Bombay H.C : The reopening of assessment as invalid and bad in law by observing that reopening in the present case is change of opinion when in fact no opinion was formed at any stage of assessment in respect of admissibility of claim of assessee u/s. 80IA in view of the fact that there is loss from the windmill project

High Court Of Bombay

CIT vs. Prima Paper And Engineering Industry

Assessment Year : 2001-02

Section : 80-IA, 147

Mohit S. Shah, Cj. And M. S. Sanklecha, J.

IT Appeal No. 1923 Of 2011

April 18, 2013

JUDGMENT

M.S. Sanklecha, J. – In this appeal by the revenue for assessment year 2001-02, following questions of law have been raised for our consideration:—

“(a) Whether on the facts and in the circumstances of the case the Tribunal was justified in holding the reopening of assessment as invalid and bad in law when the same was based on the revenue audit objection?

(b) Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that the reopening of assessment as invalid and bad in law by observing that reopening in the present case is change of opinion when in fact no opinion was formed at any stage of assessment in respect of admissibility of claim of assessee u/s. 80IA in view of the fact that there is loss from the windmill project?

(c) Whether on the facts and in the circumstances of the case the Tribunal was justified in holding the reopening of assessment as invalid and bad in law when the Supreme Court in the case of CIT v. P.V.S. Beedies (P.) Ltd. 237 ITR 13 (SC) has held the reopening of assessment on the basis of a factual error pointed out by the internal audit party as valid?”

2. The respondent-assessee was originally assessed under Section 143(3) of the Income Tax Act, 1961 (“the Act”) for the assessment year 2001-02 by order dated 29th April, 2003 to an income of Rs.63.84 lacs. This was after inter alia allowing a deduction under Section 80IA of the said Act of Rs.26.73 lacs in computing the income on account of its Windmill project.

3. Thereafter by notice dated 25th July 2005 under section 147/148 of the said Act, the Assessing Officer sought to reopen the assessment for assessment year 2001-02 on the following grounds.

‘On verification of the record it is observed that the “a” is engaged in the business of plastic molded products. The “a” has a windmill project and income derived from this unit from sale of electricity of Rs.28,14,000/- was credited to P & L account and claimed @ 100% depreciation u/s. 80IA. It is also noticed that expenses relating to power generation were not allocated against income of Rs.26,73,300/- the “a” has also not mentioned any separate books of accounts for this suit. On allocation of proportionate expenses this will be loss from windmill project no deduction u/s.80IA is admissible to the “a” as claimed, In view of the decision of Mumbai High Court in the case of Indian Rayon Corpn. Ltd. v. CIT [2003] 261 ITR 98, the same is therefore required to be withdrawn as wrongly allowed.’

4. The respondent-assessee contested the reopening of the assessment. However, the Assessing Officer did not accept the same and by an order dated 30th December, 2005 reduced the respondent’s claim for deduction under Section 80IA of the Act and consequently re-determined the total income at Rs.91.54 lacs. In appeal the CIT(A) upheld the order of the Assessing officer. On further appeal by the respondent-assessee. the Tribunal by impugned order dated 8th October, 2010 held that the reopening of the assessment for assessment year 2001-02 was bad in law. This was on account of the fact that reopening of assessment was sought on mere change of opinion. The impugned order holds that the Assessing Officer had during the course of the original assessment proceeding leading to the order dated 29th April, 2003 had specifically enquired into the claim of the respondent assessee for deduction on account of Windmill project made under Section 80IA(4) of the said Act.

5. The revenue’s grievance with regard to the impugned order of the Tribunal is that there is no change of opinion as the original assessment order dated 29th April, 2003 of the Assessing officer does not discuss the claim for deduction under Section 80IA of the Act. In these circumstances, it is the case of the revenue that as the reopening of assessment is within a period of four years from the end of the relevant assessment year, the reopening of assessment for assessment year 2001-02 was justified. Counsel for the revenue has also made submissions with regard to reopening of assessment not being bad in law merely on account of the fact that information about escapement of income for assessment year 2001-02 was received from revenue audit. In fact, Questions (a) and (c) are framed on the above basis. However, as the impugned order has not granted relief to the respondent-assessee on the basis that the reassessment was done on the basis of audit objection, we see no reason to deal with the above submission.

6. It is well settled that the power to reopen an assessment is not a power of review and mere change of opinion would not justify reopening of an assessment. This would apply even when assessment sought to be reopened is within four years from the end of the assessment year. We find that the revenue in its appeal in ground 6.1 states as under:

“It is true that the issue of claim of deduction u/s.80IA(4)(iv)(a) of the Income Tax Act was already discussed and deliberated by the Assessing officer during the regular scrutiny proceedings u/s.143(3) of the Income Tax Act, the first round of the assessment proceedings, however, there is no prevention in Income Tax Act of reopening of the assessment on the issues discussed earlier in the scrutiny proceedings u/s. 143(3) of the Income Tax Act”.

7. From the above ground itself, it is clear that revenue does not dispute the fact that the issue with regard to which the reopening is sought to be done was the subject matter of discussion and deliberation before the Assessing officer during the original proceedings leading to the order dated 29th April, 2003. In these circumstances, it is an undisputed position that the Assessing Officer did have occasion to apply his mind to the deduction claimed by the respondent-assessee before allowing the same. The objection of the revenue that there was no opinion formed during the original assessment proceeding as the order dated 29th April, 2003 did not deal with the same is unsustainable. The mere fact that the assessment order does not discuss the issue of deduction under Section 80IA (4) of the Act would not lead to the conclusion that the Assessing officer had made no opinion with regard to the issue. In fact, the revenue does not dispute as noticed from the ground extracted above that the issue was considered by the Assessing Officer during the assessment proceedings. The Tribunal has reached a finding of fact that question with regard to claim for deduction under Section 80IA of the Act was raised by the Assessing Officer and responded too by the respondent-assessee. This position is also not disputed by the revenue. Merely because the issue is not discussed in the assessment order would not lead to a conclusion that no opinion was formed as to subject of the query as held by this Court in the matter of Idea Cellular Ltd. v. Dy.CIT [2008] 301 ITR 407 (Bom.).

8. So far as Questions (a) and (c) are concerned, they do not arise out of the impugned order of the Tribunal. Therefore, we see no reason to admit question (a) and (c).

9. So far as Question (b) is concerned, the Tribunal in the impugned order has reached a finding of fact that the issue of deduction under Section 80IA of the Act was raised by the Assessing Officer during the assessment proceedings and responded to by the respondent-assessee. This finding of fact is accepted by the revenue as is evident from the ground extracted above. Therefore, as the decision is based on finding of fact, we see no reason to entertain Question (b).

10. Accordingly, the appeal is dismissed with no order as to costs.

[Citation : 364 ITR 222]