TaxTMI 
TaxTMI 
2023 (7) TMI 171
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Audited Financial Statements and tax Audit Report u/s 44AB of the Act and also the fact in view of the specific reply as was also placed on record, on due query raised and replies submitted and placed on record during the course of original Assessment proceedings for asstt. made u/s 143(3) of the Act in respect of. the Central subsidy amount, accounted and treated as capital subsidy and also in respect of calculation of depreciation on such Assets without adjusting the amount of the said Capital subsidy from the cost of the Assets. 2. That the worthy CIT(Appeals) has erred both on facts and in Law to have upheld the addition in account arbitrary calculation of depreciation of Rs. 72.90 Lacs in respect of receipt/accrual of Central Capital Subsidy amount on the said Power Projects on misperceived and misconstrued provisions of Law contrary to the settled law and decisions of the Hon'ble Supreme Court in the case of CIT vs P.l. Chemical Limited reported at Appeal (Civil) 2474 of 1991 followed by the Hon'ble ITAT 'F' Bench, Delhi in case of PVR Limited vs ACIT s reported in ITA No. 1897/Del/2010 and ITAT Vishkhapatnam Bench in the case of Sasisri Extractions Limited vs ACI....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on of depreciation of Rs. 72.90 Lacs in respect of receipt/accrual of Central Capital Subsidy amount on the said Power Projects on misperceived and misconstrued provisions of Law contrary to the settled law and decisions of the Hon'ble Supreme Court in the case of CIT vs .l.P Chemical Limited reported at Appeal (Civil) 2474 of 1991 and ITAT Vishkhapatnam Bench in the case of Sasisri Extractions Limited vs ACIT (2008) 307 ITR (AT) 127, and the said being part of the records, duly disclosed in original assessment proceedings framed u/s 143(3) of the Act, therefore such reopening was on mere change of opinion and review of the completed assessment, which is impermissible in law. 3. That the worthy CIT (Appeals) while upholding the reassessment proceedings and the quantum thereof was absolutely wrong, unjustified & erred both on facts and in law since in para 7 of the Reasons recorded, such disallowance was observed at Rs. 72.90 lacs, the additions as made in Asstt. Order was Rs. 61,96,000/- whereas due differential depreciation as per applicable rates on the said Hydro projects as per working documents on record vide submissions 28th Sept., 2018, even hypothecally presuming, tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Government has been disallowed and added back to the income of the assessee. Aggrieved by the assessment order dated 26/12/2017, the assessee preferred an appeal before the CIT(A). The Ld.CIT(A) vide order dated 05/09/2018 dismissed the appeal filed by the assessee on 05/09/2018. 5. As against the order of the CIT(A) dated 05/09/2018, the assessee is on Appeal before us on the grounds mentioned above. 6. In the Ground No. 1, the assessee challenged initiation of reassessment proceedings u/s 147/148 of the Act. The Ld. counsel for the assessee submitted that the CIT(A) has committed error in upholding the order of the Assessing Officer in initiating the reassessment proceedings on mere change of opinion and on review subsequently of a completed assessment u/s 143(3) of the Act, on the same material facts as stood categorically disclosed in the Audited Financial Statements and tax Audit Report u/s 44AB of the Act. Further the specific reply was also placed on record on due query raised by the A.O. during the course of original Assessment proceedings made 143(3) of the Act in respect of the Central subsidy amount, accounted and treated as capital subsidy and also in respect of calc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me has been escaped for the Assessment Year 2012-13 for following reasons:- 1. In this cases, it was noticed that the assessee filed its return of income on 29/09/2012 at an income of Rs. NIL but paid taxes on income of Rs. 4,16,26,187/- u/s 115JB. The assessment order u/s 143(3) was passed on 30/03/2015 at an income of Rs. 53,59,780/- at normal income and Rs. 4,16,26,187/- at income u/s 115JB. 2. Subsequently", it was noticed that the assesses received subsidy of Rs. 4,55,00.000/- as financial support for encouraging setting up of (1.40KW) SHP Project from Government of Himachal Pradesh and Haryana. The assesses has neither treated the subsidy received as revenue income nor reduced the value of depreciable assets from 'actual cast. Thereafter, the assessee had failed to disclose fully arid truly dl material facts necessary' for its assessment for A Y 2012-13. 3. Section 5 of the Income Tax Act, 196!, provides that the total income of the person for previous year includes at income from whatever sources derived which is received or deemed to be received or which accrues or arises during such previous year unless specifically exempted from tax under the provisions of Act. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in respect of the Power Projects set up in the State of Himachal Pradesh/Haryana etc, the terms of the declared policy of the Ministry of New & Renewal Energy, Govt. of India and the Accounting treatment of the said Central Capital Subsidy has been disclosed in the Audited Financial statements, vide the relevant Statutory Auditor's Note No. 42-read with-note No. 13 (e) and 14(f) of Tax Audit Report of Form 3CD. 12. We have gone through the audited financial statement wherein Note. No. 42 forming part of audited financial statement for the year ended 31/03/2012, the auditor stated as under:- "The company in accordance with AS-12 issued by Institute of Chartered Accountant of India has accounted for Capital Subsidy in respect of Hydro Power Project at Khukhani, Mussapur and Chakshi. Total capital subsidy of Rs. 486 lacs received /receivable from MNRE (Ministry of New and Renewal Energy) have been credited to Capital Reserve." 13. The copy of the statement of particulars in form 3CD being an integral part of the tax audit report u/s 44AB of the Act for the Financial year ended on 31/03/2012 produced before the A.O. during the original assessment proceeding and Para Serial No. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....otification). Your good self's attention is invited to the heading of annexure B to the notification of MNRE which reads as under:- "Scheme for Financial support to set up new SHP Projects......." Also subject of sanction letters from MNRE reads as under: "Proposal for sanction and release of capital subsidy for setting up of ......SHP Projects." Since the subsidy is granted for promotion of setting up of the SHPS, is in the nature of capital receipt. Also, such treatment is in accordance with the Accounting Standard 12 "Accounting for Government Grants" issue by ICAI The assessee's case is squarely covered by the decision of the Apex Court reported in 306 ITR 392 (SC) in the case of CIT V Ponni Sugars and Chemicals Ltd. It was held that: The character of the receipt of subsidy in the hands of the assessee under scheme has to be determined with respect to the purpose for which subsidy is granted. In other words, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is immaterial. If the object of the subsidy is to enable he assessee to run the business more profitably then the receipt on revenue account. On the o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s been confirmed by the CIT(A) in the order impugned. 17. From the above, it is found that the assessee had disclosed details, nature and accounting of central subsidy sanctioned and released for setting up the small hydro project under Renewal Energy Scheme of the Ministry of New Renewal Energy, Government of India, but no addition was made by the A.O. after making detail examination of the documents. Thus, in our opinion, the reassessment proceedings are merely on the change of opinion of the Assessing Officer which the original assessment u/s 143(3) of the Act was completed after due consideration of the facts. 18. It is well settled law that the Assessing Officer cannot invoke the provisions of Section 147 & 148 of the Act merely on the change of opinion wherein the original assessment u/s 143(3) of the Act was completed after due consideration of the facts. The Co-ordinate Bench of the Tribunal in ITA No. 473/Del/2017 in the case of Anant Raj Ltd. Vs. DCIT reported in (2021) 226 DTR 33 held as under:- "Reassessment -Full and true disclosure-Absence of new tangible material- Assessee had declared long-term capital gain on sale of the property - It placed on record all evide....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to re-assess. But reassessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to Section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in Section 147 of the Act. However, on receipt of representations from the Companies against omission of the words "reason to believe",....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t facts. In fact, there could be no such allegation because the assessee had clearly indicated the nature and contents of the TIUF and the treatment given by the assessee in its books of accounts. The same had also been examined by the Assessing Officer as aforesaid. Thus, in respect of the assessment years 1997-98 and 1998-99 this additional ground is also available in favour of the assessee/petitioner. 10. The position that a mere change of opinion would not entitle an Assessing Officer to reopen a completed assessment is well settled. The latest decision being of the Supreme Court in Civil Appeal No.2009-2011 of 2003 and Civil Appeal No. 2520 of 2008 decided on 18th January, 2010 which approves this Court‟s Full Bench decision in the case of Commissioner of Income Tax vs. Kelvinator of India Limited:256 ITR 1 (Del.) (HC). The power of re-assessment is different from the power of review. The Assessing Officer has been given the power to re-asses under Section 147 upon certain conditions being satisfied. The Assessing Officer does not have the power of review. If a change of opinion were to be permitted as a ground for re-assessment then it would amount to granting a licen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eassessment proceedings will be hit by the principle of change of opinion. Similarly, in that situation where query is raised and answered by the assessee in original assessment proceedings, and thereafter, the Assessing Officer does not make any addition in the assessment order, the reassessment proceedings will be invalid in that scenario also, it has to be accepted that the Assessing Officer had formed an opinion in the original assessment although he had not recorded his reasons for forming opinion but still this is a change of opinion if the Assessing Officer starts the reassessment proceedings for the same issue. In the light of this, now we examine the facts of the present case. As per the original assessment order passed by Assessing Officer u/s 143(3) dated 11/12/2008, it is seen that it is noted by Assessing Officer on page No. 2 of this assessment order that queries were raised vide letter dated 12/11/2008. The queries are reproduced by the Assessing Officer on pages 2 of the assessment order and one of the queries was that the assessee was asked to explain as to why the prior years expenses should not be disallowed. The reply of the assessee before the Assessing Officer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t and had no effect on the law on the subject discussed above applicable to the subject assessment years." By respectfully following the ratio laid down in the case of Ankit Metal (supra), we allow the Ground No. 5 of the Assessee. Since, we have allowed the Ground No. 1 & 5 by quashing the addition, other grounds of the Assessee requires no adjudication. In the result, the appeal of the assessee is partly allowed. ITA No. 7726/Del/2019 (A.Y 2013-14) 24. Brief facts of the case as per the assessment order are as under:- The assessee filed its return of income at an income of Rs. 6,96,13,880/- under normal provisions and Rs. 9,90,59,286/- u/s 115JB. The assessment order u/s 143(3) of the Act was passed on 01/03/2016 at an income of Rs. 6,96,13,880/- under normal provisions of the Act. Subsequently, it was noticed that the assessee received subsidy of Rs. 4,86,00,000/- as financial support for encouraging setting up of (1.40MV) SHP Project from Government of Himachal Pradesh and Haryana during FY 2011-12. The assessee had neither treated the subsidy received as revenue income nor reduced the value of depreciable assets from 'actual cost'. The case of the assessee was reopened....