2013 (11) TMI 198 - AT - Income Tax

Appeals Dismissed: Reopening of Assessments Invalid. No Merits in Deduction.

The Tribunal dismissed all appeals, upholding the CIT (A)'s decisions that the reopening of assessments under section 147 r.w.s. 148 was invalid due to a ... Assessment Order u/s 143(3) r.w.s. 147 of the Act - Re-opening of Assessment - Revenue contended that CIT (A) had erred in cancelling the reopening of assessment – Held that:- As seen from the copy of the satisfaction placed on record AO recorded “it was seen from the records that assessee had so arranged the affairs as to show extra ordinary profits from generation of electricity to avail higher 80IA deduction than admissible” - The extra profit was then worked out by AO on the basis of the information available in the record itself - In view of this since there was no failure on the part of assessee to disclose fully and truly all material facts, the order of the CIT (A) had to be upheld which was correct both on facts as well as on law - the Ld. CIT(A) had discussed extensively the reasons for reopening, the contentions of assessee and the decisions of various judicial authorities – the findings of Ld. CIT(A) as they were based on facts and applicable judicial principles was accepted –There was no dispute with reference to the fact that AO had issued notice under section 148 after four years from the end of the relevant assessment year - an assessment under section 143(3) was made earlier, the proviso to section 147 mandates that the reopening can be done only by the reason of failure on the part of assessee to disclose fully and truly all material facts necessary for assessment for that assessment year - Decided against Revenue. Deduction u/s 80IA - Assessee claimed deduction under section 80IA on self-utilized electricity produced in various generating units by taking the cost of sale at which it was procuring from various Electricity Boards and a note was accordingly left in the records - Held that:- There was no need to adjudicate the issue on merits by the CIT(A) once the reopening of the assessment itself was considered bad in law - The profit eligible for deduction under section 80IA had been rightly computed and allowed taking into account the market value of such goods as contemplated in section 80lA of the Act - The assessee has also objected to the re-opening of the assessment on the ground that the re-opening was done only on mere change of opinion – Following the Judgement of CIT, Delhi vs. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA] and IL & FS Investment Managers Ltd. [2006 (11) TMI 181 - BOMBAY High Court ]. It has contended that all the details concerning the claim of deduction u/s 80IA in respect of power generating undertakings were disclosed in the computation of income and the Audit Report in form No. 10CCB - It was the contention of the assessee that the deductions u/s SOIA were allowed after due consideration of the details on record and submissions filed by the assessee, hence, any attempt to reopen the assessment on the same set of facts, was nothing but a change of opinion which cannot be a valid and legal ground justifying re-opening of the assessment - The assessee had also filed the assessment order passed u/s 143(3) to show that the deductions claimed by the assessee on these units were revised by the Assessing Officer, which only showed that the AO had, in fact, applied his mind to the issue of deduction. Issues Involved:1. Validity of reopening the assessment under section 147 r.w.s. 148 of the Income Tax Act, 1961.2. Computation of deduction under section 80IA of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Validity of Reopening the Assessment under Section 147 r.w.s. 148:The primary issue was whether the reopening of the assessment by the Assessing Officer (AO) under section 147 r.w.s. 148 was valid. The reopening was based on the assertion that the assessee had failed to disclose fully and truly all material facts necessary for the assessment, leading to an alleged excess deduction under section 80IA.The assessee contended that the reopening was merely a change of opinion, as all relevant details had already been disclosed during the original assessment. The assessee relied on several judicial precedents, including CIT Vs Kelvinator of India Ltd. (320 ITR 561 SC) and Asian Paints Ltd. Vs DCIT (308 ITR 195 Bom), which established that reopening on a mere change of opinion is not permissible.The CIT (A) quashed the reopening, citing that the AO had initially disagreed with the audit objection and had accepted the assessee's computation of profits eligible for deduction under section 80IA. The CIT (A) referenced the decision of the Hon'ble Bombay High Court in IL & FS Investment Managers Ltd. (298 ITR 32), which held that reopening based on an audit objection, especially when the AO did not agree with it, is not valid.The Tribunal upheld the CIT (A)'s decision, emphasizing that the AO's reopening was based on the same set of facts already examined during the original assessment, and there was no new tangible material to justify the reopening. The Tribunal reiterated that the reopening was prompted by a mere change of opinion, which is not permissible under section 147.2. Computation of Deduction under Section 80IA:The second issue was the computation of the deduction under section 80IA, specifically whether the price at which electricity was transferred to non-80IA units should be considered the market value.The AO had restricted the deduction by adopting a 16% return on capital base, based on circulars issued by Regulatory Authorities. The assessee argued that the deduction should be based on the price paid by industrial consumers to the State Power Distribution Agency, as this represented the fair market value.The CIT (A) did not adjudicate this issue on merits, as the reopening itself was annulled. The Tribunal concurred, stating that there was no need to examine the merits of the deduction computation since the reassessment was invalid. The Tribunal noted that similar issues were pending in another assessment year, and detailed examination would be conducted there.Other Appeals:For the assessment years 2003-04 and 2005-06, the issues were similar, with the reopening being within four years. The Tribunal upheld the CIT (A)'s decision to quash the reopening, citing that the AO had not brought any new material on record and had merely changed his opinion based on the same facts already considered. The Tribunal also noted that the ultimate income determined under section 115JB was the same in both original and reassessment, making the reopening academic in nature.Conclusion:The Tribunal dismissed all appeals by both the Revenue and the assessee, upholding the CIT (A)'s decisions that the reopening of assessments was invalid and that there was no need to adjudicate the merits of the deduction under section 80IA. The Tribunal's decision was pronounced in the open court on 28.2.2013.