TaxTMI 
TaxTMI 
TaxTMI 
2012 (12) TMI 379
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....f the relevant assessment year. While this appeal is with regard to reopening of assessment beyond a period of 4 years from the end of the relevant assessment year 2001-02. 3. The Revenue has formulated the following questions of law for the consideration of this Court. a) Whether on the facts and circumstance of the case and in law, the Tribunal was correct in upholding the order of the CIT(A) in canceling the notice u/s. 148 and the assessment u/s. 147 holding that the reassessment proceedings initiated based merely of change of opinion without taking into consideration that Explanation 1 to Section 147 of the Act squarely applied to this case? b) Whether on the facts and circumstances of the case and in law, the Tribunal was correct in upholding the order of the CIT(A) when the assessee did not bring to the notice of the AO, the Maharashtra Electricity Regulatory Committee (MERC) circular which prescribed the 'reasonable rate of return' earned by the assessee on the basis of which tariffs of electricity was to be calculated and on the basis of which the Assessing Officer has now reworked out the eligible profit for deduction ? &nbs....
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.... on the eligible business to which this section applies and any other person, or for any other reason the course of business between them is so arranged that the business transacted between them produced to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the AO shall, in computing the profits and gains of such eligible business for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived there from. Tariff for purchase of sale of power is determined on the basis of the normative parameters determined by the Govt of India under its Notification No. SO 251(E) dated 30.03.1992 issued under the provisions of Electricity Act, 1948. Tariff situates, both for the Central Sector and Independent Power producers (IPPS) were determined on COST PLUS PROFIT BASIS. Profit was determined on the 'return on equity' basis which was to be computed on the paid up and subscribed capital relatable to the generating unit at the rate of 16% of such capital. In this case, the assessee has claimed the deduction u/s 80IA of the Act in respect of generation of power ....
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....001-02. Issue notice u/s. 148 of the Act." 7. The respondent resisted the reopening of the assessment. However, the objections raised by the respondent were disposed of by the Assessing Officer by an order dated 21.11.2008 and reopened assessment was done on merits by an order dated 31.12.2008. The Assessing Officer by an order dated 31.12.2008 besides holding that an amount of Rs.177.08crores had escaped assessment in view of excess deduction claimed under Section 80IA of the Act in the regular proceeding also held that the reopening of assessment was justified as: (a) there was a failure on the part of the respondent to disclose fully and truly all material fact necessary for the assessment for the assessment year 2001-02. This was on the basis that the respondent had failed to disclose the order of the Maharashtra Electricity Regulatory Commission (MERC) for financial year 2004-05 determining the tariff for the sale of power by an order dated 01.07.2004 in which the profits attributable to its business of generation of electricity was pegged at 16% return on investment. (b) Consequently, it was held that a deduction hi....
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....ioner of Income Tax (Appeals) held that the order dated 31.12.2008 of the Assessing officer cannot be sustained 9. Being aggrieved, the appellant herein preferred an appeal to the Tribunal. The Tribunal by its order dated 14.05.2010 upheld the order of the Commissioner of IncomeTax (Appeals) dated 02.06.2009 and held that the order dated 31.12.2008 of the Assessing officer is not justified on account of the following: (a) Section 80IA(10) of the Act can have no application to the present facts as that subsection postulates that there has to be a close connection between assessee and some other persons. In this case, there is no other person involved. The respondent is engaged in both power generating business as well as power distribution business and there is no transaction with any other person in respect thereto. Therefore, the original order of the assessment dated 23.03.2004 correctly applied Section 80IA(8) of the Act which applies to transaction carried out by an assessee between its eligible business and its noneligible business so as to determine the market value of goods and services in arriving at its profit. In any event this was also a mere change ....
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....rder in case No. 18 of 2003 which was passed on 01.07.2004 i.e. much after the assessment order dated 23.03.2004 passed in regular assessment under Section 143(3) of the Act. In such circumstances, there could be no failure on the part of the respondent to disclose facts which are not in its possession during assessment proceeding leading to the order dated 23.03.2004. Besides, the order of MERC dated 01.07.2004 specifically deals with regard to fixing of the tariff rate at which power has to be supplied to the consumer. It is in the process of fixing of tariff rate for the consumer that 16% return on capital investments is to be taken into account as one of the ingredients to arrive at the tariff rate and has nothing to do with the actual profits which are earned by an activity of the power generation plant. As against that the deduction allowed under Section 80IA of the Act is on the actual profit earned by the power generation plant and has nothing to do with the fixing of the tariff rate for the supply of power to the consumer. Moreover the Tribunal has also correctly held that the jurisdiction to issue a reopening notice for the assessment year 200102 is absent in view of the ....