hand and the facts of the case as discussed in the case of Niko Resources Ltd (supra) are id ..... X X X X Extracts X X X X X X X X Extracts X X X X
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