TaxTMI 
TaxTMI 
2025 (5) TMI 1781
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....e assessment years, therefore, all these appeals are taken together and disposed-off by a single order. 3. First, we take up the appeal for AY 2007-08 in ITA No. 4850/Del/2017 in the case of M/s BSES Rajdhani Power Ltd. 4. Brief fact of the case are that assessee is a public limited company and engaged in a business of distribution of electricity in the specified area of south and west Delhi in the NCT of Delhi. The return of income was filed on 06.11.2007 declaring total loss of Rs. 1,76,80,71,626/-. Original assessment was completed u/s 143(3) vide order dated 24.12.2009 at a loss of Rs. 3,80,38,807/-. Thereafter vide notice u/s 148 of the Act dated 31.03.2014, the reassessment proceedings were initiated in the case of the assessee and the assessment order was passed u/s 147 / 143(3) of the Act on 26.03.2015 wherein the income of the assessee is reassessed at Rs. 36,76,28,228/- which stood rectified in terms of the rectification order passed u/s 154 / 147 / 143(3) dated 24.11.2015 at a total loss of Rs. 40,34,81,098/-. Against the order passed u/s 147 / 143(3), the assessee filed an appeal before ld. CIT(A) who vide impugned order dated 31.03.2017 has dismissed the appeal o....
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....5. That the CIT(A) erred on facts and in law in upholding the action of the assessing officer in disallowing depreciation amounting to Rs. 40,37,00,000 on capital goods purchased from M/s. Reliance Energy Limited ('REL) in earlier years. 5.1. That the CIT(A) erred in not appreciating that the aforesaid issue of disallowance of depreciation on capital goods purchased from M/s. Reliance Energy Limited ('REL) was decided in favour of the appellant by the Delhi High Court in the earlier assessment year(s). 5.2. That the CIT(A) erred in not following the binding decisions of High Court/ Tribunals and co-ordinate quasi-judicial authorities in gross violation of principles of judicial propriety. 6. That on the facts and circumstances of the case and in law, the CIT(A) erred in upholding the action of the assessing officer in making addition of Rs. 47,46,05,172 on account of theft billing and late payment surcharge ('LPSC). 6.1 That the CIT(A) erred on facts and in law in not appreciating that amounts on account of late payment surcharge and theft billing did not represent 'real' income taxable under the provisions of the Act. ....
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.... ld. CIT-DR submitted that if the assessee is having grievance that ld. CIT(A) has not provided the opportunity of being heard, the matter may be set aside to the file of the CIT(A) to decide the appeal of the assessee afresh after considering the written submissions of the assessee. 9. After considering the submissions made by both the parties, in our considered opinion, in the instant case the matter relates to AY 2007-08 whereas almost more than 15 years have been passed and since the CIT(A) has already decided the appeal of the assessee on merits also, therefore, instead of remanding back the matter to the file of the CIT(A), we hereby proceed to decide the appeal of the assessee on the basis of the material produced and submissions made by both the parties. Accordingly, the ground of appeal No. 1 to 2.1 of the assessee are partly allowed. 10. In ground of appeal No. 3 to 3.4, assessee has challenged the order u/s 147 / 143(3) as passed without jurisdiction, mere change of opinion and barred by limitation thus bad in law and void-ab-initio. 11. Before us, the ld. AR argued that the assessment in the case of the assessee was originally completed u/s 143(3) and the reass....
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....en all the enquiries / investigations were carried out thus is a mere change of opinion. He further drew our attention to the fact that notice u/s 148 was dated 31.03.2014 which was handed over to the postal authorities only on 01.04.2014 i.e. after the expiry of the six years from the relevant assessment year which fact is evident from the detailed track event of the document i.e. the envelop under which the notice u/s 148 was sent to the assessee through Speed Post, therefore, the notice which was issued on 01.04.2014 is barred by limitation and accordingly the entire reassessment proceedings are void-ab-initio. For this, the reliance is placed on the judgement of the Hon'ble Delhi High Court in the case of Sumanjeet Agarwal Vs. ITO reported in (2022) 449 ITR 517 (Del.) wherein the court has observed as under: "25.12 The review of the aforesaid judgments of the Supreme Court and the several High Courts shows that all Courts have consistently held that the expression 'issue' in its common parlance and its legal interpretation means that the issuer of the notice must after drawing up the notice and signing the notice, make an overt act to ensure due dispatch of the....
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....sment is barred by limitation of 4 years in terms of proviso to section 147 of the Act; (b) Re-assessment has been initiated on mere change of opinion, in the absence any new tangible material/information available with the assessing officer, (c) There is no valid reason to believe to allege escapement of income in the hands of the assessee; (d) Re-assessment was completed without providing complete reasons, in particular the sanction obtained; (e) Reassessment is barred by limitation in terms of section 149 of the Act. Each of the aforesaid contentions is explained as under: Re (a): Re-assessment barred by limitation in terms of proviso to section 147 27. In terms of proviso to section 147, where assessment had been completed under section 143(3) of the Act, reopening is not permissible beyond 4 years from end of relevant assessment year, unless income has escaped assessment by reason of failure of the assessee to disclose fully and truly all material/primary facts necessary for assessment. 28. The Courts have in this context held that in so far as primary facts are concerned, it is the assessee's duty to ....
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.... (Del) CIT vs. Purolator India Ltd.: [2012] 343 ITR 155 (Del) Titanor Components Ltd. v. ACTT: [2012] 343 ITR 183 (Bom) Plus Paper Food Pac Ltd vs. ITO: [2015] 374 ITR 485 (Bom) Kalpataru Sthapatya (P.) Ltd vs. ITO: [2013] 215 Taxman 479 (Guj) Kaira District Cooperative Milk Producers Union Ltd. vs. ACIT: [1995] 216 ITR 371 (Guj) 32. Applying the aforesaid settled legal position to the facts of the present case, it is respectfully submitted that on perusal of reasons recorded [refer pages 88 to 89 of PB]. it will kindly be appreciated that there is not even a whisper by the assessing officer alleging any failure on part of the appellant to disclose material facts. The reasons recorded, in fact, nowhere even notice the applicability of the first proviso to section 147 of the Act, much less mentioning any specific fact qua any of the three issues which was not disclosed by the appellant to justify the reopening. 33. On perusal of the aforesaid, it is patently clear that in the reason there is, as a matter of fact, no charge of any failure on the part of the appellant in disclosing any material fact on the contrary, the as....
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....prior to the completion of original assessment. It is, in these circumstances, the assessing officer made a specific query, and did not make any addition/ disallowance on the issue of alleged excess price of energy meters. (ii) LPSC and Power Theft * The accounting policy followed by the appellant while recognizing "income from operations" was duly disclosed vide Note No. 2 to the "Significant Accounting Policies and Notes to Accounts" as under [Refer page 32 of PB]: "Revenue from sale of energy is accounted for on the basis of billing cycles falling due to the consumers during the accounting year. Generally all consumers are billed on the basis of energy consumed as recorded by installed meters. All rectifications relating to consumer accounts are recognized in the year in which they are approved. Late Payment Surcharge and bills raised in cases of power theft are accounted for on realization." * The LPSC charge recognized as income during the relevant year was specifically disclosed in the audited accounts under "Schedule-10 - Other Income" [Refer page 18 of PB]. (iii) Capitalization of Personnel cost * The accounting policy f....
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....n, except repeating the language of proviso to section 147, which is clearly not permissible in law. 40. In view of the above, it is submitted that the re-assessment proceedings are barred by limitation in terms of proviso to section 147 of the Act. Re (b): Re-assessment initiated on mere 'change of opinion' no fresh tangible material 41. It may be pointed out that though the powers under section 147/148 are wide, the same are not unfettered or plenary, insofar as the assessing officer in the garb of reassessment, cannot seek to review the earlier assessment framed under section 143(3) of the Act on account of mere "change of opinion" and or mere review of existing material/ facts. 42. Reliance in this regard is placed on the following decisions: CIT v. Foramer France: [2003] 264 ITR 566 (SC) ACIT v. ICICI Securities Primary Dealership Ltd: [2012] 348 ITR 299 (SC) CIT v. Kelvinator of India: [2010] 320 ITR 561 (SC) [affirming CIT v. Kelvinator of India Ltd.: [2002] 256 ITR 1 (Del) (FB)] ITO v. TechSpan India (P) Ltd. [2018] 302 CTR 74 (SC) CIT v. Usha International Limited: [2012] 348 ....
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.... example, excess claim of depreciation qua energy meters has been specifically disallowed, which clearly shows that the assessing officer was very much conscious of the claim of depreciation; (e) issue of disallowance of depreciation on energy meters raised in the assessment order, in fact, merged with the order passed by the CIT(A) and hence barred by third proviso to section 147; (f) allegation of inflated purchase cost of energy meters made in FY 2004-05 and 2005-06, forming basis for denial of claim of depreciation has been deleted by the Tribunal, which also stands confirmed by the High Court; (g) the DERC order, forming the basis for reopening the issue of depreciation on energy meter stands reversed by the Appellate Tribunal for Electricity [Refer pages 208-236 @233 of PB]; (h) issue of taxability of LPSC and power theft on cash basis is covered in favour of the appellant by the order of the Supreme Court in the case of Dakshin Haryana Bijli Vitran Nigam (infra). 46. In these circumstances, it is patently clear that the impugned reassessment proceedings are nothing but a mere attempt to rake up the very same issues again which cle....
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....cting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. The court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the court." 52. It has been similarly held in the following decisions: Ganga Saran & Sons (P) Ltd vs. ITO 130 ITR 1 (SC); Birla VXL vs. ACIT 217 ITR 1 (Guj); Multiscreen Media (P) Ltd. vs UOI 324 ITR 54 (Bom.) ITO vs. Lakhmani Mewal Das 103 ITR 437, 448 (SC) Arjun Singh vs. ADIT 246 ITR 363 (MP) Seth Brothers vs. JCIT 251 ITR 270 (Guj.) Bombay Pharma Products vs. ITO 237 ITR 614 (MP) Lokendra Singh Rathore vs. WTO 155 ITR 629 (MP) United Electrical Co. (P) Limited vs. CIT 258 ITR 317 (Del.) 53. In view of the aforesaid, it may be noted that the words "reason to believe" suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds to suggest that income of the assessee has escaped assessment and that the assessing officer may act on direct o....
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...., resulting in escapement of income. The assessing officer has failed to appreciate that-(i) there is considerable uncertainty in realization of LPSC and power theft billing revenue and hence the same is recognized as receipt basis considering the Accountant Standards, (ii) the same cannot be considered as income as per real income theory; and (iii) covered by judgements in the case of ACIT vs. Dakshin Haryana Bijli Vitran Nigam Ltd: [2013] 35 taxmann.com 486 as affirmed by P& H High Court. * Addition on account of alleged short-capitalization of personnel cost vis-à-vis the capitalization permitted by the DERC. The AO failed to appreciate that DERC itself, vide subsequent order passed on 23.02.2008, approved personnel costs aggregating to Rs. 6.57 crores to be capitalized to the value of assets, being approximately same to the actual capitalization of Rs. 6,57,40,336 made by the assessee. [Merits detailed infra] 56. For the aforesaid reasons, there cannot be any reason to belief that income of the assessee has escaped assessment on any of the aforesaid accounts. Re (d): Non-furnishing of complete reasons, specifically sanction: 57. During....
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....ong with the reasons (iv) the exercise of considering the assessee's objections to the reopening of assessment is not a mechanical ritual. It is a quasi-judicial function. The order disposing of the objections should deal with each objection and give proper reasons for the conclusion. No attempt should be made to add to the reasons for reopening of the assessment beyond what has already been disclosed. SLP filed by the Revenue against the aforesaid decision has been dismissed by the apex Court. 59. Further, it is respectfully submitted that initiation of proceedings under section 147 is invalid since sanction obtained, if any, under section 151 has not been communicated to the assessee along with reasons recorded nor is there any reference in the notice under section 148 of the Act regarding any sanction being obtained; be that as it may, the sanction, if any, has not been communicated even till date. 60. Reliance, in this regard, is placed on the following decisions wherein reassessment has been held to be invalid in absence of valid sanction being obtained: CIT v. SPL's Siddhartha Ltd. [2012] 345 ITR 223 (Del) Ghanshya....
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....oceedings initiated under section 147 cannot be regarded as having been validly initiated unless reasons recorded for initiating the proceedings are served on the assessee within the period of limitation prescribed in section 149 of the Act, i.e., before the expiry of six years from the end of the relevant assessment year. [Refer: Haryana Acrylic Manufacturing Company vs. CIT: [2009] 308 ITR 38 (Del); Shri Balwant Rai Wadhwa in ITA No. 4806/Del/10] 66. In the present case, notice under section 148 of the Act dated 31.03.2014 was issued. Reasons recorded were communicated much later on 11.04.2014 i.e., clearly after the expiry of the limitation period of six years from the end of the assessment years as provided under section 149 of the Act. 67. Since in the present case copy of reasons recorded was served on the assessee after the expiry of the limitation prescribed in section 149 of the Act, the reassessment proceedings are barred by limitation prescribed under that section. 68. For the aforesaid cumulative reasons, it is respectfully submitted that the impugned reassessment proceedings are bad in law and are liable to be quashed." 16. He therefore pr....
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....r the assessment, it appears that the Assessing Officer has acted based on some report received from some unknown source which has not been appearing in the reasons recorded entire exercise was carried out of reopening the assessment. Here it is pertinent to mention that in the case of the assessee itself in AY 2009-10, the case were reopened u/s 148 wherein these reasons for reopening were common as is evident from the copies of the reasons recorded for AY 2009-10 available in the paper book pages 96-100. The said reassessment proceedings were quashed by ld.CIT(A) and on further appeal the coordinate bench of the ITAT in ITA No. 1843/Del/2023 vide its order dated 29.01.2025 has confirmed the order of ld. CIT(A) by making following observations: 3. We next note that the learned CIT(A)'s lower appellate discussion quashing the impugned reopening thereby holding it as not sustainable in law being an invalid one, reads as under: "5.1.1 These grounds relate to challenging the issue of notice u/s. 148 of I.T. Act. Before adjudicating the issues under disputes, it is pertinent to have a look at the statutory provision of income escaping assessment as envisaged under sec....
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.... the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return: 1. Where an assessment has been made, but- 1. Income chargeable to tax has been underassessed; or 2. Such income has been assessed at too low a rate; or 3. Such income has been made the subject of excessive relief under this Act, or 4. Excessive loss or depreciation allowance or any other allowance under this Act has been computed. Explanation 3. For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the Income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under subsection (2) of section 148." 5.1.2 Hence, considering the above legal provisions before initiating action under section 147 of IT Act, the first and the foremost step is that AO should examine the information in his possession which he is going to rely on, for ....
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....hat AO has to record reasons in writing that income has escaped assessment. The reasons should be clear specific and not vague, it should clearly point towards the escaped income and not based on any kind of suspicion, conjunctures and surmises. It is not only mandatory upon the AO to record the reasons but also it is mandatory upon the AO to supply the copy of the same to the assessee after he files his return enabling him to make his case. 248 ITR (P&H) 266, 203 CTR (Bom) 232, 258 ITR (Bom) 183, 96 TTJ (Hyd) 832, 106 TTJ(JP) 114, 112 TTJ(Del) 445, 218 CTR (Guj) 53, 114 ITD (Del) 166, 340 ITR (Bom) 66, 350 ITR (Bom) 120, 350 ITR (Guj) 131. It is mandatory upon the AO to record the reasons for re-opening of the assessment. Now after filing of the return it is the right of the assessee to obtain the copy of the reasons recorded by the AO. Once this request is made the AO is bound to provide the copy of the reasons recorded within a reasonable time but before starting the reassessment proceedings. After receiving the copy of the reasons recorded the assessee shall within a reasonable time file his objections to the reasons recorded with the AO. It is important to note here t....
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....essee has failed to disclose full and true material facts. However, he has nowhere, in the reasons recorded stated any instance of failure on the part of the assessee to disclose any material facts in respect of issue sought to be re-assessed. The entire premise of the re-assessment was based on scrutiny and verification of the material already existing on record and not even an iota of any new tangible material which the assessee had failed to disclose was brought on record by the AO. It has been held in several decisions of Hon'ble High Courts that, if the reasons recorded for reopening the assessment after expiry of four years from the end of the relevant assessment year do not specify that the income has escaped assessment on account of default on failure on the part of the assessee to disclose material facts, the entire re-assessment proceeding and re-assessment order would be invalid. I find force in the argument of the appellant that conditions necessary as envisaged in proviso to section 147 of I.T. Act are not fulfilled by the AO while recording the reason for re-opening the assessment, hence; the issuance of notice u/s. 148 of I.T. Act is held to be bad in law and acc....
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....andalone basis, the CIT(A) has rightly decided the instant legal issue in assessee's favour and against the department whilst invoking section 147 1st proviso as well as going by the various judicial precedents. The same are hereby upheld in the Revenue's instant appeal which stands rejected in very terms. 9. This Revenue's appeal is dismissed. 21. In the instant case, we find that assessee has truly and fully disclosed all the material facts necessary for the purpose of assessment during the course of assessment proceedings carried out. In the original assessment proceedings, the AO after considering all the material has formed an opinion. There was nothing more to disclose and a person cannot be said to have omitted or failed to disclose something when, of such thing, he had no knowledge. Not only material facts were disclosed by the assessee but the same was fully scrutinized by the AO in the original assessment proceedings and figure of income as well as the deductions were worked out by the AO. The claim of depreciation, LPSE receipts and capitalization were duly disclosed in the Profit & Loss account which were available with the AO while framing the assessment u/....
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....This appeal relates to AY 2007-08 in the case of M/s BSES Yamuna Power Ltd. where the all the facts, except for limitation issue of service of notice remaining facts are identical with the facts of the appeal in the case of M/s BSES Rajdhani Power Ltd. for AY 2007-08 in ITA No. 4850/Del/2017 where we have already held the entire reassessment proceedings as void-ab-initio. It is also a matter of fact that ld. CIT(A) has also decided the appeal of both the assessee's i.e. M/s BSES Rajdhani Power Ltd. and M/s BSES Yamuna Power Ltd. by a single order dated 31.03.2017 which further fortified the fact that all the issues in both the appeals of different assessee's are common. Thus, the findings given by us in appeal for AY 2007-08 in the case of M/s BSES Rajdhani Power Ltd. are also applicable to the facts of the present appeal in the case of M/s BSES Yamuna Power Ltd., thus, by following the same, the appeal of the assessee is allowed on legal issues. 28. As we have allowed the assessee's appeal on legality on the notice issued u/s 148, therefore the other grounds of appeal taken on merits become academic and not adjudicated. ITA No. 4853/Del/2017 of M/s BSES Yamuna Power Ltd. [AY....