TaxTMI 
TaxTMI 
TaxTMI 
2016 (2) TMI 605
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....ed captive power plants / units which generate and supply power to its manufacturing units. The captive power units are entitled to deduction under Section 80IA of the Act in respect of its profits on account of generation and distribution of power. For the subject Assessment Year, the Appellant filed its return of income claiming the benefit of Section 80IA of the Act. The Assessing Officer, on examining the same, by an order dated 27th November 2006 passed under section 143(3) of the Act inter alia allowed the benefit as available under Section 80IA of the Act. (b) On 30th March 2010, a notice under Section 148 of the Act was issued by the Assessing Officer seeking to reopen assessment for AY 2004-05. This notice for reopening of assessment beyond the period of four years from the end of the relevant assessment year was issued in view of Revenue's audit objection. This audit objection had been resisted to by the Assessing Officer. Nevertheless the Assessing Officer issued the reopening notice and communicated the following reasons as recorded in support of the reopening notice :- "Reasons for reopening under section 148 1. Assessee company filed return of income on 01/11....
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....s are on COST PLUS BASIS, Ministry of power has fixed the 16 % rate of return of investment as reasonable rate of return and 0.50% on loan funds. All regulatory bodies to fix tariff chargeable by State Electricity Boards as well as independent power suppliers follow this principle. Hence, the profit of the generating station cannot exceed the reasonable return of investment. Considering the above tariff policy adopted for fixing tariff for supply of electricity the profit cannot exceed 16 percent of the investment of capital base. It is seen from the records that the assessee has so arranged the affairs as to show extra ordinary profits from generation of electricity to avail higher 80IA deduction than admissible. The estimated excess profit shown was as follows :- Generation plant Capital base 16% return on capital base 80IA deduction claimed by assessee Excess deduction claimed by assessee u/s 80IA GTG1PG 6,67,64,153 1,06,82,264 38,62,84,451 37,56,02,187 GTG2PG 14,94,89,585 2,39,18,334 18,79,38,426 16,40,20,092 GTGAHD 21,96,29,982 3,51,40,797 14,63,32,788 11,11,91,991 CPP III/IV 40,41,19,289 6,46,59,086 104,30,98,240 97,84,39,154 CPP V 19,45,18,197 3,1....
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....ted position that the impugned reopening notice dated 30th March 2010 was seeking to reopen the assessment for the AY 2004-05 which is beyond the period of four years from the end of the relevant assessment year. In such a case, the jurisdictional requirements to reopen an assessment are (i) the Assessing Officer must have reason to believe that the income chargeable to tax escaped assessment; (ii) the Assessing Officer in the regular assessment proceedings had not formed an opinion in regard to the issue on which the reopening notice is issued; and (iii) there has been a failure on the part of the Assessee to truly and fully disclose all necessary facts for the assessment. 5. In this case, the CIT (A) as well as the Tribunal have on consideration of the facts arising before them have concluded that none of the three conditions precedent have been satisfied. The reason to believe that income chargeable to tax has escaped assessment on the part of the Assessing Officer is a sine qua non for issue of an reopening assessment under section 148 of the Act as non-satisfaction of reason to believe would by itself make the notice fatal. In such a case, the satisfaction of other cond....
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....rned counsel for the Revenue, supports the appeal by stating that once an audit objection had been raised, then the Assessing Officer is obliged to take remedial action, as in this case, by issuing a reopening notice. This for the reason he states that otherwise the revenue due to the State would be lost even in case the audit objection is upheld. 8. We are unable to understand how the mandate of the Act requiring the Assessing Officer to have reason to believe that income chargeable to tax has escaped assessment can be ignored on the altar of revenue collection. If such a submission is to be accepted, it would, be the beginning of the end of the Rule of Law. In fact, a Division Bench of this Court in IL & FS Investment Managers Ltd. v/s Income Tax Officer, (Bom), reported in 298 ITR 32 has concluded the issue by pointing out that where the Assessing Officer in response to the query from the Revenue audit has opposed the reopening, it cannot be said that the Assessing Officer has formed his opinion that income has escaped assessment for the purpose of the reopening notice. In the above view, the question as framed does not give rise any substantial question of law. 9. In fact, th....