Loading judgment…
Facts
M/s NTPC Ltd challenged the reopening of assessment for A.Ys 2011-12 and 2012-13. The original assessments were completed under section 143(3). The reopening was initiated based on an audit observation claiming the assessee made an excess deduction under section 80-IA by incorrectly adding back 'corporate expenses' to the profits of eligible units. The assessee contended that the reopening constituted a mere change of opinion as the issue was already examined during the original assessment proceedings.
Held
The tribunal found that the Assessing Officer had thoroughly examined the deduction claim under section 80-IA during the original assessment proceedings under section 143(3). Therefore, the subsequent reopening of assessment based on the same issue amounted to a mere change of opinion, which is not permissible under the Income Tax Act, citing precedents from the Supreme Court and Delhi High Court. The assumption of jurisdiction for reassessment was deemed bad in law.
Key Issues
Whether the reopening of assessment under section 147/148 was valid when the issue of excess deduction under section 80-IA had been thoroughly examined during the original assessment, constituting a mere change of opinion.
Sections Cited
Section 147, Section 148, Section 143(3), Section 80-IA
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI ‘E’ BENCH,
Before: SHRI N.K. BILLAIYA, & SHRI KUL BHARAT
PER N.K. BILLAIYA, ACCOUNTANT MEMBER:-
The above captioned two separate appeals by the assessee are preferred against two separate orders dated 18.04.2023 pertaining to A.Ys 2011-12 and 2012-13.
Both these appeals were heard together and are disposed of by this common order for the sake of convenience and brevity as in both the appeals, the assessee has challenged the reopening of the assessment u/s 147 of the Income-tax Act, 1961 [the Act, for short].
We will first address to the facts of A.Y 2011-12.
Briefly stated, the facts of the case are that return of income filed by the assessee was taken up for scrutiny assessment and assessment was completed u/s 143(3) of the Act on 07.02.2014.
Subsequently, notice u/s 148 of the Act was issued to the assessee dated 07.10.2016 after recording reasons for reopening assessment.
Reasons recorded for reopening the assessment are as under:
A perusal of the reasons shows that the Assessing Officer wanted to reassess the completed assessment for the reason that the assessee has claimed excess deduction u/s 80IA of the Act.
Having heard the rival representatives, we have carefully perused the orders of the authorities below.
During the course of scrutiny assessment, vide notice dated 09.05.2013, the Assessing Officer sought clarification from the assessee in respect of deduction claimed under Chapter VIA of the Act and the assessee has filed detailed replies which are placed at pages 78 to 144 of the Paper Book explaining in detail the claim of deduction u/s 80IA of the Act. The details are exhibited at pages 143 and 144 of the Paper Book.
While framing the assessment u/s 143(3) of the Act, after thoroughly scrutinizing the claim, the Assessing Officer addressed the issue at para 6 of the assessment order and continued the discussion from pages 10 to 24 of the assessment order.
These undisputed facts clearly show that the Assessing Officer has thoroughly examined the claim while framing the assessment order dated 07.02.2104 u/s 143(3) of the Act and, therefore, assuming jurisdiction by issuing notice u/s 148 of the Act to reassess the completed assessment is nothing but change of opinion which has not been accepted by the Hon'ble Supreme Court in the case of Kelvinator of India 320 ITR 561 wherein the Hon'ble court has held as under:
“When a regular order of assessment is passed in terms of section 143 (3) of the Act, a presumption can be raised that such an order has been passed on application of mind. An order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving premium to an authority exercising quasi-judicial function to take benefit of its own wrong. Section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceedings upon a mere change of opinion.”
Similar view was taken by the Hon’ble Jurisdictional Delhi High Court in the case of Usha international 3 48ITR 485 wherein it has been held as under:
“11. Accordingly, we hold that the following observations in Consolidated Photo and Finvest Limited (supra) do not reflect the correct legal position:
“In the light of the authoritative pronouncements of the Supreme Court referred to above, which are binding upon us and the observations made by the High Court of Gujarat with which we find ourselves in respectful agreement, the action initiated by the Assessing Officer for reopening the assessment cannot be said to be either incompetent or otherwise improper to call for interference by a writ court. The Assessing Officer has in the reasoned order passed by him indicated the basis on which income exigible to tax had in his opinion escaped assessment. The argument that the proposed reopening of assessment was based only upon a change of opinion has not impressed us. The assessment order did not admittedly address itself to the question which the Assessing Officer proposes to examine in the course of reassessment proceedings. The submission of Mr. Vohra that even when the order of assessment did not record any explicit opinion on the aspects now sought to be examined, it must be presumed that those aspects were present to the mind of the Assessing Officer and had been held in favour of the assessee is too far-fetched a proposition to merit acceptance. There may indeed be a presumption that the assessment proceedings have been regularly conducted, but there can be no presumption that even when the order of assessment is silent, all possible angles and aspects of a controversy had been examined and determined by the Assessing Officer. 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 completed 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 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.”
12. The said observations have been rightly held to be contrary to the Full Bench decision of the Delhi High Court in Kelvinator of India Limited (supra) in Eicher Limited (supra). The said decision in Eicher Limited (supra) makes reference to the decision of KLM Royal Dutch Airlines vs. Assistant Commissioner of Income Tax [2007] 292 ITR 49 (Delhi). KLM Royal case (supra) deals with some other issues on which we do not express or make any observation approving or disapproving. Some of these aspects have been considered and explained in other decisions in light of the judgment of the Supreme Court in the case of Rajesh Jhaveri Stock Brokers Pvt. Ltd. 291 ITR 500”.
Considering the facts of the case in totality, in light of the judicial decisions discussed hereinabove, we are of the considered view that the assumption of jurisdiction is bad in law and, therefore, the assessment order dated 29.12.2017 framed u/s 143(3) r,w,s 147 of the Act is liable to be quashed.
Since we have quashed the assessment order, we do not find it necessary to dwell into the merits of the case.
Coming to pertaining to A.Y 2012-13, we find that the underlying facts are mutatis mutandis same. Reasons for reopening the assessment are as under:
Statement of section 80IA deduction filed during the course of original assessment proceedings are exhibited at page 120 of the paper book. Specific replies are exhibited at pages 81 to 119 of the paper book. The Assessing Officer has discussed the claim of deduction u/s 80IA of the Act in his assessment order dated 21.0.22014 from pages 7 to 24 of the assessment order.
On similar facts, we have annulled the assessment order for A.Y 2011-12 [supra]. For our detailed discussion therein, assessment for A.Y 2012-13 is also annulled.
In the result, both the appeals of the assessee in ITA Nos.
1810/DEL/2023 and 1811/DEL/2023 are allowed.
The order is pronounced in the open court on 16.02.2024.