GARDEN SILK MILLS LIMITED V. ASSISTANT COMMISIONER OF INCOME TAX CIRCLE - 1(1)(2)

SCA/16245/2018

AI Insights

Garden Silk Mills Limited challenged a notice issued by the Assistant Commissioner of Income Tax under Section 148 of the Income Tax Act, 1961, seeking to reopen their income tax assessment for the Assessment Year 2011-12. The original assessment had allowed deductions under Section 80IA for profits derived from power generation, which were partly disallowed by the Assessing Officer. The company appealed, and the disallowance was deleted by the Commissioner of Income Tax (Appeals). The reopening was based on the grounds that the company had claimed excessive deductions and had not fully disclosed material facts. The High Court found that the reopening was based on a change of opinion and that the issues were already addressed in the original assessment, leading to the quashing of the notice and proceedings.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 749934 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 01-03-2021
• Assessment Year: misc
• Other Referred Cases: CIT Vs. Kelvinator India Ltd, Asian Paint Ltd Vs. Dy. CIT, Gemini Leather Stores Vs. ITO, VXL India Capital Ltd Vs. Asst. CIT, Sayaji Hotels Ltd Vs. ITO, Amrit Feeds Ltd Vs. ACIT, ITO Vs. Sirpur Papers Mill Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: KALPANA RAVAL
• Assessee Lawyers: MANISH SHAH
• Keywords: Income tax reassessment; Power generation; Section 80IA; Tax Evasion; Misinterpretation of Act
• Section: 148; 143(3); 142(1); 143(2); 143(1); 80IA; 10CCB; 226

Judgement Text

"C/SCA/16245/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 16245 of 2018 ================================================================ GARDEN SILK MILLS LIMITED Versus ASSISTANT COMMISIONER OF INCOME TAX CIRCLE - 1(1)(2) ================================================================ Appearance: MR MANISH J SHAH(1320) for the Petitioner(s) No. 1 MRS KALPANA K RAVAL(1046) for the Respondent(s) No. 1 ================================================================ CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE ILESH J. VORA Date : 01/03/2021 ORAL ORDER (PER : HONOURABLE MR. JUSTICE ILESH J. VORA) 1. By filing this writ application under Article 226 of the Constitution of India, the writ applicant seeks to challenge the Notice dated 30.03.2018 issued by the respondent under Section 148 of the Income Tax Act, 1961 (‘the Act’ for short) seeking to reopen the writ applicant’s Income Tax assessment for the A.Y. 2011-12. 2. The brief facts leading to file this writ application can be summarized as under: 2.1 The assessee company - Garden Silk Limited is engaged in manufacturing and dealing in Men made Textiles POY. The assessee filed its return on 30.09.2011 declaring total income at Rs.70,32,21,512/- and claimed deduction under Section 80IA of the Rs.23,37,65,504/- in respect of various power generation Page 1 of 21 C/SCA/16245/2018 ORDER units. 2.2 The return of income was processed under Section 143(1) of the Act. 2.3 The case of the assessee was selected for scrutiny and notice under Section 143(2) of the Act was issued on 21.08.2012 and subsequently, notices under Section 142(1) of the Act dated 11.04.2013 and 26.08.2013 were issued along with detail questionnaire. The assessee company had submitted the explanation about justification of the deduction under Section 80IA and also furnished Form No. 10CCB in respect of all Power Generation Unit being the report of CA, as required under Section 7 of the 80IA of the Act. The Assessing Officer passed a detailed scrutiny order under Section 143(3), wherein, he disallowed Rs.3,65,25,780/- from the total claim made under Section 80IA of Rs. 23,37,65,504/- for generation of power consumed by other units. The assessee company preferred an appeal against the assessment order including the disallowance of Rs.3,65,25,860/-. The Appellate Authority i.e. the Commissioner of Income Tax (Appeals), allowed the Appeal and delete the addition of Rs.3,65,25,860/-, which was disallowed by the Assessing Officer out of total deduction claimed by the assessee Company under Section 80IA of the Act. 2.4 The notice dated 30.06.2018 under Section 148 of the Act was issued and at the request of assessee company, the reasons recorded have been furnished, which reads thus : Page 2 of 21 C/SCA/16245/2018 ORDER REASONS RECORDED “In connection to above referred subject, it is stated that notice u/s. 148 of the I. T. Act was issued on 30.03.2018, which was duly served upon you. You have filed your return of income in pursuance to notice u/s. 148 of the Act on 02.05.2018 and sought for reasons recorded fore­opening. Reasons recorded for reopening are as follows: i) The assessee company M/s. Garden Silk Mills Ltd., Surat deriving income from manufacturing of made textile and generation and distribution of power. The assessee filed return of income on 30.09.2011 for A.Y. 2011­12 declaring total income of Rs. 70,31,22,512/­. The same was processed by accepting the return of income. Further the case was selected for scrutiny, assessment u/s. 143(3) of the Act was completed on 30.03.2014 by determining total income of Rs.74,07,45,129/­. On perusal of records following facts of concealment of income are observed, ii) On going through the profit and loss account of the assessee company for A.Y. 2011­12, the assessee claimed deduction under Section 80IA in respect of profits derived from the generation of power of following five units. Units Date of Commencemen t of undertaking (F.Y.) Initial assessment year for claim of 80IA Profit undertaking Deduction u/s 80IA claimed Gas based Power General undertaking Vareli 2000-01 2010-11 5,68,918 5,68,918 Gas Turbine Power Generation Undertaking Jolva 2004-05 2010-11 4,10,96,209 4,10,96,209 Rolls Royes-I Gas Power Generation Undertaking Jolva 2005-06 2010-11 6,23,53,723 6,23,53,723 MMB Power Generation Undertaking Jolva 2002-03 2010-11 (-) 4,45,42,275 0 Rolls Royes-II Gas Power Generation Undertaking Jolva 2006-07 2010-11 6,19,46,527 6,19,46,527 Rolls Royes-III Gas Power Generation Undertaking Jolva 2008-09 2011-12 6,30,41,097 6,30,41,097 Total 22,90,06,474 It was observed from the unit­wise details provided along with Form 10CCB, that the assessee had claimed deduction on profit on sale of electricity and steam both in respect of following units: Page 3 of 21 C/SCA/16245/2018 ORDER Units Power Steam Total Percentage Proportion Power iii total Sale (%) Percentage Proportion of Steam in total sale (%) Profit claimed Eligible for units as per Form 10CCB Profit Allowable for claim u/s 80IA (excluding Proportion ate proportion of steam) Excess Allowed Gas Turbine Power Generatio n undertakin g 287283588 96989683 384273271 74.76 25.24 4109629 30723621 10372588 Gas based Power Generatio n under­ taking Vareli 17414167 16885627 191027094 91.16 8.84 568918 518629 50289 Rolls Rove­I Gas Power Generatio n Undertaki ng 219895015 53065093 272960108 80.56 19.14 61946527 49903748 12042779 Rolls Royes­II Gas Power Generatio n Undertaki ng 219895015 530655093 272960108 80.56 19.44 61946527 49903748 12042779 Rolls Royes­III Gas Power Generatio n Undertaki ng 276098703 53205396 331304099 83.14 16.66 63041097 52536522 10504575 Total 1446708486 229006474 18812539 18812539 40881115 As the word Power is not defined in the Act, therefore, while allowing the deduction u/s.80 IA, the intention of the legislature was required to be considered. For this purpose it is very important to consider the Budget Speech of the Hon‘ble Finance Minister dated 27th February,1993, Part­B Para­57 and 58 wherein it was stated that: “57. Electricity is a critical input for the future growth of our economy. I therefore propose to introduce a five­year tax holiday in respect of profits and gains of new industrial undertakings set up anywhere in India for either generation or veneration and distribution of power. The five year tax holiday will begin from the year of generation of power. The five­year tax holiday, in both these cases, Page 4 of 21 C/SCA/16245/2018 ORDER will be part of section 80IA of the Income Tax Act. At the end of the five­year period, these units will be entitled to the existing deduction under section 80­IA for the remaining period.” Hence, it is very clear that the intention of the legislature was explicit and unambiguous that the benefit of section 80­IA would be available only for units producing and distributing electricity and not for producing any other form of power. The steam generated is only a raw material which is used by the power plant to rotate the turbines. The steam which was transferred by the assessee company to its other units has low pressure is not able to rotate the turbines on its own and hence, steam generated is only and intermediate product and not a final product saleable in open market. The assessee is also not selling the same in open market, but to its other units and hence had captive usage of the same. The quantitative details of the actual generation and subsequent verification of the correctness of the captive usage was not available on record. Thus, by doing so, the eligible unit of the assessee company on one hand was claiming 100% deduction u/s. 80IA on sale of steam, on the other hand the other non eligible units decrease their profits by the amount of steam purchased by them from assessee company. Hence, it is a clear case of Tax evasion by misinterpreting the Act. In view of the above, the deduction u/s. 80IA(4)(iv) claimed on sale of steam is required to be disallowed. As per Form 10CCB the assessee company was eligible to claim deduction u/s.80IA of Rs.22,90,06,474/­ as against this the assesseé had claimed deduction u/s. 80IA to the tune of Rs.23,37,65,504 resulting into excess claim to the extent of Rs.47,59,030/­. The assessee had charged the transfer value of Rs.4.80 per unit at the time of transferring the same to its other unit claiming the same as market value based on tariff chart of Madhya Gujarat Vidyut Company Limited, erstwhile Gujarat Electricity Board (MGVCL). The said rate had two identifiable separate components of different nature viz. Energy Charges @ Rs.4.05 per unit and Time use charges @ Rs.0.75 per unit. The time use charge component was disallowed for working of 80IA and transfer value was taken at Rs.4.05. As a result the amount of Rs.3,65,25,860 Page 5 of 21 C/SCA/16245/2018 ORDER (23,37,65,504/4.80 x 0.75) was disallowed from deduction u/s. 80IA and the claim was restricted to Rs.19,72,39,644 (Rs.23,37,65,504 less Rs.3,65,25,860) u/s. 80 IA of the Act. However, as per Form 10CCB the assessee company was eligible for deduction of Rs.22,90,06,474 u/s. 80IA which was based on transfer value of Rs.4.80 per unit. The profit allowable for claim of deduction u/s. 80IA excluding proportionate portion of steam works out to Rs.18,81,25,359/­. Since, the above amount was based on the transfer value of Rs.4.80, which was revised to Rs.4.05, the revised profit allowable for claim of deduction u/s. 80IA excluding proportionate portion of steam works out to Rs.15,87,30,772 (Rs.18,81,25,35914.80 X 4.05). As against this, the assessee was allowed deduction of Rs. 19,72,39,644 u/s. 80IA resulting into excess allowance of deduction of RS.3,85,08,872 (Rs.19,72,39,644 less Rs.15,87,30,772) u/s. 80IA of the Act. Omission to disallow excess allowance of deduction of Rs.3,85,08,872 u/s. 80IA resulted into under assessment of income to that extent and consequent short levy of tax of Rs. 1, 73, 96,691/­. iii) It is further noticed by the AO that the assessee has claimed excess deduction u/s.80IA of Rs.3,85,08,872/­. iv) The above discrepancies were extracted from the material on records and submission filed by the assessee. v) After analyzing the data it came to the notice of the AO that the assessee has wrongly claimed deduction of Rs.3,85,08,872/­ which resulted under­ assessment his income, which required to be tax in the hand of the assessee. vi) In view of the above facts, the AO has reason to believe that the income to the extent of Rs.3,85,08,872/­ has escaped assessment within in the meaning of sec. 147 of the I.T. Act 1961 during the year. vii) In view of the above it is a case of underassessment of income amounting to Rs.3,85,08,872/­ and the tax effect thereon comes to Rs.1,73.96,691/­. Page 6 of 21 C/SCA/16245/2018 ORDER viii) In view of the above written fact that it is clear that the assessee has not disclosed true income for A.Y. 2011­12 and the assessee has under assessed his income to the extent of Rs.3,85,08,872/­ and the case attract provisions of explanation 1 of section 147 of the Act. Since 4 years from the end of the relevant year has expired in this case, the requirement to initiate proceedings u/s. 147 of the Act are reason to believe that income for the year under consideration has escaped assessment because of failure on part of the assessee to disclose fully and truly all material fact necessary for his assessment for the assessment year under consideration. I have carefully considered the assessment records and have noted that assessee has not fully and truly disclosed his income. Hence it is a fit case for issuing notice u/s.148. It is evident from the above discussion that in this case, the issue under consideration were never examined by the AO during the course of regular assessment / reassessment. “This fact is corroborated from the contents of notices issued by the AO u/s.143(3) proceedings. It is important to highlight here that material facts relevant for the on the issue(s) under consideration were not filed during the course of assessment proceedings and the same may be embedded in annual report, audited P & L A/c. Balance sheet and books of account in such manner that it would require due diligence by the A.O. to extract these information. For aforesaid reasons, it is not a case of change of opinion by the A.O. In this case more than four years have lapsed from the end of assessment year under consideration. Hence necessary sanction to issue notice u/s. 148 has been obtained separately of Principal Commissioner of Income Tax as per the provisions of section 151 of the Income Tax Act.” 2.5 The assessee company raised its objection vide its communication dated 26.07.2018, namely on the following grounds : (i) No satisfaction of preconditions for invoking the provisions of Section 147; (ii) Reopening beyond the period of 4 years is not Page 7 of 21 C/SCA/16245/2018 ORDER permissible, when there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment; (iii) Reassessment proceedings initiated on mere change of opinion on the part of the Assessing Officer, as the present reopening is not on the basis of any new and/or fresh tangible materials. The Assessing Officer has proceeded on the basis of the disclosures forming part of the original assessment which merely amounts to review of the case assessed earlier; (iv) No case can be reopened on account of the reasons recorded by Assessing officer which are subject matter of any appeal, reference or revision; 2.6 The aforesaid objections came to be rejected by the respondent authority vide order dated 17.09.2018. 3. In the aforesaid factual background, being aggrieved with the action of the respondent, the assessee has come up before this Court by filing present writ application. 4. We have heard Mr. M.J. Shah, the learned counsel appearing for the writ applicant and Mrs. Kalpana K. Raval, the learned Senior Standing Counsel appearing for the revenue. 5. Mr. M.J. Shah, the learned counsel appearing for the writ applicant, raised the following contentions: 5.1 It was submitted that the condition precedent for invoking the provisions of Section 147 is not satisfied. In this regard, he Page 8 of 21 C/SCA/16245/2018 ORDER pointed out that reopening of the assessment beyond 4 years two conditions are required to be fulfilled namely (i) there must be a reason to believe that income or profit or gain chargeable to tax had escaped assessment and (ii) The Assessing Officer must have reason to believe that such an escapement or underassessment was occasioned either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. The learned counsel further submitted that in the present case, both the conditions do not exists and therefore, reopening is unjustified and uncalled for, as company had fully and truly disclosed all the material facts necessary for assessment and the then Assessing Officer made detailed inquiry into the issue and partly allowed the major portion of claim under Section 80IA made by the Company in respect of captive power generation unit. 5.2 It was vehemently contended that the present reassessment proceedings initiated is mere a change of opinion on the part of the Assessing officer. In this regard, it was pointed out that the then Assessing Officer had issued notice under Section 142 (1) of the Act for the original assessment made under Section 143(3) of the Act and in response to the notice, the assessee was called for the details/information regarding justification of the claim of deduction under Section 80IA along with complete working of profit and gain eligible for such claim and after considering the explanation and other materials, the claim was partly disallowed to the extent of Rs.3,65,25,860/- and the addition thereof, was deleted by the Appellate Authority vide Page 9 of 21 C/SCA/16245/2018 ORDER order dated 06.07.2015. Thus, in these factual background, the learned counsel submitted that the then Assessing Officer had formed an opinion while passing earlier assessment order and now issuance of notice under Section 148 for the reopening of the assessment on the same material, reviewing the same issue, in the absence of any new tangible material, by the succeeding Assessing Officer cannot be sustained on mere a change of opinion. 6. In view of the above contentions, the learned counsel submitted that the notice dated 30.03.2018 and the order disposing of the objections are bad in law and contrary to the provisions of Section 147 of the Act and therefore, he prays that the writ application having merits, may be allowed. 7. Ms. Kalpana Raval, learned Standing Counsel appearing for the revenue vehemently opposed the writ application, contending that the revenue is justified in reopening the assessment, as the assessee company failed to disclose fully and truly the relevant and necessary material for the assessment for the year under consideration. Referring to the affidavit-in-reply, she submitted that the assessee has claimed excessive claim with regard to generation of power. In this regard, relying on the reasons recorded, it was pointed out that the issue raised in the present case was not discussed in the earlier assessment order and no inquiry was made by the then Assessing Officer and therefore, the Assessing Officer is not precluded to reopen the assessment on the ground that the assessee company failed to disclose true facts while Page 10 of 21 C/SCA/16245/2018 ORDER claiming the deduction under Section 80IA of the Act and had misled the revenue while claiming the amount. 8. In view of the contention raised by the revenue, Ms. Kalpana Raval, the learned Standing Counsel prays that there being no merits in the writ application, the same may be rejected. 9. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is whether the revenue is justified in reopening the assessment for the year A.Y. 2011-12. 10. It is a settled law that in order to assume jurisdiction under Section 147, where the assessment has been made under Section 143(3), two conditions are required to be satisfied. (a) The Assessing officer must have reason to believe that the income chargeable to tax have escaped assessment (b) Such escapement occurred by reason of failure on the part of the assessee either (a) to make a return of income under Section 139 or in response to the notice issued under sub-section (1) of Section 142 or section 148 or (b) to disclose fully and truly all the material facts necessary for his assessment for that purpose. 11. The writ applicant has challenged the reopening proceeding substantially on the grounds that (i) the proceedings initiated is mere a change of opinion on the part of the Assessing Office as the issue already decided in the previous assessment order and (ii) no case can be reopened on account of the reasons recorded by the Assessing Officer which are subject matter of any appeal, reference Page 11 of 21 C/SCA/16245/2018 ORDER or revision. 12. It is a settled law that mere a change of opinion cannot be a basis for reopening completed assessment, where, in the previous assessment proceedings the Assessing Office has applied his mind and taken a conscious decision on a particular matter and issue. 13. In the case of CIT Vs. Kelvinator India Ltd (2010) 320 ITR 561 (SC), wherein, it was held that the concept of “change of opinion” must be treated as in-built test to check the abuse power by AO. Hence, after 1.4.1989, the AO has power to reopen an assessment provided there must be a “tangible material” to come to the conclusion that there was an escapement of income from assessment. The relevant paras 5, 6 and 7 reads thus; “5…...where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post­1st April, 1989, power to re­open is much wider. However, one needs to give a schematic interpretation to the words “reason to believe” failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re­open assessments on the basis of “mere change of opinion”, which cannot be per se reason to reopen. 6. We must also keep in mind the conceptual difference between power to review and power to re­assess. The Assessing Officer has no power to review; he has the power to re­assess. But re­assessment has to be based on fulfillment of certain pre­condition and if the concept of “change of opinion” is removed, as contended on behalf of the Department, then, in the garb of re­opening the assessment, review would take place. 7. One must treat the concept of “change of opinion” as an inbuilt test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re­open, provided there is “tangible material” to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief.” Page 12 of 21 C/SCA/16245/2018 ORDER 14. We take notice of the fact that the case of the assessee company was selected for scrutiny by issuing notices under Section 143(2) and 142 of the Act. Questionnaires were issued to which the assessee company had responded by furnishing details and documents about the deduction under Section 80IA and finally the then Assessing Officer made the assessment and detail scrutiny order under Section 143 (3) of the Act was passed, disallowing the deduction to the extent of Rs.3,65,25,780/- from the total claim made under Section 80IA of Rs.23,37,65,405/-. The order was challenged before the CIT (Appeals) and same was allowed by deleting the addition of Rs.3,65,25,860/-. Thereafter, the Assessing Officer has issued impugned notice dated 30.06.2018. 15. The revenue has sought to reopen the assessment mainly on the ground that the assessee company had claimed deduction on “profit on sale of electricity” and “steam” both in respect of their different units, as a result, the deduction under Section 80IA(4)(iv) claimed on sale of steam is required to be disallowed and same facts having not been fully and truly disclosed by the assessee. 16. We have heard the learned counsel appearing for the parties at length and perused the materials on record. 17. Before adverting to the issues raised by both the parties, it would be useful to refer the original assessment order framed under Section 143 of the Act, vide order dated 30.03.2014, wherein, the issue of excess claim of deduction was dealt with at length in para- 4 of the order. The relevant portion reads thus: Page 13 of 21 C/SCA/16245/2018 ORDER “Para­4 Impermissibility of claim of deduction under Section 80IA : 4.1 : On verification of computation of income, it is noticed that the assessee had claimed deduction under Section 80IA of the Act to the tune of Rs.23,37,65,504/­ for generation of power. The assessee has generated the power and utilized / transferred the same to its other unit. The assessee has charged the transfer value while applying the rate of per unit at Rs.4.80/­ claiming it as market value and during the course of assessment proceedings, the assessee was asked to explain why the demand charges and time used charges should not be disallowed from deduction under Section 80IA as these are over and above the energy charge, which is actual sale price of the energy and both charges are not sale price but these are the additional charge. 4.3 The explanation of the assessee that they have submitted statement and Form no. 10B of the Act and further stated that in the earlier years also claim was considered and allowed by the Assessing Officer and legally the company is entitled for the claim. 4.14 In view of the above, transfer value to the extent of time used charge of Rs.3,65,25,880/­ at the rate of 0.75 is liable to the disallowed from the deduction under Section 80IA and we brought to taxation as the income of the assessee company.” 18. A bare perusal of the reasons recorded for reopening reveals that the Assessing Officer upon perusal of the records found that the assessee Company has concealed its income. The Assessing Officer while recording the reasons, has verified the profit and loss account and case records and he has noticed deduction under Section 80IA towards profit of business of the company from generation of power and during the A.Y. 2011-12, the assessee company claimed deduction under Section 80IA in respect of profits derived from a generation of power from its 5 units and after considering the unit wise details, provided by the company along with IOCCD, he further noticed that the assessee company Page 14 of 21 C/SCA/16245/2018 ORDER had claimed deduction on profit on sale of electricity and steam in respect of some of the units as referred in the reasons. The Assessing Officer mainly observed thus: “the benefits under Section 80IA would be available only for the units producing electricity and not for producing any other form of power. In this context, the Assessing Officer has opined that the generation of the steam is only a raw material, which is used by the power plant to rotate the turbines and hence, steam generation is only an intermediate product and not a final product saleable in the open market and therefore, deduction claimed on sale of steam is required to be disallowed to the extent of Rs.3,85,08,872/- for which, the company has not disclosed true income and the same issue was never examined by the then Assessing Officer during the course of regular assessment.” 19. In the background of the aforesaid facts, we have examined all the material facts as well as reasons recorded for reopening of the assessment for the year under consideration. We are of the opinion that the impugned action on the part of the respondent to issue Notice is without authority of law mainly on the ground of change of opinion and the claim under Section 80IA in respect of time usage charge component is still pending for disposal before the Second Appellate Authority. Therefore, we are of the firm view that the impugned notice as well as the proceeding are required to be quashed and set aside for the following reasons: (i) The then Assessing Officer while framing the assessment order under Section 143(3), had raised the issue of deduction and in response to issue No. (37), the assessee company had furnished all the details / information along with the complete working of profit and gains eligible for the claim Page 15 of 21 C/SCA/16245/2018 ORDER and after considering all the primary materials, disclosed by the assessee company, the erstwhile Assessing Officer assigned cogent reasons and discussed the issue at length and disallowed the claim of deduction to the extent of Rs.3,65,25,860/- out of total claim of Rs.23,37,65,504/- stating that deduction is available only in relation to profits and gain derived from the generation of powers. Now on the same set of facts and materials, the Assessing Officer formed the belief about the escapement of assessment which is nothing but mere a change of opinion on the facts which were already before the Assessing Officer while making the first assessment on which conscious application of mind is reflected from the proceedings. Therefore, on the issue of steam power, the relevant material was available on record, however, the then Assessing Officer failed to apply his mind to that material in making the assessment order, now in the present proceedings, again the Assessing Officer cannot take recourse to the provisions of Section 147 for the failure of the Assessing Officer to apply his mind to the material which according to him is relevant. In this regard, we may refer to the following decisions, wherein, the identical issue being decided in favour of the assessee: (a) In Asian Paint Ltd Vs. Dy. CIT (2009) 308 ITR 195 Bombay, it was held that since the AO had failed to apply his mind to the relevant material while framing the assessment order, he could not take advantage of his own wrong and reopen the assessment under Section 147 of the Act. Page 16 of 21 C/SCA/16245/2018 ORDER (b) In the case of Gemini Leather Stores Vs. ITO (1975) 100 ITR 1 (SC), wherein, it was held that after discovery of the primary facts relating to the transactions evidence by the drafts, it was for the officer to make necessary inquiries and draw proper inference as to whether the amounts represented by the drafts could be treated as part of total income of the appellant. This, the officer did not do. It was plainly a case of oversight and it could not be said that the income chargeable to tax had escaped assessment by reason of the omission or failure on the part of appellant to disclose fully and truly all material facts. He could not, thereafter, take recourse to section 170A to remedy the error resulting from his own oversight. (c) In the decision of this Court in case of VXL India Capital Ltd Vs. Asst. CIT (1995) 215 ITR 295, wherein, it was held that “ the scope of Section 147 of the Act is not for reviewing its earlier order sou-motu, irrespective of there being any material to come to a different conclusion apart from just having second thoughts about the inferences drawn earlier.” (d) In Sayaji Hotels Ltd Vs. ITO, (2011) 339 ITR 499 (Gujarat), it was held that it was only a case of successor AO holding a different opinion as regard the computation of book profit then, that of the AO who framed the original assessment. The reopening was, therefore, based on mere a change of opinion, and as such could not be Page 17 of 21 C/SCA/16245/2018 ORDER sustained. (e) In Amrit Feeds Ltd Vs. ACIT (2011) 51 BRT 315 (cal.), wherein, it was held that if the AO had questioned the entitlement of assessee to deduction under 80IB in the assessment in question, it was their mistake. All the information regarding the alleged manufacturing process was before them. After the time limit for making assessment or reassessment has long expired, the revenue cannot turn round take recourse to an extraordinary provision which is section 147 and attempt to reopen concluded reassessment. If such exercise is permitted, that would be quite contrary to the intention of the Act. In that case, there would be no finality to any assessment. Then, at any point of time, after expiry of time, the AO can reopen assessment. That would plainly be against the statutory policy. Therefore, the impugned notice and proceedings are quashed and set aside. (f) In ITO Vs. Sirpur Papers Mill Ltd (1978) 113 ITR 393 (AP), it was held that where the assessee discloses his all primary facts to the Income Tax officer and if officer does not draw appropriate inference on the facts placed before him and complete the assessment, the assessment cannot be reopened under Section 147(a) merely on the ground that subsequently he came to regard to the conclusion he reached earlier as erroneous and therefore, the AO cannot take recourse to the reassessment proceedings in order to correct the mistake on account of Page 18 of 21 C/SCA/16245/2018 ORDER lack of inquiry, deficiency in inquiry, total oversight or inadvertence on the part of the AO, while making the assessment, sought to be reopened. (ii) In view of the legal proposition and considering the facts and circumstances of the present case, it appears that on the issue of steam power, the succeeding Assessing Officer has different opinion and it seems to be re-look on the issue decided in previous assessment. The record indicates that special queries were raised on the issue of allowances made under 80IA of the Act. The calculation of deduction works out by the assessee company was reflected in the audited books of accounts and it was not hidden. Therefore, Assessing Officer could have possibly with due diligence discover the incorrect allowances by drawing heavy inference. On the contrary, in the previous assessment proceedings, the Assessing Officer was duty bound to go through the issue of dis-allowances claimed on the basis of steam power generation, before completing the assessment. Therefore, now mere change of opinion cannot be basis for reopening completed assessment, where in the previous assessment proceedings, the then Assessing Officer has applied his mind and taken a conscious decision in respect of time usage charge component and partly disallowed the claim made under Section 80IA of the Act. (iii) In the present case previous assessment order dated 30.03.2014 was challenged before the CIT (Appeals) with respect to dis-allowance of claim under Section 80IA of the Page 19 of 21 C/SCA/16245/2018 ORDER Act. The first Appellate Authority vide order dated 06.07.2015, deleted the addition of Rs.3,65,25,680/- which was disallowed by the Assessing Officer, out of total deduction claimed by the assessee under Section 80IA of the Act. In this context, we may refer to the 3rd proviso to Section 147 of the Act, which is reproduced as under : “147. Income escaping assessment : Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matter of any appeal, reference or revision, which is chargeable to tax and has escaped assess” From the aforesaid proviso, it can be seen that the AO may assess or reassess such income, which is chargeable to tax and has escape assessment, other than the income involving matters which are the subject matters of any appeal, reference or revision. It implies that the reassessment proceedings under Section 147 of the Act cannot be resorted to in respect of income which is subject matter of an appeal, reference or revision. In this regard, a reference can be made to the case of Prashant Project Ltd. Vs. ACIT (2011) 333 ITR 368 (Bom), wherein, the assessment was concluded and deduction under Section 80HHC was accordingly recomputed. The issue was carried in Appeal by the assessee. The CITA, accepted the contention of the assessee and thereafter, the assessment was reopened on the basis that the assessee had claimed special deduction under Section 80 HHC. The High Court was of the view that, as per 2nd proviso of Section 147, when very issue on which the Page 20 of 21 C/SCA/16245/2018 ORDER assessment was sought to reopen was canvassed in appeal and was determined in the appellate proceedings. Therefore, same issue could not lawfully form the basis of the notice for reopening of the assessment and accordingly, the assessment proceedings held invalid. (iv) Bearing in mind the legal provision as well as the judicial pronouncements on the issue, we are of the view that in the present case, the issue regarding disallowance of the claim is pending for disposal before 2nd Appellate Authority and in view of the 3rd proviso to Section 147 of the Act, the respondent cannot reopen the assessment invoking the provision of Section 147. (v) In the present case, considering the materials on record, we are of the view that at relevant time, there was no omission or failure to disclose the truly and fully all primary material facts for the assessment by the assessee company. Therefore, the reopening on the ground that the assessee failed to disclose the facts regarding calculation workout for the allowances having not been disclosed has no merits. 20. In view of the discussions made hereinabove, the writ application succeeds and consequently, we hereby quashed and set aside the impugned notice and proceedings. (J. B. PARDIWALA, J) (ILESH J. VORA,J) P.S. JOSHI Page 21 of 21 "