TaxTMI 
TaxTMI 
2022 (9) TMI 1247
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....ssessment year and also confirmed by Ld. CIT (A), the same is against the facts & also against the law. 2. That the Ld. A.O has grossly erred on facts and in the circumstances of the case and in law in disallowing claim of depreciation on DAM amounting to Rs 7072.14 Lakhs and also confirmed by Ld. CIT (A), the same is against the facts & also against the law, hence may kindly be deleted. 3. That the Ld. A.O has grossly erred on facts and in the circumstances of the case and in law in disallowing claim of additional depreciation amounting to Rs.12017 Lakhs and confirmed by Ld. CIT (A), the same is against the facts & also against the law, hence may kindly be deleted. 4. That the Ld. A.O has grossly erred on facts and in the circumstances of the case and in law in making addition of Rs 122.17 Lakhs to total income by invoking the provisions of section 14A of the Act read with rule 8D and also adding the same to book profit for calculating MAT u/s 115JB of the Income Tax Act, 1961 and same is confirmed by Ld. CIT (A), the same is against the facts & also against the law, hence may kindly be deleted. 5. The appellant reserves its right to add, amend,....
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....he basis of which its case was reopened u/s.147 of the Act, which were disposed off by the A.O. Thereafter, the assessee once again raised objections as regards the validity of the reopening of its case which too were disposed off by the A.O vide his letter dated 03.11.2014. 3. Assessment was thereafter framed by the A.O vide order passed u/s.143(3) r.w.s. 147, dated 05.02.2015 determining the income of the assessee company at a loss of Rs. (-)25896.40 lacs after making certain additions/disallowances which are briefly culled out as under: Sr. No. Particulars Amount 1. Disallowance of assessee's claim of 100% depreciation: Rs.7072.14 lacs a). The assessee company which was engaged in generation of power and its supply had incurred an expenditure of Rs.70,72,14,643/- for constructing water supply Dam & bridge on the river Kurkut after obtaining permission of Water Resources Department of the State Government of Chhattisgarh, for the purpose of continuous water supply in order to facilitate the production of electricity i.e. power. As the Dam/Bridge was exclusively constructed in order to facilitate uninterrupted water supply for the assessee's power....
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....that the additional depreciation u/s.32(1)(iia) of the Act was applicable to the assessee who was engaged in the business of manufacturing and production of any article or thing or in the business of generation or generation and distribution of power. It was observed by the A.O that the benefit of additional depreciation was extended to an assessee who was engaged in the business of generation or generation and distribution of power only w.e.f. A.Y.2013-14. Accordingly, the A.O being of the view that the assessee was not eligible for additional depreciation during the year under consideration before him i.e. A.Y. 2008-09 u/s.32(1)(iia) of the Act, thus, disallowed its claim of Rs.120.17 crore. 3. Disallowance u/s.14A of the Act: Rs.122.17 lacs. a). It was observed by the A.O that though the assessee had made substantial investments in shares and securities, income from which did not form part of its total income, however, it had not offered any suo-motto disallowance u/s.14A of the Act. On being queried, it was the claim of the assessee that no part of the expenditure that was claimed as deduction by it was incurred/ attributable to its investments m....
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.... dam/bridge of Rs.70,72,14,643/-, on the ground that the said amount was even otherwise allowable as a revenue expenditure/deduction u/s.37 of the Act; and (ii). that though the assessee had during the year claimed deduction towards depreciation on dam/bridge amounting to Rs.35,36,07,322/-, but the A.O while declining its said claim of deduction had wrongly worked out the addition/disallowance of an amount of Rs.70,72,14,643/-. As the assessee-appellant has by raising the aforesaid additional grounds of appeal sought our indulgence for adjudicating its entitlement for deduction of the expenditure incurred on construction of Dam/Bridges u/s.37 of the Act, which is purely a legal issue that requires looking no further beyond the facts borne on record, therefore, we have no hesitation in admitting the same. Apropos the claim of the assessee that the A.O had wrongly quantified its disallowance of depreciation, the same, too, not requiring any fresh factual verification is herein admitted by us. Our aforesaid view that as the respective additional grounds of appeal raised by the assessee appellant before us involves purely a question of law adjudication of which would require no fresh v....
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....ces made/sustained by the A.O/CIT(Appeals) were even otherwise not maintainable and were liable to be vacated. As regards the disallowance made by the A.O u/s.14A of Rs.122.17 lacs, viz. (i) disallowance of interest expenditure U/Rule 8D(2)(ii) : Rs.88.31 lacs; and (ii) disallowance of administrative expenses U/Rule 8D(2)(iii) : Rs.33.86 lacs, it was at the very outset submitted by the Ld. AR that as the A.O had without referring to the accounts of the assessee company and recording his dissatisfaction as regards the assessee's claim that no part of the expenditure that was claimed by it as a deduction was incurred/attributable to earning of exempt income, had however summarily substituted the same with an amount that was worked out by him by triggering the mechanism contemplated in Rule 8D, therefore, the disallowance so made by him u/s.14A r.w.r. 8D could not be sustained and was liable to be struck down. In support of his aforesaid contention the Ld. AR had relied on the judgments of the Hon'ble Supreme Court in the case of Maxopp investment Ltd vs. CIT (2018) 402 ITR 640 (SC) and that in the case of Godrej & Boyce Manufacturing Co Ltd vs. DCIT (2017) 394 ITR 449 (SC). Also, the....
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.... contemplated u/s 14A read with Rule 8D. In support of his aforesaid contention reliance was placed by the Ld. AR on the order of the ACIT, Circle 17(1) New Delhi Vs.Vireet Investment Pvt Ltd. (2017) 82 taxmann.com 415 (Del)(SB). 9.2 Adverting to the assessee's entitlement for claim of additional depreciation u/s. 32(1)(iia) of the Act, it was submitted by the Ld. AR that as generation of electricity did tantamount to manufacturing /production of an article or thing hence, the assessee was duly entitled for additional depreciation during the year under consideration. Rebutting the view taken by the lower authorities that as additional depreciation in respect of business of generation; or generation and distribution of power was made available on the statute vide the Finance Act 2012 w.e.f A.Y.2013-14, therefore, the assessee was not entitled to claim the same during the year under consideration i.e. A.Y.2008-09 the Ld. AR had relied on the judgment of the Hon'ble High Court of Calcutta in the case of Pr. CIT Vs. Damodar Valley Corporation (2022) 134 taxmann.com 63 (Cal.). Also support was drawn by him from the order of the ITAT, Pune Bench 'A' (Third Member) in the case of Girir....
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.... ITR 478 (Raj). It was submitted by the Ld. AR that in the aforesaid judicial pronouncement the Hon'ble High Court had clearly held that expenditure that was incurred by the assessee towards construction of part of dam that was built by State Government, in as much as it required large quantity of water for day to day operation of its super smelter located near about was allowable as a revenue expenditure. On the basis of his aforesaid contentions, it was submitted by the Ld. AR that though the assessment framed by the A.O for want of valid assumption of jurisdiction could not be sustained in the eyes of law, however, even otherwise the additions/disallowances made by him could were liable for being struck down. 10. Per contra, the Ld. Departmental Representative (for short 'DR') relied on the orders of the lower authorities. However, the Ld. DR on being confronted with the claim of the Ld. AR that the reopening of the assessee's case was in clear violation of the "1st proviso" to section 147 of the Act as there was no failure on its part 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, coul....
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.... the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the assessment year under consideration i.e AY 2008-09. Admittedly, it is not the case of the department that the case of the assessee falls within the realm of the first limb of the "1st proviso" of section 147,i.e, for the reason that there had been any failure on its part to make a return under section 139 or in response to notice issued under sub-section (1) of section 142 or section 148. Ostensibly, it is the claim of the department in the reasons forming the very basis for reopening of the concluded assessment of the assessee that the assessee had not fully and truly disclosed the material facts for its assessment. We, thus, in terms of the aforesaid claim of the department confine ourselves to the issue as to whether or not there was any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the year under consideration.? Undeniably, the concluded assessment of the assessee company for AY 2008-09, as per the mandate of law, could have been validly reopened vide notice issued u/s.148, dated 23.08.2013 i.e beyond....
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....disclosed the material facts for the assessment. In view of the above, I have reason to believe that income of the assessee has escaped assessment within the meaning of section 147 of the IT Act, 1961. To bring the said amount into tax net, issue of notice u/s.148 is felt necessary. Hon'ble CIT, Bilaspur vide his letter no. CIT/Bsp/Tech/148/2013-14/524 has accorded necessary approval under section 151(1) of the IT Act, 1961 to reopen the case. Accordingly, notice under section 148 is issued. Sd/- (I B Khandel) Deputy Commissioner of Income Tax Circle 1(1), Bilaspur (C.G)" On a careful perusal of the "reasons to believe" that forms the very basis for reopening of the concluded assessment of the assessee, it transpires that the same hinges around four issues, viz. (i) excess allowance of depreciation on dam by the A.O; (ii) failure on the part of the A.O to work out the disallowance u/s.14A; (iii) allowing of additional deprecation u/s.32(1)(iia) by the A.O loosing sight of the fact that the assessee who was engaged in generation or generation and distribution of power was entitled for the same only w.e.f. A.Y.2013- 14; and (iv) irregular disallowance....
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....he aforesaid Annexure2/Annexure 2A are culled out as under: 13.2 Apropos the AO's claim that in the depreciation rate schedule of IT Act there is no provision of depreciation on dam, the same, without commenting on the correctness of the said observation of the AO, by no means could be brought within the meaning 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". 13.3 As can safely be gathered, the aforesaid reason to believe clearly reveals beyond doubt that the alleged escapement of income of the assessee chargeable to tax is not for any failure on its part in disclosing fully and truly all materials facts as regards the aforesaid issue which were necessary for its assessment for the year under consideration. On the contrary, the aforesaid reason reveals two fold aspects, viz. (i). misconceived and incorrect observation of the AO that the assessee company had claimed 100 depreciation on dam worth of Rs. 70,72,14,643/-; and (ii). changed opinion/view of the AO that even otherwise in the depreciation rate schedule of IT Act there was no provision of depreciation on da....
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....rial facts which were necessary for its assessment for the year under consideration", therefore, the "1st proviso" of Sec. 147 of the Act cannot be brought into play in its case. (iii). Allowance of additional depreciation:- 15. It was observed by the A.O that as the assessee was engaged in the business of generation or generation and distribution of power which was eligible for additional depreciation contemplated in Section 32(1)(iia) of the Act only w.e.f. A.Y.2013-14, therefore, the additional depreciation so allowed to him for the year under consideration i.e. A.Y.2008-09 was liable to be disallowed. In our considered view, the aforesaid reason is in itself self-speaking of the fact that though there had been a full and true disclosure of all material facts on the part of the assessee qua the aforesaid issue as were necessary for its assessment, but the AO had on the basis of changed view sought to reassess the assessee on the said count. As the aforesaid view of the AO cannot be brought 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", thus,....
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....r under consideration i.e. A.Y. 2008-09, but merely for the reason that as per the A.O certain allowances/deductions had wrongly/excessively been allowed to the assessee, therefore, we are inclined to concur with the claim of the Ld. AR that the case of the assessee had wrongly been reopened beyond the stipulated period contemplated in the "1st proviso" to section 147 of the Act i.e. beyond the period of four years from the end of the relevant assessment year. Our aforesaid view that in absence of any failure on the part of the assessee to fully and truly disclose all material facts necessary for its assessment for the year under consideration, its concluded assessment cannot be reopened beyond a period of four years from the end of the relevant assessment year is supported by the judgments of the Hon'ble High Court of Delhi in the case of Pr. CIT Vs. M/s. Superior Films Pvt. Ltd., ITA No.153 of 2020, dated 19.07.2021 (Del) and in the case of CIT Vs. Viniyas Finance & Investment Pvt. Ltd., ITA No.271 of 2012, dated 11.02.2013 (Del). Also, a similar view had been taken by the Hon'ble High Court of Bombay in the case of Ananta Landmark Pvt Ltd. vs Deputy Commissioner of Income-Tax, W....
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....s 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 of the Act. 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, dated 05.02.2015, therefore, we herein quash the assessment so framed by him. Thus, the Ground of appeal No.1 is allowed in terms of our aforesaid observations. 20. As we have quashed the assessment framed by the AO vide his order passed u/s.143(3) r.w.s.147 dated 05.02.2015 for want of valid assumption of jurisdiction by him, therefore, we refrain from adverting to and the....