DCIT CIRCLE-4(2), NEW DELHI V. BSES RAJDHANI POWER LTD., NEW DELHI

ITA 1843/DEL/2023

AI Insights

The case involves an appeal by the Deputy Commissioner of Income Tax (DCIT), Circle-4(2), New Delhi against BSES Rajdhani Power Ltd. concerning reassessment proceedings for the assessment year 2009-10. The primary legal contention was whether the CIT(A) erred in quashing the reassessment proceedings initiated under section 147 of the Income Tax Act, 1961. The CIT(A) had found the notice under section 148 to be bad in law, as the Assessing Officer did not prove any failure on the part of the assessee to disclose material facts. The Tribunal agreed with the CIT(A)'s decision, emphasizing that the reassessment was based on existing records without any new tangible material, and the reasons recorded did not specify any failure by the assessee to disclose material facts.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 473589 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Other Referred Cases: ACTT Vs. DHARIYA CONSTRUCTION CO., Hindustan Liver Ltd. Vs. R.B. Wadkar
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV KAUSHAL
• Assessee Lawyers: ROHIT JAIN
• Keywords: Reassessment proceedings; Depreciation; Reason to believe; Tangible material; Borrowed satisfaction
• Section: 147; 148; 143(3); 153; 139(1); 139

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘A’ NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI AVDHESH KUMAR MISHRA, ACCOUNTANT MEMBER ITA No.1843/Del/2023 Assessment Year: 2009-10 DCIT, Circle-4(2), New Delhi Vs. BSES Rajdhani Power Ltd., BSES Bhavan, Nehru Place, New Delhi PAN :AAGCS3187H (Appellant) (Respondent) ORDER PER SATBEER SINGH GODARA, JM This Revenue’s appeal for assessment year 2009-10, arises against the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre [in short, the “CIT(A)/NFAC”], Delhi’s DIN and order no. ITBA/NFAC/S/250/2022-23/1051176056(1), dated 23.03.2023 involving proceedings under section 147 of the Income- tax Act, 1961 (hereinafter referred to as ‘the Act’). Assessee by Sh. Rohit Jain, Adv. Sh. Deepesh Jain, Adv. Sh. Shivam Gupta, CA Department by Sh. Sanjeev Kaushal, CIT(DR) Date of hearing 16.01.2025 Date of pronouncement 29.01.2025 ITA No.1843/Del/2023 2 | P a g e 2. The Revenue raises the following substantive grounds: 1. Whether on the facts & circumstances of the case and in law, Ld. CIT(A) has erred in quashing the reassessment proceeding by holding that the notice u/s 148 of the Act is bad in law on grounds that the Assessing officer could not prove any failure on part of the assessee to disclose fully and truly all material facts necessary for assessment. 2. Whether on the facts & circumstances of the case and in law, Ld. CIT(A) has erred in ignoring the fact that AO has clearly recorded reasons for reopening stating that as per report of DERC, assessee has made expenses purchase of Capital goods at 68% higher than their purchase price in A.Y. 2005-06 & 2006-07 leading to diversion of profits and although the above purchase of Capital Goods does not pertain to year in consideration, however depreciation has been claimed on such assets during the year under consideration. 3. Whether on the facts & circumstances of the case and in law, Ld. CIT(A) has erred in not adjudicating on merit on the issues of addition on LPSC & Power Theft of Rs. 8,86,78,767/-, issue of addition on Account of capitalization of personnel cost of Rs. 5,67,47,209/- by holding that the grounds have become academic pursuant to the quashing of reassessment proceedings. 4. The appellant carves leave for reserving the right to amend, modify, alter, add or forego any grounds(s) of appeal at any time before or during the hearing of this appeal. 5. Whether there is any delay in filing of appeal (if yes, please attach application seeking condonation of delay) 3. We next note that the learned CIT(A)’s lower appellate discussion quashing the impugned reopening thereby holding it as not sustainable in law being an invalid one, reads as under: “5.1.1 These grounds relate to challenging the issue of notice u/s. 148 of I.T. Act. Before adjudicating the issues under disputes, it is pertinent to have a look at the statutory provision of income escaping assessment as envisaged under section 147 of IT Act, which stipulate \"If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned ITA No.1843/Del/2023 3 | P a g e (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1. Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2. - For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:- 1. Where no retum of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; 1. Where a retum of income has been fumished by the assessee but not assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the retum: 1. Where an assessment has been made, but- 1. Income chargeable to tax has been underassessed; or 2. Such income has been assessed at too low a rate; or 3. Such income has been made the subject of excessive relief under this Act, or ITA No.1843/Del/2023 4 | P a g e 4. Excessive loss or depreciation allowance or any other allowance under this Act has been computed. Explanation 3. For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the Income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub- section (2) of section 148.\" 5.1.2 Hence, considering the above legal provisions before initiating action under section 147 of IT Act, the first and the foremost step is that AO should examine the information in his possession which he is going to rely on, for formation of his belief that income of the assessee has escaped assessment. The information should be specific clear and have nexus with the assessee. Further, the information should be available at the time of reopening of the assessment and not subsequent to the re- opening of the assessment by issuing a notice u/s. 148, 240 ITR (Nagpur) 12 & 311 ITR (P&H) 38.Further, the information should be specific and not general in nature. After the examination of the information, the AO has to form a belief that income has escaped assessment. Again for formation of the belief the information should be credible and should have a live link and nexus with the belief about escapement of income. The belief is to be formed on the basis of the information available with the AO at that time. He cannot go ahead in re-opening of the assessment, issue a notice and then search for the material. IT is also important to note that there should be reasons to form a belief and not reasons to suspect. Whatsoever strong the suspicion, it may be. 90 ITR Patna (TM) 90, 104 TTJ(Asr)353. Further, there is an another aspect also to formation of the belief and that is the satisfaction should be the own satisfaction of the AO and not the borrowed satisfaction. If the AO re-opens an assessment simply on the basis of satisfaction recorded by some other authority like Sales Tax, Excise or Director Investigation and does not record his own satisfaction re- opening by the assessment has been held as bad. 313 ITR (Raj 231, SLP dismissed (St) 27, 135 ITD (Ahd) I, 220 CTR Mad 335 & (Raj) 361 & (Del) 531 125 TTJ (Del) 816, 236 CTR (Del) 362. 5.1.3 The Hon'ble Supreme Court in the case of ACTT Vs. DHARIYA CONSTRUCTION CO. reported in 328 ITR 515 has held that having examined the record, we find that in this case, the department sought reopening of the assessment based on the opinion given by the District Valuation Officer (DVO). The opinion of the DVO per se is not an information for the purposes of reopening assessment under section ITA No.1843/Del/2023 5 | P a g e 147 of the Income Tax Act, 1961. The AO has to apply his mind to the information, if any, collected and must form a belief thereon. In the circumstances, there is not merit in the civil appeal. The department was not entitled to reopen the assessment. 5.1.4 After formation of the belief that income has escaped assessment, the next important step is that AO has to record reasons in writing that income has escaped assessment. The reasons should be clear specific and not vague, it should clearly point towards the escaped income and not based on any kind of suspicion, conjunctures and surmises. It is not only mandatory upon the AO to record the reasons but also it is mandatory upon the AO to supply the copy of the same to the asssessee after he files his return enabling him to make his case. 248 ITR (P&H) 266, 203 CTR (Bom) 232, 258 ITR (Bom) 183, 96 TTJ (Hyd) 832, 106 TTJ(JP) 114, 112 TTJ(Del) 445, 218 CTR (Guj) 53, 114 ITD (Del) 166, 340 ITR (Bom) 66, 350 ITR (Bom) 120, 350 ITR (Guj) 131. It is mandatory upon the AO to record the reasons for re-opening of the assessment. Now after filing of the return it is the right of the assessee to obtain the copy of the reasons recorded by the AO. Once this request is made the AO is bound to provide the copy of the reasons recorded within a reasonable time but before starting the reassessment proceedings. After receiving the copy of the reasons recorded the assessee shall within a reasonable time file his objections to the reasons recorded with the AO. It is important to note here that objections must be filed within a reasonable time before the initiation of the reassessment proceedings. In case the assessee files his objections, the objections must be disposed off by the AO by way of speaking order. This procedure was settled by the Hon'ble Apex Court in the famous case of GKN Drive Shaft reported in 259 ITR(SC) 19.The AO gets its power to issue the notice and start the reassessment proceedings from the reasons recorded by him. It is clearly settled by Hon'ble Bombay High Court, in the case of Jet Airways 331 ITR 236, Delhi High Court, in the case of Ranbaxy Laboratories and Punjab & Haryana High Court in the case of Atlas Cycle 180 ITR that, if no addition is made in the assessment order by the Assessing Officer in respect of the escaped income recorded in the reasons of re-opening and the other additions are made in respect of other escaped income, which has no nexus with the reasons recorded then the AO losses his jurisdiction for making reassessment and the assessment order passed by him was treated to be invalid. This judgment was followed and discussed by various Benches of ITAT and the High Court in the following judgements: 108 TTJ(Asr)I, 108 ITD (Agra)115, 239 CTR(Bom)183, 242 CTR(Del)117, 339 ITR (Pat)272, 253 CTR(Guj)321, 258 CTR(Guj)168, 128 TTJ(Mum)514, 217 ITA No.1843/Del/2023 6 | P a g e CTR(Raj)345, 237 CTR(Del)473, 220 CTR(Raj)629, 246 CTR(Chatti)255. 5.1.5 Admittedly, in impugned case, the issue relates to AY 2009-10, therefore, a notice u/s.148 of 1.T. Act can only be issued upto 31.03.2016. Accordingly, notice u/s.148 of 1.T. Act was issued on 03.03.2016, which is well within the statutory time limit. However, since an assessment u/s. 143(3) of I.T. Act was already completed in this case by an order dated 23.12.2011, therefore, proviso to section 147 of I.T. Act applies as the notice was issued after four years from the end of the relevant assessment year. The proviso to the aforesaid section places fetters on the powers of the AO to initiate re-assessment proceedings beyond the period of four years from the end of the relevant assessment year, where, the assessment has been completed u/s.143(3) of I.T. Act unless the income has escaped assessment by reason of the failure of the assessee to disclose fully and truly all material facts necessary for assessment. While recording the reasons, the AO has merely alleged that the assessee has failed to disclose full and true material facts. However, he has nowhere, in the reasons recorded stated any instance of failure on the part of the assessee to disclose any material facts in respect of issue sought to be re-assessed. The entire premise of the re-assessment was based on scrutiny and verification of the material already existing on record and not even an iota of any new tangible material which the assessee had failed to disclose was brought on record by the AO. It has been held in several decisions of Hon'ble High Courts that, if the reasons recorded for reopening the assessment after expiry of four years from the end of the relevant assessment year do not specify that the income has escaped assessment on account of default on failure on the part of the assessee to disclose material facts, the entire re-assessment proceeding and re-assessment order would be invalid. I find force in the argument of the appellant that conditions necessary as envisaged in proviso to section 147 of I.T. Act are not fulfilled by the AO while recording the reason for re-opening the assessment, hence; the issuance of notice u/s. 148 of I.T. Act is held to be bad in law and accordingly, the re-assessment proceeding is quashed. As a result, ground no.1 to 1.4. are allowed.” 4. We have given our thoughtful consideration to both the parties reiterating their respective stands against and in support of the impugned reopening. ITA No.1843/Del/2023 7 | P a g e 5. Learned CIT(DR), more particularly, invites our attention to the reopening reasons discussed in para 3 onwards of the assessment order dated 20.12.2016 that since the assessee was found to have inflated the corresponding acquisition of fixed assets purchased in the preceding assessment years itself, corresponding depreciation claim thereupon raised herein, deserves to be disallowed as a necessary corollary thereof. 6. The assessee, on the other hand, inter alia, submits that it had filed its return on 28.09.2009 under section 139(1) of the Act declaring loss of Rs.154,39,15,018/-, which stood assessed in a regular assessment under section 143(3) of the Act framed on 23rd December, 2011. 7. We are further taken to the learned Assessing Officer’s reopening reasons as well, wherein, there is not even an iota of allegation against the taxpayer that it had not disclosed the relevant particulars in its returns, the said section 143(3) assessment proceedings “fully” and “truly” in light of section 147 1st proviso, and, therefore, it is prayed that the learned CIT(A)’s detailed discussion quashing the impugned reopening itself be confirmed. ITA No.1843/Del/2023 8 | P a g e 8. Learned counsel further invites our attention to the assessee’s detailed paper-books wherein all the relevant details of facts as well as case law(s) have been duly compiled. Our attention is invited to pages 425 to 436 wherein the tribunal had settled the issue long back in the preceding assessment years 2005-06 and 2006-07 that the foregoing allegation raised at the department’s behest of alleged inflated purchases stood decided in assessee’s favour, as upheld in hon’ble jurisdictional high court’s itself dated 14.09.2016. The Revenue could hardly dispute that all these developments took place well before the learned Assessing Officer had set into motion his section 148/147 proceedings. We thus quote Hindustan Liver Ltd. Vs. R.B. Wadkar (2004) 268 ITR 332 (Bom.) that once there is no scope of any addition/deletion or substitution in the reopening reasons recorded by the learned prescribed authority as the same have to be read on standalone basis, the CIT(A) has rightly decided the instant legal issue in assessee’s favour and against the department whilst invoking section 147 1st proviso as well as going by the various judicial precedents. The same are hereby upheld in the Revenue’s instant appeal which stands rejected in very terms. 9. This Revenue’s appeal is dismissed. ITA No.1843/Del/2023 9 | P a g e Order pronounced in the open court on 29th January, 2025 Sd/- Sd/- (AVDHESH KUMAR MISHRA) (SATBEER SINGH GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 29th January, 2025. RK/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi "