TMI Blog2022 (9) TMI 1247X X X X Extracts X X X X X X X X Extracts X X X X ..... ive claim of depreciation on dam, for the solitary reason that the assessee having claimed 100 percent depreciation on dam was allowed excessive depreciation of Rs. 35.36 crore. As neither of the aforesaid observations of the AO would fall within the meaning of failure on the part of the assessee to fully and truly disclose all material facts which were necessary for its assessment for the year under consideration i.e AY 2008-09, therefore, its case on the aforesaid aspect would not fall within the four corners of the 1st proviso of Sec. 147 of the Act. Disallowance u/s.14A - As the assessee had came forth with full and truly disclosure of all material facts as regards its investments in shares and securities a/w a specific claim that no part of the expenditure was attributable to earning of the exempt income, therefore, it can safely be gathered that there was no failure on its part to disclose fully and truly all material facts necessary for its assessment in so far the aforesaid issue was concerned. As the aforesaid observation of the AO would by no means fall within the meaning of failure on the part of the assessee to fully and truly disclose all material facts which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, the assessment order so passed by him on the said count cannot be sustained and is liable to be struck down. We are of the considered view, that as claimed by the Ld. AR and, rightly so, as there had been no failure on the part of the assessee company to disclose fully and truly all material facts which were necessary for its assessment for the year under consideration i.e. A.Y.2008-09, therefore, the reopening of its concluded assessment de hors satisfaction of the said statutory requirement beyond a period of four years from the end of the relevant assessment year i.e. A.Y.2008-09 vide notice issued u/s.148 dated 23.08.2013 clearly militates against the mandate of the 1st proviso to section 147 - As the very assumption of jurisdiction by the A.O for reopening the concluded assessment of the assessee that was originally framed vide order passed u/s.143(3) dated 31.12.2010 smack of want of valid assumption of jurisdiction for framing of the impugned assessment u/s.143(3) r.w.s 147, therefore, we herein quash the assessment so framed by him. Assessee appeal allowed . - ITA Nos.199/RPR/2017 - - - Dated:- 23-9-2022 - Shri Ravish Sood, Judicial Member And Shri Arun Khodp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition in respect of dam is illegal as the said expense/deduction/claim is allowable under section 37 of the Act. 2. That without prejudice, on the facts and circumstances of the case and in law, the claim of the assessee is of Rs.35,36,07,322/- in respect of dam and hence addition of Rs.70,72,14,643/- is wrongly made and is highly excessive and hence cannot be sustained in law. 2. Succinctly stated, the assessee company which is a subsidiary of Jindal Steel Power Ltd. (JSPL) had e-filed its return of income for the assessment year 2008-09 on 29.09.2008, declaring an income of Rs. Nil a/w book profit u/s 115JB of Rs. 21,84,91,786/-. The return of income filed by the assesee company was processed as such u/s.143(1) of the Act. Original assessment was thereafter framed by the A.O vide his order passed u/s.143(3) dated 31.12.2010, wherein the income was determined by the AO under the normal provisions at a loss of Rs.(-) 45107.71 lac, while for the book profit u/s.115JB was determined at Rs.21,84,91,786/- (i.e as returned). Case of the assessee company was thereafter reopened by the AO under Sec. 147 of the Act. Notice u/s.148(2) of the Act was issued to the assessee after obt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Dam @100% was claimed on the basis that it was a building that was used for water supply project, which in turn was used for the purpose of its business of providing infrastructure facilities u/s.80IA(4)(i) of the Act. Alternatively, it was the claim of the assessee that the expenditure incurred on construction of Dam was even otherwise allowable as a revenue expenditure u/s.37(1) of the Act as it was built for the purpose of continuous supply of water that was drawn for its power plant, therefore, its claim for deduction was even otherwise in order. b). However, the aforesaid explanation of the assessee did not find favour with the A.O. The A.O was of the view that as the assessee had built a Dam on a government property and the same was not owned wholly or partly by it, therefore, it did not fulfil the basic criteria for claiming depreciation on the same. Apart from that, it was observed by the A.O that there was no mention of depreciation on Dam in the depreciation rate schedule of the Income-Tax Act. As regards the assessee s contention that the expenditure incurred towards construction of water supply Dam/Bridges e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utable to its investments made in exempt income yielding shares and securities. b). Also, it was the claim of the assessee that as the interest bearing funds i.e. term loans which were sanctioned for its business project had been exclusively used for the purpose for which the funds were sanctioned, therefore, no disallowance of any part of the correlating interest expenditure was called for in its hand. It was also claim of the assessee that as it had infused its temporary surplus funds for making investment in the exempt income yielding shares and securities, therefore, there was no question of disallowing any part of interest expenditure. However, the A.O was not inclined to accept the claim of the assesee that no part of the expenditure so claimed as deduction was attributable for earning of exempt income. Holding a conviction that as the assessee had incurred the expenditure for composite indivisible activities, the A.O was of the view that it was impossible to apportion expenses attributable to the multi-facet activities carried out by the assessee company. Accordingly, the A.O triggered the mechanism contemplated under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee appellant before us involves purely a question of law adjudication of which would require no fresh verification of facts, thus, merits admission is supported by the judgment of the Hon ble Supreme Court in the case of National thermal power Company Limited vs. CIT (1998) 229 ITR 383 (SC). 8. The Ld. Authorized Representative (for short AR ) for the assessee has assailed before us the validity of the jurisdiction that was assumed by the A.O for reopening the case of the assessee u/s.147 of the Act on multiple grounds, viz. (i).that as the assessment in the case of the assessee was earlier framed by the A.O u/s.143(3) dated 29.09.2008, therefore, reopening of its concluded assessment after expiry of four years from the end of the relevant A.Y. 2008-09 in the absence of any failure on the part of the assessee to disclose fully and truly all materials facts necessary for its assessment for the said year was in clear contravention of the 1st proviso to section 147 of the Act, and thus, was liable to be struck down on the said count itself; (ii). that as assessee s case had been reopened merely on the basis of a change of opinion of the A.O as against that of his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 640 (SC) and that in the case of Godrej Boyce Manufacturing Co Ltd vs. DCIT (2017) 394 ITR 449 (SC). Also, the Ld. AR had drawn support from the judgment of the Hon ble High Court of Delhi in the case of Pr. CIT Vs. M/s. Hindustan Clean Energy Ltd., ITA No. 268/2018 dated 05.07.2018. Apart from that, it was submitted by the Ld. AR that as the assessee had during the year under consideration earned exempt income of only Rs.30 lacs, therefore, even otherwise the disallowance made by the A.O u/s. 14A of the Act of Rs. 122.17 lac could not be sustained to the said extent. 9.1 Alternatively, it was submitted by the Ld. AR that as the assessee had sufficient self-owned funds of Rs.867 crores which would justifiably explain its investments in the exempt income yielding shares and securities, therefore, no disallowance of any part of interest expenditure was called for in its hands. In order to buttress his aforesaid contention the Ld. AR had taken us through the financial statements of the assessee company at Page 143 of APB. It was further submitted by the Ld. AR that, even otherwise, as the A.O had failed to give a clear finding with reference to the assessee s accounts as to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Cal.). Also support was drawn by him from the order of the ITAT, Pune Bench A (Third Member) in the case of Giriraj Enterprises Vs. DCIT, Central Circle- 1(1), Pune (2017) 79 taxmann.com 202 (Pune). It was submitted by the Ld. AR that as observed in the aforesaid judicial pronouncements though the aforesaid amendment i.e. applicability of additional depreciation in the case of generation or generation and distribution of power had been made available on the statute vide the Finance Act, 2012 only w.e.f. A.Y.2013-14, but the same only gave impetus to the existing view that as generation of electricity is a manufacturing process, therefore, it qualifies for the benefit conferred under section 32(1)(iia) of the Act. Accordingly, on the basis of his aforesaid contentions it was submitted by the Ld. AR that both the lower authorities had grossly erred in law and the facts of the case in declining the assessee s claim for additional depreciation u/s.32(1)(iia) of the Act. Also, in order to buttress his aforesaid contention the Ld. AR had relied on the judgment of the Hon ble High Court of Madras in the case of CIT v. Hi Tech Arai Ltd. [2010] 321 ITR 477 (Mad.) 9.3 Adverting to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y all material facts which were necessary for its assessment for the year under consideration i.e. A.Y.2008-09, could not rebut the same. The Ld. DR had filed before us his written submissions by referring to which he had drawn support from the judgment of the Hon ble High Court of Calcutta in the case of Rampuria Industries Investment Ltd. (2017) 391 ITR 18 (Cal.). It was submitted by the Ld. DR that in its aforesaid judgment the Hon ble High Court had observed that as the petitioner before them had not pressed its objections that were raised before the A.O and in fact, had allowed the A.O to proceed with the reassessment without insisting for disposal of the objections raised before him, therefore, from its very conduct, it could safely be inferred that he had waived its right to have his objections disposed off; or in the alternative had withdrawn its objection to the invocation of Section 148 of the Act. It was further averred by the Ld. DR that as in the present case the assessee had not seriously assailed the validity of its objection to the invocation of Section 148 of the Act by the A.O, therefore, it could safely be concluded that it had in fact withdrawn its objection q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the mandate of law, could have been validly reopened vide notice issued u/s.148, dated 23.08.2013 i.e beyond a period of four years from the end of the relevant assessment year, if there was failure on the part of the assessee to disclose fully and truly all material facts which were necessary for its assessment for the said year. For adjudicating the aforesaid issue we herein cull out the reasons to believe on the basis of which the concluded assessment of the assessee was reopened, as under: Reasons for the belief that income has escaped Assessment (i) Excess allowance of depreciation: -Assessee, has claimed 100percent deprecation on dam worth of Rs.70,72,14,643/. The DAM was introduced in the second half of the year. However, in the depreciation rate scheduleof IT Act there is no provision of depreciation on dam. Thus depreciation of Rs.35.36 crore (being one half ofRs.70,72,14,643/-) has been allowed excessively. (ii) Disallowance u/s 14A :- Assessee had made substantial investment in shares and securities income from which does not form part of total income. However no expenditure was disallowed in this respect. The disallowance on this account comes to R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same only w.e.f. A.Y.2013- 14; and (iv) irregular disallowance of depreciation for the preproduction period despite the fact that the assessee s power production had started from 08.12.2017. 12. Ostensibly, the A.O had sought to reopen the concluded assessment of the assessee company not on the basis of any fresh material coming to his notice, but on the basis of the same facts that were available on his record at the time of framing the original assessment u/s.143(3), dated 31.12.2010. Admittedly, it is a matter of fact borne from record that the A.O in the reasons to believe have stated that the assessee had not fully and truly disclosed the material facts that were necessary for its assessment. But as observed by us hereinabove, the facts are far from what is claimed by the A.O. Case of the assessee had been reopened by the A.O not for any failure on its part to disclose fully and truly all material facts necessary for its assessment for the year under consideration i.e. A.Y.2008-09, but clearly for the reason that he had after perusing the assessment records, held a conviction that certain claims of deduction of the assessee, to his understanding, had wrongly been allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation rate schedule of IT Act there was no provision of depreciation on dam. In our considered view neither the aforesaid misconceived and incorrect observation of the AO; nor his changed/new view as regards the entitlement of the assessee for depreciation on dam in absence of any provision of depreciation on dam in the IT Act would by any means fall within the realm of failure on the part of the assessee to disclose fully and truly all material facts which were necessary for its assessment for the year under consideration , which would have justifiably triggered the applicability of the second limb of the 1st proviso to Sec. 147 in the case of the assessee before us. At this stage, we may herein observe, that though the AO had referred to the absence of any provision of depreciation on dam in the IT Act, but thereafter he had confined the reopening of the case on the aspect of excessive claim of depreciation on dam, for the solitary reason that the assessee having claimed 100 percent depreciation on dam was allowed excessive depreciation of Rs. 35.36 crore. Be that as it may, as neither of the aforesaid observations of the AO would fall within the meaning of failure on the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts which were necessary for its assessment for the year under consideration , thus, the extended time period provided in the 1st proviso of Sec. 147 i.e beyond a period of four years from the end of the relevant assessment year i.e AY 2008-09 could not have been availed by the AO for reopening the concluded assessment of the assessee company. (iv). Irregular disallowance of depreciation for pre-production period (before September) :- 16. It has been observed by the A.O that though the assessee s power production started from 08.12.2007, but it had claimed depreciation on the assets which were introduced before the commencement of production. Accordingly, on the basis of his aforesaid observations, the A.O was of the view that one-half of the assessee s claim for depreciation i.e. Rs.1,26,53,829/- that had excessively been allowed was liable to be withdrawn. 16.1 Ostensibly, the aforesaid reason inter alia forming the basis for reopening the concluded assessment of the assessee by no means can be attributed to any failure on its part to disclose fully and truly all material facts in respect of its aforesaid claim of depreciation, as werenecessary for its assessment. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in the case of Ananta Landmark Pvt Ltd. vs Deputy Commissioner of Income-Tax, WP No.2814 of 2019, dated 14.09.2021 (Bom). Further, we find that the Hon ble Supreme Court in the case of New Delhi Television Ltd. vs Deputy Commissioner of Income Tax, (2020) 116 Taxmann.com 151 (SC) had, inter alia, held that though the assessee is obligated to disclose the primary facts , but it is neither required to disclose the secondary facts nor required to give any assistance to the A.O by disclosure of the other facts and it is for the A.O to decide what inferences are to be drawn from the facts before him. It was categorically observed by the Hon ble Apex Court that the extended period of limitation for initiating proceedings under the 1st proviso to Section 147 of the Act would only get triggered where the assessee had failed to disclose fully and truly all material facts necessary for its assessment. 18. As the assessee in the case before us had disclosed all material facts necessary for its assessment, therefore, we are of the considered view that the A.O as per the limitation provided in the 1st proviso to Sec. 147 was divested of his jurisdiction for reopening the concluded a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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