TaxTMI 
TaxTMI 
2023 (7) TMI 171
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.... material facts as stood categorically disclosed in the 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 Vishkhap....
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....peals) 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 .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 proj....
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....Act, wherein the depreciation of Rs. 72,90,000/- claimed on assets purchased from the amount of subsidy received from Central 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....
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.... the Act was issued to the Assessee 10. As per the reasons recorded the Assessing Officer, the A.O. had reason to belief that the income 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....
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....n raised in the original assessment proceedings. Further, it is the case of the assessee that the assessee Company had disclosed all primary facts, in respect of the receipt/accrual of Central Capital subsidy 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 p....
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....h capital subsidy from MNRE are enclosed as jure 5. The subsidy is given as a financial support for [aging setting up of new Small Hydro Power Projects ('SHPs') by the MNRE. The quantum of subsidy if linked with the capacity of the project (See annexure B of the Notification). 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 whi....
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....of income always lies on the assessee which in the current case is not the situation and therefore I am satisfied that the assessee has furnished inaccurate particular of income. Hence, penalty proceedings u/s 271 (l)(c) is being initiated separately for furnishing inaccurate particular of income." The said addition made by the A.O. has 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 conside....
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....ers jurisdiction to re-open the assessment. Therefore, post-1st April, 1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere change of opinion", which 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 vi....
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....not make a full and true disclosure. It is an admitted position that the assessee had filed a return, therefore, the only question which remains to be open is whether the assessee made a full and true disclosure or not. In the present case there is no allegation in the reasons recorded by the Assessing Officer that the assessee had failed to make a full and true disclosure of the relevant 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. Kelvinato....
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....ing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. 6.1 As per above paras from this judgment of Full Bench of Hon'ble Delhi High Court, it is seen that it was held in this case that reassessment proceedings will be invalid in case the assessment order itself records that the issue was raised and is decided in favour of the assessee because in that situation the reassessment 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 ....
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....#39;capital receipts' and is not an 'income' liable to be taxed in relevant assessment year 2010-11 on the basis of discussion made above and further taking into consideration the definition of Income under Section 2(24) of the Income Tax Act, 1961, where sub- clause (xviii) has been inserted including 'subsidy' for the first time by Finance Act, 2015 w.e.f. April, 2016 i.e assessment year 2016- 17. The amendment has prospective effect 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....