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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
आयकर अपीलीय अधिकरण “A” न्यायपीठ म ुंबई में। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI श्री महावीर स ुंह, न्याययक दस्य एवुं श्री एन. के. प्रिान लेखा दस्य के मक्ष । BEFORE SRI MAHAVIR SINGH, JM AND SRI NK PRADHAN, AM Aayakr ApIla saM./ ITA No. 3036/Mum/2018 (inaQa-arNa baYa- / Assessment Year 2009-10) Aroma Organics Limited The Asst. Commissioner of 106-110, Krishna Bhavan Income Tax, Circle 14(1)(1), Annex, Govandi, Room No. 432, Aayakar Vs. Mumbai-400 088 Bhavan, Mumbai-400 020 Mumbai .. (ApIlaaqaI- / Appellant) (p`%yaqaaI- / Respondent) स्थायी लेखा सं./PAN No. AAACA5370J अपीलाथी की ओर से / Appellant by : Shri Shekar Gupta, AR प्रत्यथी की ओर से / Respondent by : Shri R.A. Dhyani, DR सुनवाई की तारीख / Date of hearing: 14-05-2019 घोषणा की तारीख / Date of pronouncement : 21-05-2019
AadoSa / O R D E R
महावीर स ुंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:
This appeal filed by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-22, Mumbai [in short CIT(A)], in appeal No. CIT(A)-22/IT/428/2014-15, dated 23.01.2018. The Assessment was framed by the Asst. Commissioner of Income Tax, Circle-14(1)(1), Mumbai (in short ACIT/ITO/ AO) for the A.Y. 2009-10 vide order dated
2 19.01.2015 under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The first issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in reopening of assessment under section 148 of the Act which is beyond jurisdiction. For this assessee has raised the following two grounds: -
“Appeal No. 1:
a) The A.O. failed to appreciate that notice u/s 148 is time barred and therefore bad in law.
b) Your appellant prays that the notice u/s 148 be held time barred and bad in law and be quashed
Appeal No 2:
a) There was no additional any new specific information available at all which could justify the reopening. The reason given for reopening was regarding unabsorbed depreciation only and which was also written as approximate. However, the re- assessment order is based on different reasoning altogether.
b) Your appellant prays that the reason given for re- opening and the order passed being of a different reason, the order is bad in law and your appellant prays that 148 order be quashed.”
Briefly stated facts are that the assessee filed its original return of income for AY 2009-10 by way of e-filing on 13.03.2010. The return of income was processed under section 143(1) of the Act. Subsequently,
3 the assessee’s case was selected for scrutiny assessment by issuing notice under section 143(2) of the Act dated 18.08.2010. The scrutiny of assessment was completed by the AO under section 143(3) of the Act vide order dated 19.12.2011. Subsequently, the AO issued notice under section 148 of the Act dated 25.03.2014 for reopening of assessment and for this the AO recorded the following reasons: -
“The assessee company e-filed its return of income for A.Y. 2009-10 on 30.09.2009 declaring income of Rs.36,76,450/- under normal provision of the Act. Then the case was selected for scrutiny and the assessment was completed u/s 143(3) of the Act on 19.12.2011 accepting total income as per return of income as filed by the assessee.
In the instant case, the assessee company has claimed a deduction u/s 80IA amounting to Rs.15,52,080/. against the profit from a windmill in the state of Tamil Nadu during the previous year and same was allowed in the scrutiny assessment. It was observed that the assessee commenced this windmill in F.Y. 2004-05 with the installed cost of Rs.2.86 crore. The assessee claimed depreciation @ 80% and shown average energy sales of Rs.20 lakhs per annum from wind mill. With this pace of annual receipts, the wind mill as an undertaking will be having unabsorbed depreciation of Rs.1.86 crore (approx.) at the end the previous year. Thus unit had no profit to claim any deduction u/s So IA. The assessee had also stated in Directors Report that no benefit u/s 8olA was claimed as the wind mill had loss. However, in the computation of income the 4 deduction of Rs.15,52,080/- was claimed and the same was allowed. This has resulted into underassessment of income by same amount, involving tax effect of Rs.5,27,552/-.
In view of above specific information available with the undersigned, I have reasons to believe that the income amounting to Rs.15,52,080 chargeable to tax has escaped assessment and therefore, I am satisfied that it is a fit case for reopening of the assessment u/s 148 of the Act and hence, notice u/s 148 of the Act is issued accordingly.”
Accordingly, the AO completed the assessment under section 143(3) of the Act read with section 147 of the Act vide order dated 19.01.2015, whereby the AO has made disallowance of deduction under section 80IA of the Act amounting to Rs. 15,52,080/-. Aggrieved, assessee preferred the appeal before CIT(A) and before CIT(A) assessee challenged the reopening of assessment but according to CIT(A) the reopening is as per law by observing in Para 6.2 as under: -
“6.2 I have considered the matter. On the issue of full disclosure of facts, I find that the assessment has been re-opened within a period of four years from the end of the relevant assessment year. The bar on re-opening of assessment by the proviso to section 147 of the Act is, therefore, not applicable in the instant case. On the issue of change of opinion. I find from a perusal of the original assessment u/s 143(3) of the Act that the assessment was completed summarily by accepting the appellant's
5 income as returned. The merits of the allowability of deduction claimed u/s 80IA has not been discussed at all. On the issue of change of opinion, the Hon'ble Delhi High Court in the case of Consolidated Photo & Finvest Ltd Vs ACIT (2006) 151 taxman 41 (Delhi) held as follows:
It is trite that a matter in issue can be validly determined only upon application of mind by the authority determining the same. Application of mind is, in turn, best demonstrated by disclosure of mind, which is best done by giving reasons for the view which the authority is taking. In cases where the order passed by a statutory authority is silent as to the reasons for the conclusion it has drawn, it can well be said that the authority has not applied its mind to the issue before it nor formed any opinion. The principle that a mere change of opinion cannot be a basis for reopening computed assessments would be applicable only to situations where the Assessing Officer has applied his mind and taken a conscious decision on a particular matter in issue. It will have no application where the order of assessment does not address itself to the aspect which is the basis for reopening of the assessment, as is the position in the present case. It is in that view inconsequential whether or not the material necessary for taking a decision was available to the 6 Assessing Officer either generally or in the form of a reply to the questionnaire served upon the assessee. What is important is whether the Assessing Officer had based on the material available to him taken a view. If he had not done so, the proposed reopening cannot be assailed on the ground that the same is based only on a change of opinion.
Considering the facts of the case and in view of the above decision of the Hone Delhi High Court, since the issue of allowability oi deduction claimed u/s 801A has not been considered by the Assessing Officer in the original assessment, the re-opening of assessment cannot be said to be on account of change of opinion. The appellant's objection to the re-opening of assessment on this issue is dismissed.”
Aggrieved now, assessee is in appeal before Tribunal.
We have heard the rival contentions and gone through the facts and circumstances of the case. We have gone through the reasons and noted that the main challenge for reopening was that the assessee claim deduction under section 80IA of the Act for an amount of Rs. 15,52,080/- against the profit from wind mill in the state of Tamil Nadu during the previous year. The assessee during the course of assessment proceedings filed complete details and AO also observed in Para 4 as under: -
“4. The assessee company is carrying on the business of bulk import and trading in chemicals and power generation by wind energy generator.”
7 It was explained by assessee that in the audit report and audit report including form No. 10CCB contains information for date of commencement of business and initial assessment year and vide item No. 8 and 9, the same was disclosed as under: -
“8. Date of commandment of operation/ activity by the under taking enterprises 31.03.2005
Initial assessment year from when deduction is being claimed 2009-10.”
It was claimed that during the assessment proceedings, the assessee has filed complete details of computation of deduction under section 80IA of the Act in regard to wind mill division and the details are enclosed in assessee’s paper book at page 12 which read as under: -
Rs. Rs. Net loss as per profit & Loss account of 8,36,538 windmill division Less Depreciation as per books: Building 44,706 Plant & Machinery 24,94,355 25,39,061 17,02,523 Less Depreciation as per Income Tax Act: Building 42,482 Plant & Machinery 1,07,961 1,50,443 15,52,018 7. Now, before us, the learned Counsel for the assessee drew our attention to letter filed during the original proceedings on 20-10-2011, whereby the assessee has enclosed the copies of wind mill purchase bills, ledger and copy of profit and loss account and audit report and even the depreciation working was also submitted along with copy of audit report during the original assessment proceedings. In view of the above,
8 the learned Counsel for the assessee before us stated that the issue is squarely covered by the decision of Hon’ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd (2010) 320 ITR 561 (SC), wherein it is held as under: -
“4. On going through the changes, quoted above, made to section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987 , re- opening could be done under above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1-4-1989], they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re-open the assessment. Therefore, post 1-4-1989 , power to reopen 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 re-assess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment 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 9 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 1-4-1989 , Assessing Officer has power to reopen, 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 view gets support from the changes made to section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987 , Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in section 147 of the Act. However, on receipt of representations from the Companies against omission of the words "reason to believe", Parliament re-introduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the Assessing Officer. We quote hereinbelow the relevant portion of Circular No. 549 , dated 31-10-1989, which reads as follows :
"7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression 'reason to believe' in section 147. —A number of representations were received against the omission of the words 'reason to believe' from section 147 and their substitution by the 'opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, 'reason to believe' had been 10 explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989 , has again amended section 147 to reintroduce the expression 'has reason to believe' in place of the words 'for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new section 147, however, remain the same." [Emphasis supplied].”
In view of the above facts of the case and decision of Hon’ble Supreme Court in the case of Kelvinator of India Ltd. (supra), we are of the view that this is merely the change in opinion and reopening is bad and hence, assessment framed is quashed. The appeal of assessee is allowed.
In the result, the appeal of assessee is allowed.
Order pronounced in the open court on 21.05.2019. (एन. के. प्रधान/ NK PRADHAN) (महावीर ससंह /MAHAVIR SINGH) (लेखा सदस्य / ACCOUNTANT MEMBER) (न्याययक सदस्य/ JUDICIAL MEMBER) मुंबई, ददनांक/ Mumbai, Dated: 21.05.2019. दीप रकार, व.यनजी धिव / Sudip Sarkar, Sr.PS
11 आदेश की प्रयिसलपप अग्रेपिि/Copy of the Order forwarded to : अपीलाथी / The Appellant 1. प्रत्यथी / The Respondent. 2. आयकर आयुक्त(अपील) / The CIT(A) 3. आयकर आयुक्त / CIT 4. ववभागीय प्रयतयनधध, आयकर अपीलीय अधधकरण, मुंबई / DR, ITAT, 5. Mumbai गार्ड फाईल / Guard file. 6. आदेशान ार/ BY ORDER, सत्यावपत प्रयत //// उप/ हायक पुंजीकार (Asstt.