Income Tax Appellate Tribunal - Raipur
Jindal Power Limited, Raigarh vs Deputy Commissioner Of Income Tax, ... on 25 June, 2024
आयकर अपील य अ धकरण यायपीठ रायपुर म।
IN THE INCOME TAX APPELLATE TRIBUNAL,
RAIPUR BENCH, RAIPUR
BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER
AND
SHRI ARUN KHODPIA, ACCOUNTANT MEMBER
आयकर अपील सं. / ITA No. 200/RPR/2017
नधारण वष / Assessment Year : 2009-10
Jindal Power Limited
Kharsia Road,
Raigarh (C.G.)
PAN: AABCJ4683J
.......अपीलाथ / Appellant
बनाम / V/s.
The Jt. Commissioner of Income Tax,
Range-1, Bilaspur (C.G).
...... यथ / Respondent
Assessee by : S/shri Salil Kapoor &
Vibhu Jain, Advocates
Revenue by : S/shri V.K Singh, CIT-DR &
Rahul Mishra, Dy. CIT
S.L. Anuragi, CIT-DR
सुनवाई क तार ख / Date of Hearing : 15.04.2024
घोषणा क तार ख / Date of Pronouncement : 25.06.2024
2
Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur
ITA No.200/RPR/2017
आदे श / ORDER
PER RAVISH SOOD, JM:
The present appeal filed by the assessee company is directed against the order passed by the Commissioner of Income-Tax (Appeals), Bilaspur, dated 05.03.2017, which in turn arises from the order passed by the A.O under Sec.143(3) r.w.s 147 of the Income-tax Act, 1961 (in short 'the Act') dated 13.02.2015 for the assessment year 2009-10. The assessee company has assailed the impugned order on the following grounds of appeal:
"1. That the Ld. A.O has grossly erred on facts and in the circumstances of the case and in law in re-opening of the assessment already done u/s. 143(3) of the Act, by issuing notice under section 148 of the Income Tax Act, 1961 and also confirmed by Ld.CIT(A), the same is against the facts & also against the law.
2. That the Ld. A.O has grossly erred on facts and in the circumstances of the case and in law in disallowing claim of depreciation on DAM amounting to Rs.850.32 Lakhs and also confirmed by Ld.CIT(A), the same is against the facts & also against the law, hence may kindly be deleted.
3. That the Ld. A.O has grossly erred on facts and in the circumstances of the case and in law in disallowing claim of additional depreciation amounting to Rs.37781 Lakhs and confirmed by Ld.CIT(A), the same is against the facts & also against the law, hence may kindly be deleted.
4. That the Ld. A.O has grossly erred on facts and in the circumstances of the case and in law in making addition of Rs.1153 Lakhs to total income as per the provision of section 14A of the Act read with rule 8D and also adding the same to book profit for calculating MAT u/s.115JB of the Income Tax Act, 1961 and confirmed by Ld.CIT (A), the same is against the facts & also against the law, hence may kindly be deleted.
5. That the Ld. A.O has grossly erred on facts and in the circumstances of the case and in law in making addition of Rs.347 Lakhs to total income with respect to pre-production period income and confirmed by Ld.CIT (A), the same is against the facts & also against the law, hence may kindly be deleted.
6. The appellant reserves its right to add, amend, or alter the grounds of appeals on or before the date: the appeal is finally heard for disposal."3
Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 The assessee company vide an application dated 07.03.2022 had raised an additional ground of appeal, which reads as under:
"1. That without prejudice and in the alternative, on the facts and circumstances of the case and in law, the addition in respect of dam is illegal as the said expense/deduction/claim is allowable under section 37 of the Act."
Also, the assessee company vide an application dated 09.11.2022 has raised additional grounds of appeal, which reads as under:
"2. That the notice issued under section 148 of the Act and reassessment order passed on 13.02.2015 are illegal, bad in law and without jurisdiction, as no approval is obtained of the appropriate authority under section 151 of the Act before issuance of notice under section 148 of the Act. Hence, the reassessment order passed under section 143(3) r.w.s. 147 dated 13.02.2015 is liable to be quashed.
3. That the alleged approval, if any, under section 151 of the Act is also without application of mind and as such notice under section 148 of the Act and the reassessment order passed is illegal, bad in law and without jurisdiction."
2. Shri Salil Kapoor, Ld. Authorized Representative (for short 'AR') for the assessee at the threshold submitted that the additional ground of appeal No.2 raised vide letter dated 09.11.2022 as per the instruction is not being pressed. Accordingly, the additional ground of appeal No.2 is dismissed as not pressed.
3. As the assessee based on his additional ground of appeal raised vide letter dated 07.03.2022 and that raised vide letter dated 09.11.2022 (additional ground of appeal no. 3) has sought our indulgence for adjudicating certain legal issues which would not require looking any further beyond the facts available on record, therefore, we have no hesitation in admitting the same.
4
Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017
4. Succinctly stated, the assessee company which is a subsidiary of Jindal Steel & Power Limited, is engaged in the business of commercial generation of power w.e.f. 08.12.2007. The assessee company had e-filed its return of income for A.Y.2009-10 on 30.09.2009, declaring an income of Rs.95,29,85,465/-. The return of income filed by the assessee company was initially processed as such u/s. 143(1) of the Act.
5. The original assessment of the assessee company was framed by the A.O. vide his order passed u/s. 143(3) of the Act, dated 28.12.2011, determining the income of the assessee company at Rs.98,66,03,568/-, and "book profit" u/s. 115JB of the Act at Rs.1919,78,85,663/-.
6. On appeal, the CIT(Appeals) scaled down the income of the assessee company as was originally assessed to Rs.96,55,13,861/- while for the "book profit"
disclosed u/s. 115JB of the Act remained as such.
7. After the culmination of the original assessment the case of the assessee company was reopened by the A.O u/s. 147 of the Act. Ostensibly, the concluded assessment of the assessee company was reopened on four aspects, viz. (i) excess allowance of depreciation as claimed by the assessee company on "DAM" @100%;
(ii) failure on the part of the A.O to make disallowance u/s. 14A of the expenditure attributable to investment in exempt income-yielding shares and securities; (iii) wrong allowing of the assessee's claim for additional depreciation u/s. 32(ii)(a) of the Act; and (iv) wrong allowing of the assessee's claim for deduction of the interest and 5 Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 other income earned during the pre-production period from the closing work-in- progress. Notice u/s. 148 of the Act, dated 05.07.2023 was issued by the A.O. to the assessee company. In compliance, the assessee company requested that its return of income filed u/s. 139(1) of the Act, dated 30.09.2009 be treated as the return filed in response to the aforesaid notice. The A.O accepted the aforesaid request of the assessee company and issued notice u/s 143(2) of the Act, dated 20/01/2014, and also provided the copy of the reasons recorded a/w the approval that was obtained u/s 151 of the Act for reopening of its concluded assessment.
8. The A.O. during the course of the assessment proceedings, observed that the assessee company had raised an excess claim for depreciation on "DAM" of Rs.8,50,32,403/-, i.e. @100%. It was observed by him that there was no provision of depreciation on "DAM" in the depreciation rate schedule of the Income Tax Act. On being queried, it was the claim of the assessee company that it had incurred the aforesaid capital expenditure of Rs.8,50,32,403/- for constructing a water supply dam/bridge on the river Kurkut for facilitating continuous water supply that was required for the production of power, i.e. electricity. It was stated by the assessee that it had capitalized the investment made towards the construction of the dam/bridge under the head "building" in its books of account and had treated the same as a fixed asset during the subject year. Elaborating on its claim for depreciation @100% of the investment made towards the construction of the dam, it was stated by the assessee company that the same was raised by treating it as a "building" used for the water supply project. Alternatively, the assessee company 6 Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 had claimed that as the "DAM" was built up to facilitate a continuous supply of water which was indispensably required in its business of generation of power, therefore, the expenditure incurred on the construction of the same was even otherwise allowable as a revenue expenditure.
9. The A.O. did not find favor with the aforesaid claim of the assessee company. Apropos the claim of the assessee company for depreciation @100% on the investment made towards the construction of "DAM", the A.O was of the view that as the same was built up on government property, therefore, the assessee company not being the owner of the same was not entitled for depreciation u/s. 32 of the Act. Apart from that, the A.O. observed that even otherwise, there was no mention of depreciation on "DAM" in the depreciation rate schedule of the Income Tax Act. The A.O. further observed that the alternative claim of the assessee company, i.e. the expenditure incurred towards the construction of "DAM" was of the nature of revenue expenditure and, thus, was allowable as deduction u/s. 37(1) of the Act, also did not merit acceptance for two-fold reasons, viz. (i) that the assessee company had not claimed the same as a revenue expenditure in its profit and loss account; and (ii) that the structure of the DAM by its nature having a long term and enduring effect, thus, could not be considered as a revenue expenditure. Accordingly, the A.O. based on his aforesaid observation declined the assessee's claim for depreciation of Rs.8.50 crore (approx.).
10. The A.O. further observed that the assessee company had raised a claim for additional depreciation u/s. 32(ii)(a) of the Act of Rs.377.81 crore. It was observed 7 Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 by the A.O. that the assessee company which is, inter alia, engaged in the business of generation and distribution of power was eligible for claiming additional depreciation u/s. 32(ii)(a) of the Act only w.e.f. A.Y.2013-14. Accordingly, the A.O. based on his aforesaid observations declined the assessee's claim for additional depreciation for the subject year, i.e. A.Y.2009-10.
11. Also, the A.O. observed that though the assessee company had made a substantial investment in the exempt income-yielding shares and securities, but no part of the expenditure that was claimed was offered for disallowance u/s. 14A of the Act. Although the assessee claimed that no part of the expenditure was attributable towards earning the exempt income but the same did not find favor with the A.O. The A.O, observing that Section 14A of the Act contemplates the implicit notion of apportionment in cases where expenditures were incurred for composite indivisible activities, held a firm conviction that the assessee's claim that no part of the expenses which were claimed as deduction could be attributed to earning of exempt income, did not merit acceptance. Accordingly, the A.O. based on his aforesaid deliberations worked out a disallowance u/s. 14A r.w.r. 8D of Rs.11.53 crores, viz.
(i) disallowance of interest expenditure under rule 8D(2)(ii): Rs.10.68 crore; and (ii) disallowance out of administrative expenses: Rs.0.85 crore.
12. The A.O. further observed that though the assessee company had during the subject year earned interest and other income of Rs.3.47 crore during the pre- production period, but had instead of disclosing the same as its income, had deducted it from its closing work-in-progress. The A.O observed that the Hon'ble 8 Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 Supreme Court in the case of Tuticorin Alkalies Chemical & Fertilizer Ltd., 227 ITR 172 (SC), had held that the pre-production interest income should be taken in its profit and loss account as income from other sources and, thus, made an addition of Rs.3.47 crore (supra) in the hands of the assessee company.
13. Accordingly, the A.O. vide his order passed u/s. 143(3) r.w.s. 147 of the Act, dated 13.02.2015 determined the income of the assessee company under normal provision at Rs.193139.06 lacs.
14. Aggrieved, the assessee company carried the matter in appeal before the CIT(Appeals), but without success. The assessee company had, inter alia, assailed the validity of the jurisdiction assumed by the A.O. for reopening its concluded assessment u/s. 147 of the Act, as well as assailed the additions/disallowance made by him on the merits of the case before the CIT(Appeals) but the same did not find favor with the first appellate authority. For the sake of clarity, the multi-facet contentions raised by the assessee company before the CIT(Appeals) a/w. the observations of the CIT(Appeals) on the respective issues are culled out as under:
"Ground No.1 -- That the Ld.AO has grossly erred on facts and in the circumstances of the case and in law in re-opening of the assessment already done u/s.143(3) of the Act, by issuing notice under section 148 of the Income Tax Act, 1961.
The learned AR has argued that reopening of the assessment already completed u/s. 143(3) of IT Act is not legal and not valid. He has argued that on the basis of recorded reason it is found by the assessee that submissions against all the reasons had been already filed during the original assessment proceedings u/s. 143(3) and duly placed on the recorded, hence the reopening is bad in law and against the principle of natural justice.
Decision -- I have carefully considered the arguments of the learned AR. During A.Y 2008-09the assessee has filed return of income and paid the tax 9 Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 on the basis of section 115JB of IT Act and did not claim any deduction under section 801A of IT Act. Since the option had been exercised by the assessee, despite having commenced the generation of power the initial assessment year was not the assessment year 2008-09. During original assessment proceeding the assessing officer had only made disallowances and after relying on sub section 2 of section 115JB, he left the computation of depreciation to be decided on the basis of provisions of regular sections of IT Act which means that the assessing officer did not compute the total income to the extent by which section 11 SJB could have become redundant. Since The AO has recorded the reasons that assessee has claimed excessive depreciation at the rate of 100% and also claimed additional depreciation even when law did not permit the same and did not apply the rates prescribed for part II of VI schedule of Companies Act for computation of books profit as per Companies Act I am of the considered view that the issue of depreciation has been left by the AO vide open. So far as written submission are concerned the perusal of the case record shows that the assessee had furnished replies in bulk and did not point out the issue of depreciation claimed him on the dam built by the assessee on the property of government of which the assessee was not owner. The material fact for the assessment has not been disclosed by the assessee fully and truly and claimed the depreciation on the dam at 100% which is not even prescribed in the table of depreciation chart appearing in appendix of IT Rule 1962. It cannot be stated that the assessee has intended to disclose full and true facts during assessment proceedings u/s 143(3). After considering the facts and circumstances of the case as to whether assessee was entitled to depreciation or not and at which rate he has claimed the depreciation cannot be held as full and true disclosure. In the facts and circumstances of the case and after perusal of the material available on record, I find that the submissions having been filed in bulk had never been discussed by the assessee because the rate of depreciation had been stated to be prescribed by the companies Act and in the computation of the book profit assessee company is to follow the rate prescribed for book profit in the companies Act. The assessee has not followed the rate prescribed under companies Act. Thus I do not find any infirmity in the reopening of the assessment and also hold that the learned AO has assumed jurisdiction legally and badly. The ground of appeal is dismissed.
Grounder --2 That the Ld. AO has grossly erred on facts and in the circumstances of the case and in law in disallowing the claim of depreciation on DAM amounting to Rs. 850.32 Lakhs.
The AO has discussed the issue in Para 5 of his assessment order. The assessee has claimed 100% depreciation on the dam and the learned AR had argued that had he not capitalized the building and treated as fixed assets in the books of account the expenditure would have been allowed as revenue expenditure u/s. 37 of IT Act. The learned AO has held that for claiming of depreciation under section 32 of IT Act asset should be owned by the assessee and used for the purpose the of business. In the case of assessee the property of Government on which dam has been constructed 10 Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 the assessee does not fulfil the basic criteria of claiming depreciation. During appellate proceedings the learned AR reiterated the argument that the assessee has constructed the infrastructure facility u/s. 80IA (4)(i) for providing infrastructure facility after getting permission of Water Resource department for continuous supply of water. He was asked by the undersigned whether the assessee had furnished the Audit report for claiming deduction u/s. 80IA(4)(i) or not during original assessment proceedings u/s.143(3) of IT Act, the learned AR kept silence.
Decision -- I have considered the rival submissions. On issue of building constructed as Commercial Complex on leased land the Hon'ble Apex Court has held that the income from commercial building does not fall under House Property Income and also does not fall under Business Income. The same is to be assessed under the residuary head. The learned AR had failed to file the audit report during assessment proceedings for claiming deduction for infrastructure facility as claimed by him and his argument that had the assessee not capitalize the expenditure the same would have been allowed u/s 37 of IT Act clearly shows that the assessee has never explain the issue of depreciation and time before reopening and failed to disclosed the material fact fully and truly. The assessee has claimed computation of book profit which had to be prepared strictly according to Part II of the Companies Act. Since assessee has not explained whether the companies has itself constructed the dam or reimbursed the cost of construction of the dam to some other person. I do not find any force in the arguments of the learned AR. The dam is a building and the depreciation at the rate of 100% is not permissible. In the latest decision which is unreported case (79 taxman.com) the Hon'ble Supreme Court has held that on the lease hold land and construction got made from a third party does not entitle the assessee to claim the depreciation. In view of the facts involve in the case of assessee, I do not find any infirmity in the findings of the learned AO. The addition made by him is hereby confirmed.
Ground No. 3 -- That the Ld.AO has grossly erred on facts and in the circumstances of the case and in law in disallowing the claim of additional depreciation amounting to Rs. 37781 Lakhs.
The assessee has claimed additional depreciation on plant and machinery. The finance Act 2012 has enlarged the scope the additional depreciation with effect from 01.04.2013 to the entities which are engaged in the generation or generation and distribution of the power. The learned AO has given finding that additional depreciation was claimed by the assessee and he has claimed it against the law. The learned AR during appellate proceedings has argued that the enlarged scope of section 32 (ii)(a) should be given a retrospective effect.
Decision -- I have considered the rival submissions. It is clear that during A.Y. 2009-10 section 32 (ii)(a) was silent about the power generating/ generating and distributing units. The assessee has not disclosed the material fact during assessment proceedings u/s 143(3) of IT Act. The law 11 Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 which was not there cannot be availed by any person unless the legislature clearly allow for availing of the same. The retrospective effect cannot be given in absence of direction given by the legislature. The argument of the learned AR does not have force. I find no infirmity in the findings given by the AO and the addition made by the AO is hereby confirmed.
Ground No. 4 -- That the Ld.AO has grossly erred on facts and in the circumstances of the case and in law in adding Rs. 1153 Lakhs to total income as per the provision of section 14A of the Act read with rule 8D and also adding the same to book profit for calculating MAT u/s 115JB of the Income Tax Act, 1961.
The learned AO has discussed the issue in Pam 7 of his assessment order and relied on Stream International Services (P) Ltd.[20131 31 taxmann.com 227 (Mum), Technopak Advisors (p) Ltd. 18 taxmann.com 146 (Delhi), M/s 1VIaxopp Investment Ltd. 203 Taxman 364 (2011), Southern Petro Chemical I tries, 3 SOT 157 (Chennai), ITAT, Sanchayita Mercantile Pvt. Ltd, 848/ Mum/ 2005, 'D' 13 Mumbai and CBDT notification no. 45/2008. The learned AR during appellate proceedings has also relied on various decisions such as CIT vs. Tamilnadu silk producers federation Ltd. 2006 TTJ (Chennai), CIT vs. Meditap Specialities Pvt. Ltd. 2012 (Mum-Tribunal), CIT vs Yatish Trading Co. Pvt Ltd. 2011, 129 ITD 237/9, (Mumbai), CIT vs. Citicorp finance (India) Ltd. 2007 12 SOT 248 (Mumbai), Cit vs. MSA Securities services Pvt Ltd. 2013, CIT vs. Taikisha Engineering India Ltd. ITA 15/2014, CIT vs. Sun Investments Pvt. Ltd. 2011 SOT 159, (Delhi- Tribunal) and Joint Investment Pvt. Vs. CIT (ITA 117/2015).
Decision -- I have carefully considered the rival submissions. The learned AR had avoided to rely on Apollo Tyre case delivered by Hon'ble Apex Court and he had rightly avoided to rely upon the Apex Court decision. He has mentioned that the AO has transgressed his powers given in the section. The close reading of section 115JB reveals that it is different from section 115J of IT Act on which Hon'ble Apex Court decided the issue in Apollo Tyres. There is sub section 5 in section 115JB of IT Act which empowers the AO to invoke all provision of the Act for computation of the book profit. The learned AR has pityingly pointed out that the explanation (1) under section 115JB is specific to the section whereas sub section 5 is of general in nature. Clause (1) of the explanation speaks about the amounts of expenditure relatable to any income which section 10 other than section 10(38) or section 11 or 12 apply, shall be increased and clause (ii) below clause (k) of the explanation speaks about the reduction of the income as earning for the same expenditure had been relatable to the income referred to in section 10, 11 or 12 except clause 38 of section 10. The word relatable is important but in continuation to it the explanation further state that the profit and loss account for clauses (a) to (i) is debited to the profit and loss account. The assessee has not debited any amount in the profit and loss account, thus the explanation specifically prohibits the AO for estimating the disallowance on the strength of sub section 5 of section 115JB. This is ticklish issue which has to be adjudicated. The learned AO has relied on sub 12 Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 section 5 of section 115JB and the learned AR is arguing the case that when assessee has not debited any amount in the profit and loss account and clause (f) has been specifically written in the language that if debited amount is relatable to the income referred to in section 10, 11 or 12 the disallowance cannot be made by the learned AO. As mentioned hereinabove that section 115JB is different from section 115J of IT Act which has prohibited any adjustment beyond the explanation to be made by the AO as beyond jurisdiction section 115JB by inserting sub section (5) has diluted the explanation 1 of section 115JB. In my considered view the section 14A was not in the statute when section 115JB was brought by the legislature. BY inserting sub section 5 the legislature has tried to widen the scope of the assessing officer and section 14A is now available with retrospective effect to the assessing officer to effect the changes in the book profit. Thus the addition made by the AO in the book profit is hereby confirmed and the ground of appeal is dismissed.
Ground No. 5 -- That the Ld.AO has grossly erred on facts and in the circumstances of the case and in law in adding Rs. 347 Lakhs to total income with respect to pre-production period income.
The AO has discussed the issue in Para 8 of his assessment order. He relied on Tuticorin Alkalies Chemical & Fertiliser Ltd Limited (227 ITR 172) SC. The learned during appellate ed that the relied upon decision by the AO is not applicable the instant case. He argued that the interest income has been earned out of temporary investment of borrowed funds. The Hon'ble Apex Court has mentioned about the interest income and it is not applicable to the present case because temporary investment of borrowed fund must be present to attract the above case law. In the instant case not any borrowed fund was invested and whatever investment was made was out of internal accruals as also reported in tax audit report in Para 13(d). He further argued that when temporary investment of internal accrual during pre production period leads to the interest the same is not taxable and all these are to be capitalized to the relevant fixed assets.
Decision -- I have carefully considered the rival submission. This is 2nd assessment year so far as production is concerned. The assessing officer has noted that the income has been earned by the assessee during preproduction period. There is no dispute that assessee has borrowed funds. The borrowed fund has been temporarily invested during the installation period of the units. The commencement of generation had started on 08.12.2007. Before commencement of generation of power their cannot be any possibility for internal accrual as claimed by the learned AR because there was no sale at all. The borrowed fund had been temporarily deposited which was kept invested and laid to the earning of interest. Since the investment was made before the commencement of the generation of the power the interest accrued and received by the assessee on the due basis. The assessee has not encashed the investment prematurely and thus on the basis of due date of maturity the same cannot be treated as income because of commencement of generation of power. The learned AO did not 13 Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 make any addition during A.Y 2008-09 because the investment was not mature. Thus the assessee by his own choice had postponed the receipt during A.Y. 2009-10. It is a settled law that income when received on due basis it should have been spread over to all the years in which the income has accrued. The learned AO did not make any addition during A.Y. 2008- 09 for pre period earning the income cannot be changed as income after generation of power. The income shall have to remain as income of pre period. In the absence of any internal accrual by way of sale proceed of generation of power the investment remained blocked as unavailable as the working capital of the assessee. The non working capital having been invested long before production if after accrual is received then that cannot be taxed as business income of the assessee and it has to be assessed as income from other sources. Thus the relied upon the decision by the AO is clearly attracted as the learned AR has failed to show any method of internal accrual during appellate proceedings. When the income has been shown by the assessee as business income, the AO was justified in analyzing the fact whether assessee has capitalized the same or not. The assessee has not capitalized the accrued income to any asset. Hence the AO is justified in taxing it as income from other sources. The Hon'ble Apex Court has held that if any fund is borrowed to acquire any asset the moment the asset is put to use then the income earn can be taxed as business income and any income before putting to use has to be capitalized. Assessee has not capitalized the interest income and in absence of capitalization and in absence of internal accrual mechanism, I am of considered view that the AO has rightly brought the pre period income for taxation. The addition made by the AO is hereby confirmed and the ground of appeal is dismissed."
15. The assessee company being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us.
16. Shri Salil Kapoor, the Ld. Authorized Representative ("A.R", for short) for the assessee company had at the threshold assailed the validity of the jurisdiction that was assumed by the A.O for the reopening of the concluded assessment of the assessee company.
17. Before proceeding any further, we deem it fit to cull out the "reasons to believe", based on which, the concluded assessment of the assessee company was reopened by the A.O, as under:
14
Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 "Recording of reasons under section 148(2) of the IT Act, 1961
(i) Excess allowance of depreciation: - Assessee has claimed 100 percent deprecation on dam of Rs.8,50,32,403/-. In the depreciation rate schedule of IT Act there is no provision of depreciation on dam. Thus depreciation of Rs.8,50,32,403/- has been allowed excessively.
(ii) Disallowance u/s.14A:- Assessee had made substantial investment in shares and securities income from which does not form part of total income.
However no expenditure in accordance with section 14A of the Act was disallowed in this respect. The disallowance on this account comes to Rs. 11.53 crores. The same was remained to be added in the income of the assessee.
(iii) Allowance of additional depreciation:- Assessee has claimed additional depreciation of Rs. 377.81 crore under section 32(iia) of the Act. The additional depreciation u/s. 32(iia) of the Act is applicable to assesses engaged in the business of manufacture/production of any article/thing of in the business of generation or generation & distribution of power. The benefit is extended to the assesses engaged in the generation or generation and distribution of power w.e.f. A.Yr. 2013-14. Thus, assessee is not eligible for additional depreciation for the year under consideration even the generation of power cannot be equated with the production of article or thing. Thus the sum of Rs. 377.81 crore on this count has allowed excessively.
(iv) Irregular disallowance of depreciation for the pre-production period (Before September) :-
Assessee has earned interest and other income worth of Rs. 3.47 crore (2.06 + 1.41) during preproduction period. The same instead of showing in P&L account was actually deducted from closing work in progress. In case of Tuticoran Alkalies Chemical & Fertilizer Limited (227 ITR 172) the Supreme Court categorically stated that pre-production interest income should be taken in P & L Account as other source of income. Thus the said amount of Rs. 3.47 crore remained to be added in the income of the assessee.
In view of the above, I have reason to believe that income of the assessee has escaped assessment within the meaning of section 147 of the IT Act, 1961. Accordingly, notice under section 148 is issued.
Sd/-
(IB Khandel) Deputy Commissioner of Income tax Circle-1(1), Bilaspur (C.G.) The Ld. AR referred to the aforesaid "reasons to believe" and, submitted that the concluded assessment of the assessee company was reopened by the A.O based 15 Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 on a mere "change of opinion", which was not permissible as per the settled position of law. The Ld. AR in support of his aforesaid contention had relied upon the judgment of the "Full Bench" of the Hon'ble High Court of Delhi in the case of CIT Vs. Kelvinator of India Ltd. 256 ITR 1 (Del) [which had been approved by the Hon'ble Apex Court in the case of CIT Vs. Kelvinator of India Pvt. Ltd. (2010) 320 ITR 561 (SC)].
18. The Ld. AR to buttress his aforesaid claim had come forth with twofold contentions, viz. (i). that all the issues, based on which, the concluded assessment of the assessee company was reopened, had been looked into and deliberated upon by the A.O. while framing of the original assessment vide his order passed u/s. 143(3) of the Act dated 28.12.2011; and (ii). that the A.O after framing the original assessment vide his order u/s 143(3) of the Act, dated 28.12.2011, had not come across any fresh tangible material that would have led to the formation of a bonafide belief that the income of the assessee company chargeable to tax had escaped assessment u/s 147 of the Act.
19. The Ld. AR to fortify his aforesaid claim had drawn our attention to the notice issued u/s. 142(1) of the Act, dated 07.12.2011 that was issued by the A.O. in the course of the original assessment proceedings, Page 112-113 of APB. The Ld. AR had drawn our attention to Sr. No.10 of the aforesaid notice u/s. 142(1) of the Act, dated 07.12.2011, wherein the assessee company was called upon to furnish evidence in support of its claim of addition to fixed assets, on which, 100% depreciation was claimed. Elaborating further, the Ld. AR had taken us through the 16 Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 reply of the assessee company dated 19.12.2011, Pages 114-116 of APB and Page 140 of APB, wherein at Sr. No. (i) a/w. "Annexure F", the assessee company had furnished complete details of additions to fixed assets, on which, 100% depreciation was claimed by the assessee company during the subject year. It was, thus, the claim of the Ld. AR that the A.O. while framing the original assessment had, inter alia, queried and looked into the assessee's claim for depreciation @100% on the "DAM" and finding the same in order had not drawn any adverse inferences.
20. The Ld. AR further submitted that as regards the disallowance made by the A.O u/s. 14A of the Act of Rs.11.53 crore that had, inter alia, formed a basis for reopening of the concluded assessment of the assessee company u/s. 147 of the Act, the said aspect had also been queried by the A.O. while framing the original assessment u/s. 143(3) of the Act, dated 28.12.2011. The Ld. AR to fortify his aforesaid claim had drawn our attention to the notice u/s. 142(1) of the Act dated 07.12.2011, Sr. No.7, Page 112 & 113 of APB wherein, the A.O had specifically queried about the expenditure which was incurred by the assessee company concerning the income not included in its total income for the subject year. The Ld. AR submitted that the assessee company had vide its reply dated 19.12.2011, Sr. No. F at Pages 114 to 116 of APB, submitted before the A.O. that it had not incurred any expenditure in relation to income not forming part of its total income u/s. 14A of the Act.
21. Apropos, the assessee's claim for additional depreciation u/s. 32(ii)(a) of the Act of Rs.377.81 crore, the Ld. AR submitted that as the A.O. after framing the 17 Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 original assessment vide his order passed u/s. 143(3) of the Act, dated 28.12.2011, had not come across any fresh tangible material, based on which, he could have arrived at a bonafide belief that the assessee's claim for additional depreciation was not in order, therefore, the reopening of its concluded assessment based on the same set of facts as were there before him in the course of the original assessment proceedings was based on a mere "change of opinion" to revisit and reappreciate the facts and the view that was taken by his predecessor. The Ld. AR submitted that as the fresh application of mind by the A.O. to the same set of facts pertaining to the assessee's claim of additional depreciation u/s. 32(ii)(a) of the Act, was to revisit and reappreciate the assessee's claim and, thus, based on a mere "change of opinion", which was not permissible as per law, therefore, the A.O had traversed beyond his jurisdiction and reopened the concluded assessment on the aforesaid aspect.
22. Apropos the observation of the A.O in the "reasons to believe" that the assessee company had earned interest and other income of Rs.3.47 crore ( Rs.2.06 crore + 1.41 crore) during the pre-production period, which instead of being disclosed as its income in the "profit and loss account" as income from other sources, had wrongly been deducted from the closing work-in-progress, the Ld. AR submitted that the said aspect was specifically queried and looked into by the A.O. while framing the original assessment. The Ld. AR to buttress his aforesaid claim had drawn our attention to notice u/s.142(1) of the Act, dated 07.12.2011, Sr. No.8, Page 112 & 113 of APB. The Ld. AR submitted that the A.O. had vide his aforesaid query by referring 18 Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 to "Schedule-4" of the "audit report" called upon the assessee company to explain the deduction of Rs.122.45 crore from its work-in-progress for the subject year. The Ld. AR had drawn our attention to the "Schedule-IV" of the audit report, dated 26.05.2009 that was enclosed a/w. the return of income for the subject year, wherein the interest income and other income of Rs.3.47 crore (Rs.2.06 crore + Rs.1.41 crore) were, inter alia, reduced from the capital work-in-progress, Page 14 of APB.
23. The Ld. AR submitted that the deduction of interest and other income of Rs.3.47 crore (supra), inter alia, formed part of the total deduction of Rs.122.45 crore made from the capital work-in-progress of the assessee company during the subject year. Elaborating further, it was submitted by the Ld. AR that the assessee company had vide its reply dated 19.12.2011, "Sr. No. G" had in the course of the original assessment proceedings submitted before the A.O that the receipts from the sale of power generation during the trial run process and other miscellaneous receipts, i.e. interest, etc. (aggregating to Rs.122.45 crore) was adjusted/deducted from Closing WIP as it was generally accepted accounting principles that whatever is recovered before the start of the commercial production is to be adjusted against the cost of relevant assets, i.e. building, plant and machinery. It was submitted by the Ld. AR that as the A.O during the course of the original assessment proceedings had queried on the aforesaid aspect, i.e. deduction of interest and other receipts of Rs.3.47 crore (supra) from the capital work-in-progress during the pre-production period and finding the claim of the assessee company in order, had not drawn any adverse inferences as regards the same, therefore, reopening of the concluded 19 Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 assessment, inter alia, on the aforesaid aspect was based on a mere "change of opinion" which was not permissible as per law.
24. The Ld. AR based on his aforesaid contentions submitted that a perusal of the "reasons to believe" based on which, the concluded assessment of the assessee company had been reopened, revealed that the same was based on a mere "change of opinion" on the same set of facts as were there before his predecessor, which, however, was not permissible as per the mandate of law. The Ld. AR in support of his aforesaid contention had relied on the following judicial pronouncements:
(i) CIT Vs. Usha International, 348 ITR 485 (Del. HC)
(ii) CIT Vs. Prima Paper and Engineering Industry, 364 ITR 222 ( Bom. HC)
(iii) Parixit Industries Pvt. Ltd. Vs. ACIT 352 ITR 349 (Guj. HC)
(iv) SLP in the case of ACIT Vs. Parixi T Industries P. Ltd. 25 Taxmann.com 301
(v) ACIT Vs. ICICI Securities Primary Dealership Ltd. 348 ITR 299 (SC)
25. On merits, the Ld. AR submitted that the subject issue, i.e. where an assessee company had incurred expenditure towards the construction of dam/bridge as it was required for the generation of power by ensuring uninterrupted supply of water, the same was allowable as a revenue expenditure was squarely covered by the order of the Hon'ble High Court of Rajasthan in the case of CIT Vs. Hindustan Zinc Ltd. 322 ITR 478 (Raj.). Also, the Ld. AR had pressed into service the judgment of the Hon'ble High Court of Bombay in the case of CIT Vs. Sociedade De Fomento Industrial (P) Ltd. (2011) 123 taxmann.com 38 (Bombay). The Ld. AR submitted that the Hon'ble High Court had observed that where the assessee had contributed to the 20 Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 construction of a bridge that would be used by the assessee for the transportation of its goods, the expenditure incurred towards the construction of the new bridge was to be treated as a revenue expenditure in the hands of the assessee company.
26. Apropos the claim of the assessee company towards additional depreciation u/s. 32(1)(ii)(a) of the Act, the Ld. AR submitted that as the assessee company was engaged in the generation of electricity which amounted to the manufacturing/production of an article or thing, therefore, it was entitled to claim additional depreciation during the subject year. It was, thus, averred by the Ld. AR that as the generation of power/electricity by the assessee company did tantamount to manufacturing or production of an article or thing, therefore, its claim for additional depreciation was in order. The Ld. A.R. in support of his aforesaid contention had relied on the order of the Hon'ble High Court of Calcutta in the case of CIT Vs. Damodar Valley Corporation (2022) 134 taxmann.com 63 (Cal.). The Ld. AR submitted that the A.O. in the aforementioned case had declined the assessee's claim for deduction u/s. 32(1)(ii)(a) of the Act while framing the original assessment of the assessee company for A.Y.2011-12, on the ground that it was eligible to claim the same only pursuant to the amendment that was made available on the statute by the Finance Act, 2012 w.e.f. 01.04.2013, i.e. from A.Y.2013-14. The Ld. AR submitted that the Hon'ble High Court had observed that as the assessee company before them was engaged in the manufacturing of power, therefore, its claim for additional depreciation for the subject year, i.e. A.Y.2011-12 was in order. Also, 21 Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 support was drawn by the Ld. AR from the order of the ITAT, Pune in the case of Giriraj Enterprises Vs. DCIT (2017) 79 taxmann.com 202 (Pune).
27. Adverting to the disallowance u/s. 14A r.w.r. 8D, the Ld. AR submitted that the assessee company had paid taxes during the subject year u/s. 115JB of the Act. Elaborating further, the Ld. AR submitted that as the disallowance u/s. 14A is not to be included while computing the "book profit" u/s. 115JB of the Act, therefore, the same would have no bearing on the tax liability of the assessee company for the subject year. The Ld. AR in support of his aforesaid contention had relied on the order of the "Special Bench" of the ITAT, Delhi in the case of ACIT, Circle 17(1), New Delhi Vs. Vireet Investment (P) Ltd. (2017) 82 taxmann.com 415 (Delhi). Also, support was drawn by the Ld. AR from the order of the ITAT, Hyderabad in the case of HBL Power Systems Ltd. Vs. DCIT (2021) 128 taxmann.com 201 (Hyderabad- Trib).
28. Apropos the claim of the assessee company that the interest and other income earned during the pre-production period was rightly deducted/reduced from closing work-in-progress, the Ld. AR had relied on the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Bokaro Steel Ltd. (1999) 102 Taxman 94 (SC). Also, the Ld. AR had pressed into service the judgment of the Hon'ble High Court of Delhi in the case of Indian Oil Panipat Power Consortium Ltd. Vs. ITO (2009) 181 Taxman 249 (Del.). The Ld. AR submitted that the Hon'ble High Court had held that where the income was earned before commencement of business, it was in the 22 Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 nature of capital receipt and hence, was required to be set off against pre-operative expenses.
29. Per contra, the Ld. Departmental Representative (for short 'DR') relied on the orders of the lower authorities.
30. We have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their contentions.
31. As the validity of the jurisdiction assumed by the A.O. for reopening the concluded assessment has been assailed before us, therefore, we shall first deal with the same.
32. As is discernible from a perusal of the "reasons to believe" read in the backdrop of the original assessment framed by the A.O u/s. 143(3) of the Act, dated 28.12.2011 and notice(s) issued u/s 142(1) of the Act by the A.O in the course of the original assessment proceedings a/w. reply filed by the assessee company in response to the same, we find substance in the claim of the Ld. AR that the concluded assessment of the assessee company had been reopened by the A.O. on the aforementioned issues, based on a mere "change of opinion" on the same set of facts as were there before his predecessor in the course of the original assessment proceedings. As observed by us hereinabove, the concluded 23 Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 assessment of the assessee company has been reopened on four issues, therefore, we shall chronologically deal with the same as under:
A). Excessive allowance of Depreciation:
33. Ostensibly, the A.O. in the course of the original assessment proceedings, had vide his notice u/s. 142(1) of the Act dated 07.12.2011 called upon the assessee company to furnish documentary evidence in support of its claim of addition to the "fixed assets" on which depreciation @100% was claimed. We find that the assessee company had vide its reply dated 19.12.2011 (that was filed with the A.O in the course of the original assessment proceedings) furnished with him the complete details of fixed asset on which depreciation @100% was claimed, Annexure-F, Page 114-116 of APB. On a perusal of Annexure-F, we find that the list of assets on which depreciation @100% was claimed by the assessee company, inter alia, included "DAM" worth Rs.8,50,32,403/-. Accordingly, the A.O. had during the original assessment proceedings taken cognizance of the fact that the assessee company had raised a claim of depreciation @100% on the value of "DAM". It is neither the case of the department nor a fact discernible from the record that the A.O. after framing the original assessment had come across "fresh tangible material" that would reveal that the assessee's claim for depreciation on "DAM" was not in order.
We would not hesitate to observe that a perusal of the "reasons to believe", reveals that the A.O. based on the same set of facts as were available before his predecessor in the course of the original assessment proceedings, had observed that excess depreciation on "DAM" @100% had been allowed to the assessee 24 Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 company. As such, there is substance in the Ld. A.R.'s claim that the concluded assessment of the assessee company had been reopened on the aforesaid aspect by the A.O., based on the same set of facts as were available before his predecessor, to revisit and reappreciate the view taken by him. We, thus, based on the aforesaid facts concur with the contention of the Ld. AR that the reopening of the concluded assessment of the assessee company, inter alia, on the aforesaid aspect was based on a mere "change of opinion" of the successor A.O. as against that held by his predecessor.
B). Disallowance u/s. 14A :
34. As stated by the Ld. AR, and rightly so, it is a matter of fact borne from the record that the A.O. in the course of the original assessment proceedings had vide his notice u/s. 142(1) of the Act, dated 07.12.2011, Sr. No.7 called upon the assessee company to furnish details of expenditure concerning income not forming part of its total income u/s. 14A of the Act. In reply, the assessee company vide its letter dated 19.12.2011 had, inter alia, claimed before the A.O. that it had not incurred any expenditure concerning income not forming part of its total income, which would otherwise have been liable for disallowance u/s. 14A of the Act.
35. Based on our aforesaid observations, we concur with the Ld. AR that the concluded assessment of the assessee company on the aforesaid issue, i.e. disallowance u/s. 14A of the Act had been reopened based on the same set of facts as were there before his predecessor in the course of the original assessment 25 Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 proceedings and had been looked into and deliberated upon while framing the assessment vide his order passed u/s. 143(3) of the Act, dated 28.12.2011. Also, it transpires on a perusal of the "reasons to believe" that the A.O. had merely sought to reappreciate the view taken by his predecessor as regards the claim of the assessee company that no disallowance u/s. 14A of the Act was called for in its case.
Accordingly, we are persuaded to subscribe to the claim of the Ld. AR that reopening of the concluded assessment of the assessee company on the aforesaid issue is based on a mere "change of opinion" and not based on any fresh material coming to the notice of the A.O, based on which, he had arrived at a bonafide belief that income of the assessee company chargeable to tax had escaped assessment. C). Additional Depreciation:
36. Ostensibly, a perusal of the "reasons to believe" reveals that the A.O. had sought to revisit the assessee's claim of additional depreciation u/s. 32 (iia) of the Act as was allowed by his predecessor while framing the original assessment vide his order u/s. 143(3) of the Act, dated 28.12.2011. As is discernible from the "reasons to believe", the A.O had not referred to any "fresh tangible material" coming to his notice after the culmination of the original assessment proceedings which, thus, would have led to the formation of a bonafide belief on his part that the income of the assessee company chargeable to tax on the said aspect had escaped assessment justifying the reopening of its case u/s. 147 of the Act. All that can be gathered from a perusal of the "reasons to believe" is that the A.O. had observed that the assessee company which is engaged in the business of generation and 26 Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 distribution of power was eligible for "additional depreciation" w.e.f. A.Y.2023-24 and, thus, not during the subject year. Accordingly, it can safely be held that the concluded assessment of the assessee company on the aforesaid aspect had been reopened based on a mere "change of opinion" of the successor A.O. as against that of his predecessor.
D). Pre-production period interest and other income deducted by the assessee company from its closing work-in-progress:
37. As is discernible from the "reasons to believe", the A.O had observed that the assessee company instead of accounting for the interest and other income of Rs.3.47 crore (supra) earned during the pre-production period in its "profit and loss account" had wrongly deducted the same from its closing work-in-progress. The A.O to support his aforesaid conviction had relied on the judgment of the Hon'ble Supreme Court in the case of Tuticorin Alkalies Chemical & Fertilizer Ltd., 227 ITR 172 (SC), wherein the Hon'ble Apex Court had observed that pre-production interest income should be taken in "profit and loss account" as other source income.
38. As stated by the Ld. AR, and rightly so, the A.O. in the course of the original assessment proceedings had vide his notice issued u/s. 142(1) of the Act, dated 07.12.2011, at Sr. No.8 specifically queried the assessee company about the deduction of Rs.122.45 crore (supra) from its capital work-in-progress during the subject year. In reply, the assessee company vide its letter dated 19.12.2011 had submitted before the A.O that the aforementioned amount of Rs.122.45 crore (supra) which comprised of receipts from the sale of power generated during the trial run 27 Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 process and was deducted from capital work-in-progress conformed with the generally accepted accounting principle that whatever amount recovered before the start of commercial production is to be adjusted against the cost of the relevant assets, i.e. building, plant and machinery, etc. For the sake of clarity, the reply of the assessee company dated 19.12.2011 is culled out as under:
"g) The deduction of Rs.122.45 crore from capital work in progress in schedule-4 was mainly on account of receipts from sale of power generated during trial run process and other mise receipts, i.e. interest etc. It is generally accepted accounting principles that whatever amount recovered before the start of commercial production is adjusted against the cost of relevant i.e. building, plant and machinery etc. so Rs.122.45 crore was adjusted from CWIP. However, as a matter of fact it is important to note that no any deduction has been claimed by Rs.122.45 crore but the same has been deducted from cost of CWIP. The impact of this adjustment in CWIP is such that the total cost of CWIP has been reduced by Rs.122.45 crores, details is enclosed as annexure-E."
39. On a perusal of the "Schedule-4" of the "audit report" of the assessee company for the subject year, we find that an amount of Rs.122.45 crore (supra) is deducted by the assessee company from its pre-production period capital work-in- progress. The amount of Rs. 122.45 crore (supra), inter alia, includes the subject interest and other income aggregating to Rs.3.47 crore (Rs.2.06 crore + Rs.1.41 crore). For the sake of clarity, "Schedule-4" of the "audit report" of the assessee company is culled out as under:
28
Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 It transpires on a perusal of the aforesaid facts that the A.O during the course of the original assessment proceedings had, inter alia, queried about the deduction of interest and other receipts of Rs.3.47 crore (supra) from the capital work-in-progress of the assessee company during the pre-production period. In reply, the assessee company had explained the reasons for reducing the aforementioned amount from the capital work-in-progress. We, thus, in the backdrop of the aforesaid facts, find substance in the claim of the Ld. AR that as the A.O in the course of the original assessment proceedings had duly queried upon and had found the assessee's claim 29 Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 for deduction of interest and other income of Rs.3.47 crore (supra) from capital work-
in-progress in order, therefore, reopening of its concluded assessment based on the same set of facts would tantamount to a mere "change of opinion" of the successor A.O as against that of his predecessor, which we are afraid is not permissible as per the mandate of law.
40. Accordingly, in terms of our aforesaid observations, we concur with the claim of the Ld. AR that reopening of the concluded assessment of the assessee company on the aforesaid four issues is based on a mere "change of opinion", and is not based on any "fresh tangible material" coming to the notice of the successor A.O after framing of the original assessment which, thus, would have otherwise justifiably led to the formation of a bonafide belief on his part that the income of the assessee company chargeable to tax had escaped assessment.
41. As concluded assessment of the assessee company that was originally framed by the A.O vide his order u/s. 143(3) of the Act, dated 28.12.2011 had been reopened based on a mere "change of opinion", therefore, we shall now deal with the sustainability of the same.
42. Because the case of the assessee company had been reopened with the purpose to re-appreciate the facts that were already available on record and, not based on 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 28.12.2011, which would reveal that any income of the assessee company 30 Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 chargeable to tax had escaped assessment, we find substance in the claim of the Ld. AR that the A.O. had clearly traversed beyond the scope of his jurisdiction and had wrongly reopened the concluded assessment of the assessee company under Sec. 147 of the Act. 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 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 wrong and reopen the assessment by taking recourse to the 31 Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 provisions of Sec. 147. 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 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. 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) are 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.
8. In the order rejecting the objection filed by the petitioner to the notice under section 148, respondent No. 1 has observed "verification of assessment record reveals that the said details were called for but inadvertently the same were not taken into account while framing the assessment and, therefore, it cannot be said that there is a change of opinion." According to respondent No. 1, thus, the relevant material was available on record, but he failed to apply his mind to that material in making the assessment order. The question is, can respondent No. 1 take recourse to the provision of section 147 for his own failure to apply his mind to the material which, according to him, is relevant and which was available on record. We find that this situation has been considered by the Full Bench of the Delhi High Court in its judgment in the case of CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 and the Full Bench has observed thus (page 19) :
"The said submission is fallacious. An order of assessment can be passed either in terms of sub-section (1) of section 143 or sub-section (3) of section
143. When a regular order of assessment is passed in terms of the said sub- section (3) of section 143 a presumption can be raised that such an order has been passed on application of mind. It is well known that a presumption can also be raised to the effect that in terms of clause (e) of section 114 of the Indian Evidence Act judicial and official acts have been regularly performed. If it be held that 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 a premium to an authority exercising quasi- judicial function to take benefit of its own wrong."32
Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017
9. 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.
10. 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 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.
11. In the result, therefore, petition succeeds and is allowed. Rule is made absolute in terms of prayer clause (a) with no order as to costs."
(emphasis supplied by us) At this stage, it would be relevant to point out that the view taken by the "Full bench"
of the Hon'ble High Court of Delhi in CIT Vs. Kelvinator of India (2002) 256 ITR 1 (Del), that the failure of the A.O to consider certain material that was available on record while framing the original assessment cannot justify the reopening of its concluded assessment, as the same would amount to reopening of the assessment based on a "change of opinion", which is not allowed as per the mandate of law, had thereafter been approved by the Hon'ble Apex Court in CIT Vs. Kelvinator of India 33 Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017 (2010) 320 ITR 561 (SC). The observations of the "Full bench" of the Hon'ble High Court of Delhi in CIT Vs. Kelvinator of India (2002) 256 ITR 1 (Del), which thereafter had been approved by the Hon'ble Apex Court in 320 ITR 561, are culled out as under (relevant extract):
"10. It is further to be seen that the legislature has not conferred power on the AO to review its own order. Therefore, the power under s. 147 cannot be used to review the order. In the present case, though the AO 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 AO, 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 AO to the same set of facts and 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 (supra) referred to above, has taken a clear view that reopening of assessment under s. 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 s.
148".
43. 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 assessment. Our aforesaid view is fortified by the judgments of the Hon'ble High Court of Bombay in the case of NYK Lime (India) Ltd. Vs. DCIT (No.2) [2012] 346 ITR 361 (Bom) and Purity Tech Textile Pvt. Ltd. Vs. ACIT & Anr. [2010] 325 ITR 459 (Bom).
34
Jindal Power Limited Vs. Jt. CIT, Range-1, Bilaspur ITA No.200/RPR/2017
44. We, thus, in terms of our aforesaid observation quash the reassessment order passed by the A.O u/s.143(3) r.w.s 147 of the Act, dated 13.02.2015 for want of valid assumption of jurisdiction by him u/s.147 of the Act.
45. As we have quashed the reassessment framed by the A.O. vide his order passed u/s. 143(3) r.w.s 147 of the Act, dated 13.02.2015, therefore, we refrain from adverting to the other contentions that have been advanced by the Ld. AR as regards the merits of the case, which, thus, are left open.
46. In the result, the appeal of the assessee company is allowed in terms of our aforesaid observations.
Order pronounced in open court on 25th day of June, 2024.
Sd/- Sd/-
ARUN KHODPIA RAVISH SOOD
(ACCOUNTANT MEMBER) (JUDICIAL MEMBER)
रायपुर/ RAIPUR ; दनांक / Dated : 25th June, 2024.
***SB
आदे श क त ल प अ े षत / Copy of the Order forwarded to :
1. अपीलाथ / The Appellant.
2. यथ / The Respondent.
3. The CIT(Appeals), Bilaspur (C.G.)
4. The Pr. CIT, Raipur-1 (C.G)
5. वभागीय त न ध, आयकर अपील य अ धकरण, रायपुर बच,
रायपुर / DR, ITAT, Raipur Bench, Raipur.
6. गाड फ़ाइल / Guard File.
आदे शानस
ु ार / BY ORDER,
// True Copy //
Senior Private Secretary
आयकर अपील य अ धकरण, रायपुर / ITAT, Raipur.