Income Tax Appellate Tribunal - Delhi
Acit, New Delhi vs M/S. North Delhi Power Ltd. (Now Tata ... on 1 January, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES: "E" NEW DELHI
BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER
AND
SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER
ITA No: 1345/Del/2011
Asstt. Year 2003-04
North Delhi Power Limited vs. DCIT
Grid Substation Building, Circle 13(1),
Hudson Lane, Kingsway Camp Room No. 406,
New Delhi - 110 009. C.R. Building
PAN: AABCN6808R New Delhi.
(Appellant) (Respondent)
ITA No: 1371/Del/2011
Asstt. Year 2003-04
ACIT vs. North Delhi Power Limited
Circle-13(1), Room No. 406 Grid Substation Building,
C.R. Building, I.P. Estate Hudson Lane,
Kingsway Camp
New Delhi New Delhi.
PAN: AABCN6808R
(Appellant) (Respondent)
ITA No: 4053/Del/203
Asstt. Year 2004-05
ACIT vs. North Delhi Power Limited
Circle-16(1), Grid Substation Building,
C.R. Building, Hudson Lane,
Kingsway Camp
New Delhi New Delhi.
PAN : AABCN6808R
(Appellant) (Respondent)
Appellant by : Shri S.D. Kapila, Advocate
Shri R.R. Maurya, Advocate
Shri Sanjay Kumar, Advocate
Shri Pravesh Sharma, Advocate
Shri Harish
Respondent by : Shri B.D. Mishra, CIT, DR
ITA Nos. 1345,1371/Del/2011 &
ITA No. 4053/Del/2013
Date of Hearing : 07.10.2015
Date of pronouncement : 01.01.2016
ORDER
PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER:
ITA No. 1345/11 is appeal filed by the assessee against the order dated 30.11.2010 passed by the Ld. CIT (A)- XVI, New Delhi for AY 2003-04. ITA No. 1371/11 is the cross appeal by the Department against the same order. ITA No. 4053/13 is appeal filed by the Department against the order dated 28.02.2013 passed by the Ld. CIT(A) XVI, New Delhi for AY 2004-05. Since the issues involved in all the appeals are common, we are disposing all three appeals through this common order.
ITA No. 1345/2011 & ITA No. 1371/2011
2. The main issue involved in the appeal of the assessee is regarding the assumption of jurisdiction u/s 147 of the Income Tax Act, 1961 and both the parties agreed that this issue has to be adjudicated prior to the adjudication on the merits of the case. We, therefore, proceed to dispose this ground first and if need arises, the issues relating to the merits will be taken up later.
3. The brief facts of the case, as borne out from the records and the submissions made by the Ld. AR, are as under:-
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'v* ' ITA Nos. 1345,1371/Del/2011 & ITA No. 4053/Del/2013 North Delhi Power Limited (NDPL) was set up in terms of the policy direction issued by the Government of National Capital Territory of Delhi (GNCTD) under the provisions of Delhi Electricity Reforms Act, 2000. The formation was a part of the scheme to enable privatisation of Delhi Vidyut Board (DVB). The assessee is engaged in the business of distribution and supply of electricity in the North and North West area of National Capital Territory of Delhi. It has earned income from sale of energy and other income ancillary to the business of distribution of energy during the year under consideration. The assessment u/s 143(3) of the Income Tax Act, 1961 was made on 23.2.2006 at the returned income. Thereafter, assessment was made u/s 143(3) / 263 of the Income Tax Act on 25.7.2008 revising the book profit u/s 115JB of the Income Tax Act to Rs. 836824907/- against assessee's working of Rs. 395008907/-. Further, the case was reopened u/s 147 of the Income Tax Act and notice u/s 148 of the Income Tax Act dated 20.02.2009 was issued after recording the reasons for the same. The reasons recorded for reopening are as under:-
"REASONS FOR RE-OPENING THE ASSESSMENT U/S 147 OF THE IT Act. IN CASE OF M/s NORTH DELHI POWER LTD. FOR AY. 2003-04.
Return of income in this case was filed on 02-12-2003 declaring a loss of Rs. 94,09,96,774/- and Book Profit of Rs. 39,50,08,907/-u/s 115JB of the IT Act. Assessment u/s 143(3) of the Act was made on 23-03-2006 at declared loss and book profit of Rs. 39,50,08,907/-. Thereafter, assessment u/s 143(3)/263 of the IT Act was made on 25-07-2008 revising the Book Profit u/s 115J8 of the IT Act for Rs. 83,68,24,907/- against assessee's Claim of Rs. 39,50,08,907/-
Perusal of the assessment records revealed that the assessee had made a provision of Rs. 4418.56 lakh on account of ' provision for bad and doubtful debts' in its balance sheet whereas Rs. 4254.82 lakh were debited as provision in the Profit and Loss account and were added back in its 3 'v* ' ITA Nos. 1345,1371/Del/2011 & ITA No. 4053/Del/2013 computation of income. Thereby provision of doubtful debt of Rs. 163.74 lakh, which is energy tax payable to Municipal Corporation of Delhi was not added back by the assessee in its income and has escaped assessment.
It is also observed that as per note to exhibit 5 of Tax Audit Report in form 3CEB, the Auditor has stated that out of energy tax liability of Rs. 119,098,277/- which was outstandinq at the year end Rs. 34,566,3451- has been paid till the date of the filing of the return. In view of the provisions of section 438 of the IT Act, unpaid liability of the tax and duty is not allowable and to be added back to the taxable income. In view of the above income of Rs. 8,45,31,932/- has escaped assessment.
As per assessee's theory, the liability to pay the energy tax to MCS starts after the same has been collected by it from the customers and provision of section 43B of the IT Act is not applicable in respect of uncollected liability. Moreover, as per MCD Bye Laws 1962, it is also provided that the licensee shall not be liable to pay the tax in respect of any electricity supplied by him for which he has been proved to be unable to recover his own charge. In this case it has not been proved that the assessee was unable' to recover his own charges. As per proviso to clause 7 also the licensee may himself pay the tax instead of recovering the same from the customer. Hence, the unpaid energy tax liability in respect of which it has not been proved that the assessee was unable to recover its own charged, is liable to be disallowed u/s 438 of the IT Act.
I therefore have reasons to believe that on account of failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment for above assessment year, the income chargeable to tax to the extent of Rs. 10.11 crore as mentioned above, has escaped assessment within the meaning of Section 147 of the Act."
4. Order u/s 143/147 of the Act consequent to the reopening was passed on 23.12.2009 after making disallowances of provision for bad and doubtful debts amounting to Rs. 16374000/- and unpaid energy tax u/s 43B amounting to Rs. 84531932/-. Thus a total addition of Rs. 100905932/- was made and the assessment was completed at a loss of Rs. 840090242/-. The book profit u/s 115JB of the Income Tax Act was recalculated at Rs. 836824910/- after adding the provision of doubtful debts of Rs. 441816000/-. Aggrieved the assessee filed an appeal before the Ld. CIT(A) contesting the reopening u/s 147/148 of the Income Tax Act, 1961 4 'v* ' ITA Nos. 1345,1371/Del/2011 & ITA No. 4053/Del/2013 and also contesting the case on merits. Regarding addition of Rs. 16374000/- on account of provision for energy tax as well as disallowance of Rs. 84531932/- disallowed u/s 43B of the Income Tax Act on account of unpaid energy tax, the Ld. CIT (A) in his impugned order while upholding the reopening u/s 147/148 of the Act gave relief to the assessee by deleting the addition of Rs. 16374000/- on account of difference in figures of provision for doubtful debts. However, the addition of Rs. 84531932/- disallowed u/s 43B of the Income Tax Act 1961 on account of unpaid energy tax was sustained. Further the Ld. CIT (A) also deleted the addition of Rs. 16374000/- made on account of adjustment in book profit u/s 115JB of the Act. In the present appeals before us the assessee has primarily assailed the issuance of notice u/s 148 apart from contesting on merits. The department on the other hand has objected to the act of the Ld. CIT (A) in deleting the addition of Rs. 16374000/- on account of provision for energy tax and its consequent adjustment in calculation of book profit u/s 115JB of the Income Tax Act, 1961.
5. Ld. AR for the assesee, while arguing on the issue of assumption of jurisdiction u/s 147 of the Income Tax Act, submitted that in the present case all the facts and information were available with the AO at the time of making the initial assessment u/s 143(3) of the Act. The action of the AO in reopening the assessment was bad in law as the same was passed on a mere change of opinion / re- appreciation of the same facts without there being any change in circumstances or additional facts or fresh information having come in possession of the AO between the passing of the original order u/s 143(3) and the date of issuance of notice u/s
148. Ld. AR submitted that in fact the AO has sat on a review of his earlier order 5 'v* ' ITA Nos. 1345,1371/Del/2011 & ITA No. 4053/Del/2013 which was not legally permissible. The Ld. AR drew our attention to the reasons recorded by the AO and submitted that the AO had not stated the availability of any new information or facts or evidences and that all the information used by him for recording of reasons for the purpose of issuance of notice u/s 148 were available to him even at the time of the original assessment proceedings. After drawing our attention to the various dates, the Ld. AR also submitted that this is a case of reopening after more than four years. Ld. AR also relied on a plethora of decisions viz. Xerox Modicorp Ltd. vs. DCIT (2013) 350 ITR 308 (Del), Qualcomm Incorporated vs. ADIT (2013) 85 DTR 408 (Delhi), CIT vs. Eicher Ltd. 294 ITR 310 (Delhi), Signature Hotel P. Ltd. vs. ITO 331 ITR 51 (Delhi), Panchanan Hati vs. CIT 115 ITR 336 (Calcutta) on the issue of the validity of notice u/s 148 of the Act.
6. Ld. DR on the other hand strongly supported the order of the AO and that of the Ld. CIT (A). He submitted that section 147 of the Act enables the AO to reopen an assessment even after the expiry of four years if the AO has reason to believe that by reasons of omission or failure on the part of the assesee to disclose fully and truly all material facts necessary for the purpose of an assessment, an income assessable to tax has escaped assessment. He submitted that Explanation 1 to proviso to section 147 further clarifies that production before the AO of books of accounts and other evidence does not exonerate the assessee from the duty to make full and true disclosure of material facts. He submitted that if some material necessary for assessment lay embedded in books of accounts or other evidence which the AO could have uncovered with due diligence but did not, he would be entitled to reopen the assessment. He relied on the decision of the Hon'ble High 6 'v* ' ITA Nos. 1345,1371/Del/2011 & ITA No. 4053/Del/2013 Court of Delhi in the case of M/s. Consolidated Photo & Finvest Ltd. vs. ACIT 281 ITR 394 (Del) in support of his submission. He accordingly submitted that the notice u/s 148 was rightly issued and the reopening was perfectly valid in the eyes of the law.
7. We have heard the rival contentions and have also perused the records, especially the reasons recorded for the issuance of notice u/s 148 (reproduced elsewhere). From the particulars called for by the AO at the time of original assessment proceedings, submissions made by the assessee before the AO at the time of original assessment proceedings and the reasons recorded for initiation of reassessment proceedings, it is very much evident that the reassessment proceedings were initiated by the AO on the basis of same set of facts which were available before the AO at the time of original assessment. We are of the considered view that the AO, at the time of original assessment, was very well aware about the primary facts. The AO, while reopening the assessment u/s 147, has made no reference to any new material which has come into his possession after the completion of the original assessment u/s 143(3) of the Act. In our opinion, it is merely a fresh application of mind by the AO to the same set of facts. Thus, it is our considered view that it is a case of mere change of opinion on the material which was already available on record at the time of completion of the original assessment. Therefore, the proceedings for reassessment u/s 147 fail to stand the test. Further, the first proviso to section 147 of the Income Tax Act provides that where an assessment or reassessment has already been made u/s 143(3) or 147 of the Act, no action shall be taken by the AO u/s 147 after the expiry of four years from the 7 'v* ' ITA Nos. 1345,1371/Del/2011 & ITA No. 4053/Del/2013 end of relevant assessment year where all the material facts necessary for the assessment has been disclosed by the assesse fully and truly. It is seen from the records and as specifically pointed out by the Ld. AR, all material facts necessary for the purpose of assessment were truly and fully disclosed in the audited financial statements, notes on accounts, tax audit report and also by way of filing of various submissions and documents by the assessee during the course of original assessment proceedings. Hence it is our considered view that the AO has recorded his satisfaction in the reasons recorded not on the basis of new tangible material but simply on a fresh scrutiny of assessment records and documents. We are also of the opinion that accordingly there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of assessment. Reference may be made at this juncture to the judgment of Full Bench of the Hon'ble Delhi High Court in the case of CIT vs. Kelvinator of India Ltd. 256 ITR 1 (Del) {affirmed by the Hon'ble Apex Court in CIT vs. Kelvinator of India Ltd.} wherein the Hon'ble Delhi High Court has held:
"It is not in dispute that the Assessing Officer does not have any jurisdiction to review its own order. His jurisdiction is confined only to rectification of mistake as contained in section 154. The power of rectification of mistake conferred upon the ITO is circumscribed by the provisions of section 154. The said power can be exercised when mistake is apparent. Even mistake cannot be rectified where it may be a mere possible view or where the issues are debatable. Even the Tribunal has limited jurisdiction under section 254(2). Thus, when the Assessing Officer or the Tribunal has considered the matter in detail and the view taken is a possible view, the order cannot be changed by way of exercising the jurisdiction of rectification of mistake. It is a well-settled principle of law that what cannot be done directly cannot be done indirectly. If the ITO does not possess the power of review, he cannot be permitted to achieve the said object by taking recourse to initiating a proceeding of reassessment or by way of rectification of mistake. In a case 8 'v* ' ITA Nos. 1345,1371/Del/2011 & ITA No. 4053/Del/2013 of this nature the revenue is not without remedy. Section 263 empowers the Commissioner to review an order which is prejudicial to the revenue. A mere change in the opinion would not confer jurisdiction upon the Assessing Officer to initiate a proceeding under section 147. In the event it is held that by reason of section 147 if the ITO exercises its jurisdiction for initiating a proceeding for reassessment only upon mere change of opinion, the same may be held to be unconstitutional. Section 147 does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceeding upon his mere change of opinion. If 'reason to believe' of the Assessing Officer is founded on an information which might have been received by the Assessing Officer after the completion of assessment, it may be a sound foundation for exercising the power under section 147, read with section 148."
8. In view of the factual and legal position of the case and respectfully following the decision of the Hon'ble Delhi High Court in the case of CIT vs. Kelvinator of India Ltd. (supra), it is our considered opinion that the reassessment proceedings initiated by the AO u/s 147 of the Act were based on a mere change of opinion and that the notice issued by the AO u/s 148 and the proceedings initiated u/s 147 are without any foundation. In view of the above, the order passed u/s 147/143(3) being without jurisdiction is quashed.
9. In the result this ground of the assessee is allowed and remaining grounds are not being adjudicated as being in fructuous. In view of our finding in assessee's appeal, the Departmental Appeal is dismissed as being in fructuous.
10. In the result the appeal of the assessee is allowed and the appeal of the department is dismissed.
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'v* ' ITA Nos. 1345,1371/Del/2011 & ITA No. 4053/Del/2013 ITA No. 4053/Del/2013
11. This appeal has been preferred by the Department against the order dated 28.2.2013 passed by the Ld. CIT (A) - XVI, New Delhi for AY 2004-05 wherein the department has objected to the Ld. CIT(A) quashing the order dated 18.1.2012 passed u/s 147/143(3) by the AO.
12. It is seen from the records that the regular assessment u/s 143(3) of the Act had already been done in the case of the asseseee vide order dated December, 22, 2006 wherein a sole addition of Rs. 37,00,84,297/- was made under MAT provision of the Act on account of provision for bad and doubtful debts debited to the profit and loss account. Later, the AO issued notice u/s 148 of the Act dated 28th March, 2011 and the reasons recorded for the reopening are as under:-
"Return declaring loss of Rs. 12,84,96,795 was filed on 29.10.2004. Assessment u/s 143(3) of the IT Act was made on 22.12.2006 at a loss of Rs. 12,84,96,795 under normal provisions and income of Rs. 91,52,15,718 under section 115JB of the IT Act.
The scrutiny of assessment revealed that the assessee has failed to disclose following facts in its computation of income and balance sheet:
(a) Assessee had claimed and was allowed depreciation @ 60% on UPS, Printer, Networking Equipment etc. under the head computer, whereas all these items should be treated under the head 'Plant & Machinery' to which applicable rate of depreciation is 25% instead of 60%. Thus, depreciation amounting to Rs. 47,40,963 was excess allowed. The mistake resulted in excess carry forward of loss of Rs. 47,40,963 involving potential tax effect of Rs. 17,00,820 including surcharge.
(b) The assessee had debited an amount of Rs. 37,00,84,297 in the P&L account as provision of Bad & Doubtful Debts which was added back to the taxable income in the computation sheet. A further scrutiny revealed that the assessee had made / credited provision for Bad & Doubtful Debts for Rs. 38,67,38.000 in the balance sheet. The omission resulted in under assessment of income by Rs. 1,66,53,703 with potential tax effect of Rs. 17,02,735 including interest.10
'v* ' ITA Nos. 1345,1371/Del/2011 & ITA No. 4053/Del/2013
(c) As per 3CD report, Energy tax of Rs. 13,75,87,467 (22,51,43,935 -
8,75,56,468) was not paid before the due date of filing of return and was therefore, required to he added back to the income of the assessee. The omission to do so resulted in incorrect allowance and carry forward of loss of Rs. 13,75,87,467 (inclusive of brought forward losses) involving potential tax effect of Rs. 4,93,59,504 (tax @ 35% + S.C. @ 2.5%).
I, therefore, have reasons to believe that on account of failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment for the above assessment year, the income of Rs. 15,89,82,133 has escaped assessment within the meaning of proviso to section 147 of the IT Act. "
13. The assessee thereafter filed a letter dated June 7, 2011 objecting to the re- opening of the case u/s 148 of the Act. The said objection(s) were summarily rejected by the Assessing Officer vide his order dated August 24, 2011 and the reassessment proceedings were completed. In an appeal before Ld. CIT(A), the Ld. CIT(A) quashed the reopening proceedings on the ground that the reassessment proceedings initiated by the AO were based on a mere change of opinion and that there was no failure on part of the assessee to disclose all the material facts necessary for the assessments fully and truly.
14. Aggrieved by the impugned order, the Department is in appeal and is contesting the quashing of reassessment proceedings by the Ld. CIT (A). Ld. DR, while supporting the order of the AO, submitted that there was a failure on the part of the assessee to disclose fully and truly all the material facts necessary for the purpose of assessment and therefore substantial income assessable to tax had escaped assessment. Ld. DR submitted that section 147 of the Act empowers the AO to reopen an assessment if there is an omission or failure on part of the assessee. He further submitted that even if the AO gathered a reason to believe from the very 11 'v* ' ITA Nos. 1345,1371/Del/2011 & ITA No. 4053/Del/2013 same records as had been the subject matter of completed assessment proceedings, still notice u/s 148 would be valid and the plea that mere change of opinion cannot be a basis for reopening completed assessment would have no application where the order of original assessment does not address itself to the aspect which is the basis for re-opening of the assessment.
15. Ld. AR, on the other hand, submitted that the assesee had filed a letter dated 7th June, 2011 objecting to the reopening of the case u/s 148 of the Act. However these objections were summarily rejected by the AO vide his order dated 24th August, 2011. Thereafter, the assessee had filed a writ petition before the Hon'ble Delhi High Court. However, the Hon'ble Delhi High Court, without going into the issue of reopening of the case u/s 148 of the Act, vide its order dated November 4, 2011, held that the rejection order passed by the AO suffered from a complete lack of reasoning and the rejection order dated 24th August, 2011 passed by the AO was struck down and the AO was asked to pass a fresh order dealing with the objections raised by the assessee. Thereafter, the AO again rejected the objections raised by the assessee through his order dated 4th January, 2012 and passed the reassessment order u/s 147 / 143 (3) of the Act dated 18th January, 2012 by re- assessing the income at Rs. 3,04,85,340/- under the regular provisions of the Act and at Rs. 56,17,85,124/- under the MAT provision of the Act after disallowing unpaid energy tax u/s 43B of the Act amounting to Rs. 13,75,87,467/-, difference between figure of provision for bad and doubtful debits in the balance sheet and the profit and loss account at Rs. 1,66,53,703/- and by restricting the depreciation claim on UPS to 25 % instead of 60% amounting to Rs. 47,40,963/- . The Ld. AR 12 'v* ' ITA Nos. 1345,1371/Del/2011 & ITA No. 4053/Del/2013 submitted that during the original assessment proceedings a detailed inquiry was conducted by the AO. The Ld. AR submitted that a detailed reply was given by the assessee in response to the show cause notice and the reasons recorded by the AO clearly point out that there was no new source of information available with the AO and all the information used by the AO were also available at the time of passing of original assessment order u/s 143(3) of the Act. The Ld. AR relied on a number of cases including CIT vs. Kelvinator of India Ltd. 256 ITR 1 (Delhi), CIT vs. Foramer France 264 ITR 567 (SC) and CIT vs. Bhanji Lavji 79 ITR 582. The Ld. AR submitted that the quashing of the 147 / 148 proceedings by the Ld. CIT (A) was legally correct and that it should be upheld.
16. We have heard the rival submissions and have also considered the facts. It is seen that the reopening was based on excess claim of depreciation, difference in the figures of provision for bad and doubtful debt as per the balance sheet vis-a-vis profit and loss account and unpaid energy tax u/s 43B. We have also perused the reasons recorded for the issuance of notice u/s 148 (reproduced elsewhere). From the particulars called for by the AO at the time of original assessment proceedings, submissions made by the assessee before the AO at the time of original assessment proceedings and the reasons recorded for initiation of reassessment proceedings, it is very much evident that the reassessment proceedings were initiated by the AO on the basis of same set of facts which were available before the AO at the time of original assessment. We are of the considered view that the AO, at the time of original assessment, was very well aware about the primary facts. The AO, while reopening the assessment u/s 147, has made no reference to any new material 13 'v* ' ITA Nos. 1345,1371/Del/2011 & ITA No. 4053/Del/2013 which has come into his possession after the completion of the original assessment u/s 143(3) of the Act. In our opinion, it is merely a fresh application of mind by the AO to the same set of facts. Thus, it is our considered view that it is a case of mere change of opinion on the material which was already available on record at the time of completion of the original assessment. Therefore, the proceedings for reassessment u/s 147 fail to stand the test.
17. In view of the factual and legal position of the case and respectfully following the decision of the Hon'ble Delhi High Court in the case of CIT vs. Kelvinator of India Ltd. (supra), it is our considered opinion that the reassessment proceedings initiated by the AO u/s 147 of the Act were based on a mere change of opinion and that the notice issued by the AO u/s 148 and the proceedings initiated u/s 147 were without any foundation. In view of the above, we find no reason to interfere with the order of the Ld. CIT A).
18. In the result the appeal of the Department is dismissed.
Order pronounced in the open court on 01.01.2016.
Sd/- Sd/-
(INTURI RAMA RAO) (SUDHANSHU SRIVASTAVA )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: the 1st January, 2016
'veena'
14
'v* '
ITA Nos. 1345,1371/Del/2011 &
ITA No. 4053/Del/2013
Copy of the Order forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
6. Guard File By order
Dy. Registrar
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'v* '