VIRCHOW PETROCHEMICAL PRIVATE LIMITED,HYDERABAD vs. ACIT., CENTRAL CIRCLE-8(1), HYDERABAD

Succinctly stated, the assessee company, which is engaged in the business of manufacturing of refined petroleum products, had filed its

The AO had vide his order passed under section 143(3) of the Act, dated 11/12/2018, framed the original assessment in the case of the assessee company, wherein its returned income was accepted as such.

Thereafter, the concluded assessment of the assessee company was reopened vide notice issued under section 148 of the Act, dated 31/03/2021. In compliance, the assessee company filed its return of income.

During the course of the assessment proceedings, the AO observed that the assessee company had claimed 100% depreciation of Rs. 7,34,14,979/- on its solar power plant (80% depreciation + 20% additional depreciation). The AO observed that the assessee company had, during the subject year, not offered in its Profit & loss account any income from the sale of power from its aforesaid power generation plant. Also, it was observed by him that the nature of business of the assessee company had not undergone any change during the year under consideration, wherein, as per its financial statements, it was as in the preceding years, exclusively engaged in the pharmaceutical business segment. Further, the AO observed that though the establishing of a Virchow Petrochemical Private Limited vs. ACIT power generation unit required inspection by the Chief Electrical Inspector, who certifies the same for commercial operation, but as there were no such details available on record in the case of the assessee company, therefore, it could not be gathered as to when the power generation plant was established and had commenced its commercial activities.

We have heard the Learned Authorised Representatives of both parties, perused the orders of the authorities below and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions.

Shri M.V. Prasad, Chartered Accountant, Learned Authorised Representative for the assessee company (for short, “Ld. AR”), at the threshold of hearing of the appeal, submitted that the same involves a Virchow Petrochemical Private Limited vs. ACIT delay of 144 days. Elaborating on the reasons leading to the delay, the Ld. AR submitted that the same had crept in for the reason that the assessee company had in its Memorandum of Appeal, i.e., in “Form-35” given its email Id, i.e., “vpclaccounts@virchows.com”, but had thereafter changed the same to “accounts@virchowpetro.com” and also filed its return of income for the current year, i.e., AY 2022-23 on 22/10/2022 using the said new email Id, i.e., “accounts@virchowpetro.com”. The Ld. AR submitted that as the CIT(A) order was uploaded on the old e-mail Id, i.e., “vpclaccounts@virchows.com”, therefore, the assessee company, having changed its email Id to “accounts@virchowpetro.com” had remained unaware about the disposal of its appeal. The Ld. AR fairly admitted that there was a bonafide mistake on the part of the assessee company in not intimating the new email account to the CIT(A) office/portal. Elaborating further on his contention, the Ld. AR submitted that the assessee company had learnt about the disposal of its appeal by the CIT(A) only when it was in receipt of a show cause notice (SCN) under section 271(1)(c) of the Act, dated 11/07/2025, which was dropped at its new email Id that was used for filing the latest return of income, viz., “accounts@virchowpetro.com”. Carrying his contention further, the Ld. AR submitted that the assessee company, on gathering about the disposal of its appeal by the CIT(A), had, thereafter, involving no further

Per contra, Ms. U. Mini Chandran, Ld. CIT-DR, vehemently objected to the seeking of condonation of the delay involved in filing of the present appeal by the assessee company. The Ld. CIT-DR submitted that as the assessee company does not have a sufficient cause to explain the delay in filing the present appeal, therefore, the same does not merit to be condoned. Elaborating on her contention, the Ld. CIT-DR submitted that the assessee company ought to have intimated/uploaded the changed email account in the CIT(A) office/portal, which, however it had failed to do. It was further submitted

We have given thoughtful consideration to the contentions advanced by the Learned Authorised Representatives of both parties regarding the delay of 144 days involved in filing the present appeal before us.

Although we are principally in agreement with the Ld. CIT-DR that the assessee company ought to have remained vigilant regarding filing of the present appeal within the stipulated time period, but at the same time, cannot shut our eyes to the reasons leading to the same. We find that it is the claim of the assessee company that the delay in filing of the present appeal had crept in because it had changed its email account from “vpclaccounts@virchows.com” (as was provided in the “Form-35”) to “accounts@virchowpetro.com”, but had inadvertently failed to intimate the new email Id to the CIT(A) office. We find that the claim of the assessee company that it had changed its email account is not an eye wash but a fact which can safely be gathered from its return of income for AY 2022-23 filed on 22/10/2022, wherein the said new email Id, i.e., “accounts@virchowpetro.com” was used for filing the same. In our view, as there were justifiable and bonafide reasons due to which the Virchow Petrochemical Private Limited vs. ACIT assessee company had remained oblivion about the disposal of its appeal by the CIT(A), and had gathered about the same only when a “SCN”, dated 11/07/2025 purporting imposition of penalty under section 271(1)(c) of the Act on 11/07/2025 was dropped in its new email account, i.e., “accounts@virchowpetro.com”, therefore, in our view the same explain the reason leading to the delay in filing the preset appeal, which, thus, merits to be condoned. Our aforesaid view that a liberal approach should be taken while considering an application seeking condonation of the delay involved in filing of an appeal is supported by the judgment of the Hon’ble Supreme Court in the case of Vidya Shankar Jaiswal vs. The Income Tax Officer, Ward-2, Ambikapur in Special Leave Petition (Civil) Nos. 26310-26311/2024, dated 31st January, 2025. The Hon'ble Apex Court while setting aside the order of the Hon'ble High Court of Chhattisgarh, which had approved the declining of the condonation of delay of 166 days by the Income-Tax Appellate Tribunal, Raipur Bench, had observed, that a justice-oriented and liberal approach should be adopted while considering the application filed by an appellant seeking condonation of the delay involved in filing the appeal. We thus, in terms of our aforesaid observations, condone the delay involved in the filing of the present appeal.

The Ld. AR submitted that now when the assessment in the case of the assessee company had been framed by the AO vide his order passed under section 143(3) of the Act, dated 11/12/2018, therefore, in absence of any failure on the part of the assessee company to fully and truly disclose all the material facts necessary for framing of its assessment, the AO was precluded from reopening its concluded assessment after lapse of a period of 4 years from the end of the relevant assessment year. The Ld. AR further submitted that though the assessee company had duly complied with the notice issued under section 148 of the Act, dated 31/03/2021 and had filed its return of income in response thereto, but thereafter, despite specific requests the copy of the “reasons to believe” based on which its concluded assessment was reopened was not made available to it, Page Nos.125- 126 of APB. Further, the Ld. AR submitted that its case was reopened for reappreciating its claim for depreciation on solar power plant, which though was looked into and verified by the AO in the course of the Virchow Petrochemical Private Limited vs. ACIT original assessment proceedings. The Ld. AR to support his claim that the case of the assessee company was reopened for reappreciating the assessee’s claim for depreciation on the solar power plant had drawn our attention to the “Show Cause Notice” (SCN), dated 18/03/2022 issued by the AO/NaFAC, wherein the aforesaid reason for reopening of the assessee company’s case formed part of the said letter.

Carrying his contention further, the Ld. AR submitted that though the AO vide his order passed under section 147 r.w.s 144B of the Act, dated 28/03/2022, had declined the assessee company’s claim for additional depreciation of Rs.2.49 crores (supra), but the CIT(A) had enhanced the disallowance by directing the AO to disallow the entire claim of depreciation of Rs.7.34 crores (supra). The Ld. AR submitted that the enhancement directed by the CIT(A) in absence of any notice of enhancement issued to the assessee company/appellant cannot be sustained and is liable to be vacated.

The Ld. AR submitted that as the assessee company had in its return of income and financial statements come forth with a full and true disclosure of all relevant particulars for framing of its assessment, therefore, the AO had grossly erred in law and facts of the case in assuming jurisdiction and reopening its concluded assessment in contravention of the mandate of the “first proviso” to section 147 of the Virchow Petrochemical Private Limited vs. ACIT Act. The Ld. AR submitted that the assessee company in its return of income had provided the complete details of depreciation of Rs.7.34 crores (supra), Page Nos.50 and 52 of APB. Also, the Ld. AR submitted that the complete details of the depreciation were provided by the assessee company in its audit report filed under section 44AB of the Act, i.e., in “Form-3CA”, Page No.33 of APB.

On merits, the Ld. AR has drawn our attention to a letter dated 10/09/2014 issued by the Chief Electrical Inspector, Government of Telangana addressed to the assessee company, wherein it was mentioned that an inspection was carried out on 06/09/2014, and based on the same approval was granted for installation of equipment of Electrical Installation of voltage exceeding 650V for energization, Page No.165 of APB. The Ld. AR based on the aforesaid facts submitted that undisputedly the solar power plant was installed at the premises of the assessee company during the subject year.

The Ld. AR submitted that as the AO had without any new material coming to his notice after the conclusion of the original assessment, based on a mere “change of opinion” reopened the concluded assessment of the assessee company that was originally framed by the AO vide his order passed under section 143(3) of the Act, dated 11/12/2018, therefore, the assumption of jurisdiction by him for such Virchow Petrochemical Private Limited vs. ACIT reopening of the concluded assessment based on a “change of opinion” as against that held by his predecessor cannot be sustained and is liable to be struck down. The Ld.AR to support his contention had relied upon the judgment of the Hon’ble Supreme Court in the case of CIT Vs. Kelvinator of India (2010) 320 ITR 561 (SC). Also, the Ld. AR had relied upon the judgment of the Hon’ble High Court of Gujarat in the case of Hindustan Marble (P.) Ltd vs. Assistant Commissioner of Income Tax (2023) 146 taxmann.com 255 (Gujarat), wherein the impugned reassessment proceedings initiated based on a “change of opinion” was set aside by the Hon’ble High Court.

Per contra, Ms. U. Mini Chandran, Ld. CIT, DR submitted that as the AO while framing the original assessment vide his order passed under section 143(3) of the Act, dated 11/12/2018, had not looked into the assessee’s claim for depreciation/additional depreciation on solar power plant and thus, not formed any opinion on the said claim, therefore, there can be no issue of any change of opinion by the successor AO on the said issue on which no opinion was earlier formed. The Ld. CIT, DR had further drawn our attention to the notice under section 142(1) of the Act, dated 10/03/2022 that was issued by the AO in the course of the reassessment proceedings, wherein it was stated that though the assessee company had purchased the power plant but Virchow Petrochemical Private Limited vs. ACIT had not put to use the same for its commercial operation and not generated any income, therefore, it was not entitled for claiming depreciation on the same, Page 145-147 of APB. Also, it was submitted by the Ld. CIT-DR that as the AO vide his notice issued under section 142(1) of the Act, dated 10/03/2022 had informed the assessee company about the reasons based on which its case was reopened, therefore, there was no further obligation cast upon him to separately make available to the assessee a copy of the “reasons to believe”. The Ld. CIT-DR submitted that as the assessee company in the course of the original assessment proceedings had only provided the details of additions to the fixed assets but not placed on record the supporting bills, therefore its aforesaid claim for depreciation could not be verified. Elaborating further on her contention, the Ld. CIT, DR submitted that as the assessee company in the course of the assessment proceedings had not provided the complete details to support its claim for depreciation on the solar power plant, therefore, in the absence of full and true disclose of all material facts necessary for framing of assessment, its case was as per the mandate of the “first proviso” to section 147 of the Act rightly reopened beyond the period of 4 years from the end of the relevant assessment year. The Ld. CIT-DR further submitted that the fact that the assessee company had not generated any income from its solar power Virchow Petrochemical Private Limited vs. ACIT plant during the subject year in itself evidences that the same was not put to use during the said year.

Apropos, the Ld. AR’s claim that the case of the assessee company was reopened based on a “change of opinion” as regards its entitlement towards depreciation that was claimed by the assessee company and was allowed by the AO while framing the original assessment, the Ld. CIT, DR submitted that as the AO in the course of the original assessment had not formed any opinion regarding the entitlement of the assessee for claiming of depreciation on the solar power plant, therefore, it is incomprehensible as to on what basis it is being averred by the Learned Counsel for the assessee that the case of the assessee company had been reopened based on a change of opinion.

Shri M.V. Prasad, Learned Authorized Representative for the assessee in his rebuttal to the contentions advanced by the Department on the issues, viz., (i) the case of the assessee company was reopened based on change of opinion; and (ii) the AO had traversed beyond the scope of his jurisdiction and reopened the concluded assessment of the assessee beyond a period of 4 years from the end of the relevant assessment year, i.e., AY 2015-16, i.e., in contravention of the mandate of “first proviso” to section 147 of the Act, submitted that the assessee’s

We have heard the Learned Authorised Representatives of both parties and perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contention.

We find on a perusal of the assessment record available before us, that the concluded assessment of the assessee company was reopened for re-appreciation of its claim of 100% depreciation of Rs. 7,34,14,979/- on the solar power plant (80% depreciation + 20% additional depreciation). For the sake of clarity, the aforesaid reason for reopening of the concluded assessment of the assessee company can safely be gathered on a perusal of the “Annexure” to the notice issued by the AO under section 142(1) of the Act, dated 10/03/2022, Page Nos. 145 to 146 of APB, which reads as under: “ANNEXURE From the details available on record, it is observed that the assessee has claimed 100% depreciation of Rs. 7,34,14,979/- on solar power plant (80% on power plant -20% additional depreciation) in A.Y. 2015-16. However, the assessee has not received and offered any income from sale of power from the above poweг generation plant in Virchow Petrochemical Private Limited vs. ACIT the P & L account during the year under consideration. It is also, noticed that there was no change in the nature of business of the company done during the year and according to the financial statements, the company's operations are exclusively in pharmaceuticals business segment. In view of the above, it is clear that though the assessee purchased Power plant and It was not put to use for the purpose of commercial operation and also not generated any income from the above for claiming depreciation as rule stated above. Further, the sale on power generation is not a business of the assessee. The business of power plant is altogether separate unit and claiming depreciation of the unit which is not yet started production, resulted in reduction of profits of the pharma unit from which the assessee is offering income in the Assessment year.” (emphasis supplied by us) As observed by us herein above, the AO after the culmination of the order of assessment which his predecessor had passed under section 143(3) of the Act, dated 11/12/2018, referred to the details available on record, and observed that though the assessee company had claimed 100% depreciation of Rs.7.34 crores (approx.) on the solar power plant, but had not received and incurred any income from sale of power from the said power generation plant in its “Profit and Loss account” for the year under consideration. Also, it was observed by him that there was no change in the nature of the business of the assessee company done during the year, which, as per its financial statements for the subject year was exclusively in the pharmaceutical business segment. Accordingly, the AO, based on his aforesaid observations, was of the view that though the assessee company had purchased the power plant, but it had not put the same to use for the purpose of commercial operations and Virchow Petrochemical Private Limited vs. ACIT generated any income from the said plant for entitling it to claim the depreciation on the same as required per the mandate of law. Further, the AO was of the view that the assessee company had claimed depreciation on the power plant, which, being an altogether separate unit had yet not started its production, therefore, the same had resulted in the reduction of the profits of its pharmaceutical unit from which it was offering income during the subject assessment year.

We have given thoughtful consideration to the aforesaid facts, based on which the concluded assessment of the assessee company had been reopened by the AO. In our view, the reopening of the concluded assessment of the assessee company was based on the same set of facts that were available with the AO while framing the original assessment. To sum up, no fresh material/documents had come in the possession of the AO after culmination of the original assessment proceedings, which would have vested jurisdiction with him to reopen the concluded assessment of the assessee company. Our aforesaid conviction is fortified on a bare perusal of the aforesaid reasons, which reveals that the reopening of the concluded assessment of the assessee company was based on a mere re-appreciation of the facts available on record by the successor AO, i.e., the entitlement of the assessee company for claiming 100% depreciation on its solar power plant.

Considering the fact that the case of the assessee company had been reopened with the purpose to re-appreciate its claim for depreciation on solar power plant, based on the same set of facts which were already available on record and not on the basis of any fresh material/document coming into the possession of the A.O after the culmination of the original assessment by his predecessor vide order u/s.143(3) dated 11/12/2018, which would reveal that any income of the assessee company chargeable to tax had escaped assessment, we find substance in the Ld. AR’s claim that the A.O. had traversed beyond the scope of his jurisdiction and had wrongly reopened the concluded assessment of the assessee company under Sec. 147 of the Act. In fact, we are unable to comprehend what new “material” or “information” had come up before the A.O., which justified the reopening of the concluded assessment of the assessee company. We are afraid that re- appreciation of the facts already available on record before the A.O. while framing the original assessment is not permissible u/s 147 of the Act. Our aforesaid view is fortified by the judgment of the Hon'ble High Court of Bombay in the case of Asian Paints Ltd. Vs. DCIT (2008) 308 ITR 195 (Bom). The Hon’ble High Court, by drawing support from the landmark judgment of the “Full bench” of the Hon’ble High Court of Virchow Petrochemical Private Limited vs. ACIT Delhi in the case of CIT Vs. Kelvinator of India (2002) 256 ITR 1 (Del) [which thereafter had been approved by the Hon’ble Apex Court in CIT Vs. Kelvinator of India (2010) 320 ITR 561 (SC)] had observed that the department cannot take recourse to the provisions of Sec. 147 of the Act for the failure of the A.O to apply his mind in the original assessment proceedings to the material which according to him, is relevant and which was available on record. Relying on the observations of the “Full bench” of the High Court of Delhi in CIT Vs. Kelvinator of India Ltd. (supra), the Hon’ble High Court of Bombay in Asian Paints Ltd. Vs. DCIT (supra), had observed that where according to the A.O he had failed to apply his mind to the relevant material in making the assessment order, he cannot take advantage of his own wrong and reopen the assessment by taking recourse to the provisions of Sec.

The Hon’ble High Court had further observed that fresh application of mind by the A.O to the same set of facts for the reason that some material that was on record while framing the original assessment was inadvertently excluded from consideration would not justify reopening of the assessment u/s 147 of the Act. For the sake of clarity, the observations of the Hon’ble High Court of Bombay in the case of Asian Paints Ltd. Vs. DCIT (supra) is culled out as follows: “7. We have heard the learned counsel appearing for both sides. We have also gone through the judgments on which reliance was placed by the learned counsel appearing for both sides.

It is clear from the observations made above that the Full Bench of the Delhi High Court has taken a view that in a situation where according to the Assessing Officer he failed to apply his mind to the relevant material in making the assessment order, he cannot take advantage of his own wrong and reopen the assessment by taking recourse to the provisions of section 147. We find, ourself, in respectful agreement with the view taken by the Full Bench of the Delhi High Court.

It is further to be seen that the Legislature has not conferred power on the Assessing Officer to review its own order. Therefore, the power under section 147 cannot be used to review the order. In the present case, though the Assessing Officer has used the phrase "reason to believe", admittedly between the date of the order of assessment sought to be reopened and the date of formation of opinion by the Assessing Officer, nothing new has happened, therefore, no new material has come on record, no new information has been received, it is merely a fresh application of mind by the same Assessing Officer to the same set of facts and Virchow Petrochemical Private Limited vs. ACIT the reason that has been given is that the some material which was available on record while assessment order was made was inadvertently excluded from consideration. This will, in our opinion, amount to opening of the assessment merely because there is change of opinion. The Full Bench of the Delhi High Court in its judgment in the case of Kelvinator [2002] 256 ITR1 referred to above, has taken a clear view that reopening of assessment under section 147 merely because there is a change of opinion cannot be allowed. In our opinion, therefore, in the present case also, it was not permissible for respondent No. 1 to issue notice under section 148.

At this stage, we may herein observe, that as per the mandate of law, even where a concluded assessment is sought to be reopened by the A.O within a period of 4 years from the end of the relevant assessment year, it is a must that the A.O has fresh material or information with him, that had led to the formation of belief on his part that the income of the assessee chargeable to tax has escaped

Alternatively, we concur with the view taken by the CIT(Appeals) that the reopening of the concluded assessment of the assessee company is also hit by the “1st proviso” to Section 147 of the Act. Admittedly, the original assessment was framed in the case of the assessee company for the year under consideration, i.e., A.Y 2015-16 vide order passed under Sec. 143(3) of the Act, dated 11/12/2018. The concluded assessment of the assessee company was thereafter reopened vide notice issued under Section 148 of the Act, dated 31/03/2021. It is the claim of the ld. A.R. that the A.O. had exceeded his jurisdiction and framed the reassessment order under Section 147 r.w.s 144B of the Act, dated 28.03.2022, inter alia, for the reason that the same had been passed in violation of the mandate of the “1st proviso” of Section 147 of the Act. As stated by the Ld. A.R and, rightly so, in a case where an assessment had earlier been made under Section 143(3) of the Act, and action thereafter is sought to be taken for the reopening of the case u/s.147 after the expiry of four years from the end of the relevant assessment year, then, it would be necessary that the twin

Coming back to the two conditions carved out in the “1st proviso” to Sec. 147 of the Act, as it is neither the case of the department nor a fact discernible from the record that the income of the assessee company chargeable to tax had escaped assessment for the reason that there was any failure on its part to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148, therefore, the first condition contemplated in the “1st proviso” to Sec. 147 is not satisfied in the present case.

We shall now advert to the second condition contemplated in the “1st proviso” to Sec. 147 of the Act, i.e., as to whether or not there has been any failure on the part of the assessee company to disclose fully and truly all material facts as were necessary for its assessment for the year under consideration, i.e., A.Y. 2015-16. On a perusal of the record,

As is well known, in an instance where the Assessing Officer exercises power of reassessment beyond the period of four years from the end of relevant assessment year, an essential requirement is that the escapement of income chargeable to tax is due to the failure on the part of the assessee to disclose truly and fully all material facts. This is part of section 147 of the Act itself and is on number of occasions by various judgments of High Court and Supreme Court held to be mandatory pre-requirement. In view of such settled law, it is not necessary to refer to any judgment. Revenue is unable to bring to our notice any aspect or element which did not form part of the record and on the basis of which from the reasons recorded, it can be culled out that the Assessing Officer had formed a belief that income chargeable to tax had escaped assessment. In clear terms therefore, there was no failure on the part of the assessee to disclose truly and fully all material facts.

Counsel for the revenue however submitted that one of the issues raised by the Assessing Officer is that the activity carried on by the assessee does not amount to manufacturing activity. In the present petition, it is not necessary for us to comment on this aspect of the matter. What is important however is such belief also the Assessing Officer has formed on the basis of material already on record. Looked from any angle, the Assessing Officer cannot justify issuing the notice of reopening of assessment beyond the period of four years from the end of relevant assessment year.

Under the circumstances, impugned notice is quashed. Petition allowed and disposed of accordingly.”

We, thus, hold a firm conviction that as stated by the Ld. AR, and rightly so, the assessment of the assessee company for AY 2015-16 that was earlier framed under Sec. 143(3), dated 11/12/2008, had despite any failure on its part to fully and truly disclose all material facts necessary for framing of its assessment, reopened by the AO vide Notice u/s 148, dated 31/03/2021, i.e, after the expiry of four years from the end of the relevant assessment year, which being in contravention of the

On the basis of our aforesaid deliberations, we are of the view that the A.O had wrongly assumed jurisdiction and reopened the concluded assessment of the assessee company for two fold reasons, viz. (i). that fresh application of mind by the A.O to the same set of facts for the reason that some material that was available on record while framing the original assessment was inadvertently excluded from consideration would not justify reopening of the assessment u/s 147 of the Act; and (ii). that concluded assessment of the assessee company for the year under consideration, i.e., A.Y 2015-16, had been reopened, vide notice u/s 148, dated 31/03/2021, i.e., beyond 4 years from the end of the relevant assessment year, for the purpose of reappreciating the material that was available on the assessment record while framing the original assessment u/s 143(3), dated 11/12/2018 and not for any failure of the assessee company to fully and truly disclose all material facts necessary for its assessment; therefore, the reassessment order passed by him u/s. 147 r.w.s 144B, dated 28.03.2022, for both the said reasons cannot be sustained. We, thus, set aside the CIT(A) order, and quash the impugned assessment order for want of a valid assumption of jurisdiction by the AO.

In result, the appeal filed by the assessee company is allowed in terms of our aforesaid observations. Order pronounced in the open court on 26th February, 2026.