ACIT, Faridabad V. M/s. Richa Industries Ltd., Faridabad

ITA 1220/DEL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5095 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 17-05-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 04-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: F R MEENA
• Keywords: Reopening of assessment; Depreciation; Audit objection; Tangible material; Difference of opinion; Assessment record; Reason to believe; Change of opinion; Reassessment proceedings; Capital expenditure
• Section: 143(3); 80IB; 32; 147; 148; 154; 11

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F : NEW DELHI BEFORE SHRI BHAVNESH SAINI , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 1220/DEL/2013 (ASSESSMENT YEAR: 2006 - 07 ) ACIT, CIRCLE - I, BLOCK - B, CGO COMPLEX, NH - IV, FARIDABAD VS. RICHA INDUSTRIES LTD, V&PO: KANWARA KHERI JASANA ROAD, NEAR LINGYAS INSTITUTE OF MANAGEMENT AND TECHNOLOGY, FARIDABAD PAN:AAACR7943J (APPELLANT) (RESPONDENT) CO NO. 118/DEL/2013 (IN ITA NO. 1220/DEL/2013 ) (ASSESSMENT YEAR: 2006 - 07) RICHA INDUSTRIES LTD, V&PO: KANWARA KHERI JASANA ROAD, NEAR LINGYAS INSTITUTE OF MANAGEMENT AND TECHNOLOGY, FARIDABAD PAN:AAACR7943J VS. ACIT, CIRCLE - I, BLOCK - B, CGO COMPLEX, NH - IV, FARIDABAD (APPELLANT) (RESPONDENT) REVENUE BY : SHRI FR MEENA, SR. DR ASSESSEE BY: SH RI VIJAY KUMAR SINGLA, CA DATE OF HEARING 17/05 / 2017 DATE OF PRONOUNCEMENT 08 / 08 / 2017 O R D E R PER PRASHANT MAHARISHI, A. M. 1. THIS IS AN APPEAL FILED BY THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT ( A) - FARIDABAD DATED 21.12.2012 FOR THE ASSESSMENT YEAR 2006 - 07. 2. THE REVENUE HAS RAISED THE SOLE GROUND OF APPEAL AS UNDER: - WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD CIT(A) WAS RIGHT IN LAW IN ANNULLING THE ASSESSMENT ORDER PASSED BY THE LD ASSESSING OFFICER AND THEREBY NOT ADJUDICATING ON MERITS OF THE ADDITION MADE BY THE AO. IGNORING THE FINDINGS OF HONBLE APEX COURT IN THE CASE OF CIT VS. PVS BEEDIES PVT. LTD ( 237 ITR 13) WHEREIN IT WAS HELD THAT RE - OPENING THE CASE PAGE 2 OF 8 ON THE BAS IS OF FACTUAL ERRORS POINTED BY THE AUDIT PARTY IS PERMISSIBLE UNDER THE LAW. 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN REJECTING THE RESPONDENT FOLLOWING GROUNDS OF APPEAL: - I. THAT ON LAW, FACTS AND CIRCUMSTANCES OF THE CASE, THE INITIATION OF PROCEEDING U/S 147 OF THE IT ACT , 1961 IS NOT VALID AND LIABLE TO BE QUASHED ON THE FOLLOWING GROUND. (A) THE REASONS RECORDED U/S 148(2) OF THE ACT, 1961 BEARS NO DATES. THE REASONS WERE RECORDED AFTER THE ISSUE OF NOTICE U/S 148 DATED 25.06.2010. 4. THE BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF KNITTING AND PROCESSING OF FABRICS, FILED ITS RETURN OF INCOME FOR AY 2006 - 07 ON 30.11.20 06 SHOWING INCOME OF RS. 13865605/ - . SUBSEQUENTLY, ASSESSMENT U/S 143(3) OF THE ACT WAS PASSED ON 08.12.2008 DETERMINING TOTAL INCOME OF RS. 14130950/ - WHICH WAS SUBSEQUENTLY RECTIFIED U/S 154 ON 06.01.2009. IT WAS FURTHER RECTIFIED ONCE AGAIN ON 20.05.200 9 DETERMINING TOTAL INCOME AT RS. 13985797/ - . SUBSEQUENTLY, NOTICE U/S 148 WAS ISSUED ON 25.06.2010 RECORDING REASONS U/S 147 OF THE ACT. IN RESPONSE TO THIS, THE ASSESSEE SUBMITTED THAT ORIGINAL RETURN FILED MAY BE TREATED AS RETURN IN RESPONSE TO NOTICE U/S 148 OF THE ACT. IN RESPONSE TO THE LETTER OF THE ASSESSEE REQUESTING FOR THE REASONS RECORDED THE LD ASSESSING OFFICER FURNISHED THE REASONS, WHICH ARE AT PAGE NO. 18 TO 20 OF THE PA PER BOOK. ASSESSEE FILED OBJECTION AGAINST THE REOPENING PROCEEDINGS VIDE LETTER DATED 20.07.2011 WHICH IS PLACED AT PAGE NO. 21 TO 53 OF THE PAPER BOOK. CONSEQUENTLY, THE ASSESSMENT U/S 143(3) WAS FRAMED AND THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED A T RS. 21939080/ - VIDE ORDER DATED 23.12.2011. ASSESSEE PREFERRED APPEAL BEFORE THE LD CIT ( A) WHEREIN, THE LD CIT ( A) ANNULLED THE ORDER FOR THE REASON THAT THE ASSESSMENT HAS BEEN DONE ON THE BASIS OF PREEXISTING MATERIAL AND NOTHING NEW HAS COME TO THE K NOWLEDGE OF THE AO. THE LD CIT ( A ) RELYING ON THE ORDER OF CIT VS. KELVINATOR INDIA LTD. 256 ITR 1 HELD SO. FURTHERMORE, HE RELYING ON THE DECISION OF HON'BLE SUPREME COURT IN 321 ITR 561 HELD THAT IT IS MERELY A CHANGE OF OPINION AND THEREFORE, REASSESSME NT CANNOT BE SUSTAINED. AGGRIEVED BY THE ORDER OF THE LD CIT ( A) THE REVENUE IS IN APPEAL BEFORE US RAISING ABOVE SOLITARY GROUND. THE ASSESSEE HAS ALSO FILED A CROSS OBJECTION STATING THAT REASONS RECORDED U/S 148 DOES NOT HAVE THE DATE AND THEREFORE, SAME WERE RECORDED AFTER ISSUE OF NOTICE U/S 148 OF THE ACT. HENCE , THE REVENUE AND ASSESSEE BOTH HAVE CHALLENGED THE ORDER OF LD CIT ( A). 5. COMING TO THE CROSS OBJECTION OF THE ASSESSEE WHEREIN THE DATE OF REOPENING IS CHALLENGED, THE REVENUE HAS PRODUCED THE RELEVANT ASSESSMENT RECORDS AND ON VERIFICATION OF THE SAME WE FOUND THAT THE AO HAS RECORDED THE REASONS ON PAGE 3 OF 8 25.06.2010 I.E. ON THE DATE ON WHICH THE NOTICE OF REOPENING IS ISSUED. IN VIEW OF THIS THE CROSS OBJECTION FILED BY THE ASSESSEE DOES NOT SURV IVE HENCE, DISMISSED. 6. COMING TO THE APPEAL OF THE REVENUE THE LD DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUBMITTED THAT THERE IS INFIRMITY IN THE ORDER OF THE LD ASSESSING OFFICER IN REOPENING THE ASSESSMENT PROCEEDINGS. HE SUBMITTED THAT CLAIM OF THE ASSE SSEE HAS NOT COMPUTED THE BOOK PROFIT IN PROPER MANNER AS WELL AS THE CLAIM OF THE DEDUCTION U/S 80IB IS ALSO REQUIRED TO BE VERIFIED AS IT IS CLAIMED AT MORE THAN ELIGIBLE. 7. THE LD AR VEHEMENTLY SUBMITTED THAT REOPENING HAS BEEN MADE WITHOUT ANY DUE MATERI AL AND MERELY ON CHANGE OF OPINION. HE SUBMITTED THAT IDENTICAL REASONS IN EARLIER YEARS THE COORDINATE BENCH HAS DECIDED THE ISSUE IN ITA NO; 1476/DEL/2014 FOR AY 2005 - 06 IN FAVOUR OF THE ASSESSEE SETTING ASIDE THE REASSESSMENT PROCEEDINGS. HE FURTHER SUB MITTED THAT REOPENING HAS BEEN MADE ON THE BASIS OF REPORT OF REVENUE AUDIT OBJECTION DATED 12.05.2010. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. THE REASONS RECORDED BY THE ASSESSING OFFICER ARE AS UNDER: - F NO.ACIT/C - I,/FBD/10 - 11/ DATED: 23.02.2011 TO, THE PRINCIPAL OFFICER, M/S RICHA INDUSTRIES, FORMERLY KNOWN AS: M/S RICHA KNITS LTD., VPO - KAWNRA, KHERI JASANA ROAD, NEAR LINGYAS INSTITUTE OF MANAGEMENT & TECHNOLOGY, FARIDABAD SIR, SUB: - RE - ASSESSMENT PROCEEDINGS U/S 147 OF THE INCOM E TAX ACT, 1961 FOR THE A.Y. 2006 - 07 - REGARDING KINDLY REFER TO THE ABOVE. IN THIS CONNECTION, IT IS TO INFORM YOU THAT PROCEEDINGS U/S 147 OF THE INCOME TAX ACT, 1961 WERE INITIATED AFTER DULY RECORDED REASONS AND NOTICE U/S 148 DATED 25.06.2010 WAS SENT IN THE ABOVE NOTED CASE. IT IS NOTICED THAT COMPLIANCE TO THE ABOVE REFERRE D NOTICE HAS NOT BEEN MADE TILL DATE. YOU ARE REQUESTED TO COMPLY WITH THE ABOVE SAID NOTICE. IN CASE, YOU HAVE ALREADY COMPLIED WITH THE NOTICE, THE EVIDENCE OF COMPLIANCE KINDLY BE FURNISHED. COPY OF REASONS RECORDED FOR INITIATING PROCEEDINGS U/S 147 IS ENCLOSED HEREWITH. YOUR REPLY SHOULD REACH IN THE OFFICE OF UNDERSIGNED BY 04.03,201 1 . PAGE 4 OF 8 ENDS: AS ABOVE YOURS FAITHFULLY, (SUDHA SINGG) ASSTT. COMMISSIONER OF TAX, CIRCLE - 1, FARIDABAD I O FFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCILE - 1, NEW CGO COMPLEX, NH IV, FARIDABAD 1. NAM E AND ADDRESS OF THE ASSESSEE M/S RICHA INDUSTRIES LTD. (FORMERLY KNOWN AS RICHA KNITS LTD.) FARIDABAD 2. ASSESSMENT YEAR PAN 2006 - 07 3. PAN: AAACR7943J 4. STATUS COMPANY REASONS FOR INITIATING PROCEEDINGS U/S 147 OF THE INCOME TAX ACT. 1961 REGULAR ASSESSMENT OF THE ASSESSEE WAS COMPLETED AT INCOME OF RS.1,41,30,950/ - ON 08.12.2008 WHICH WAS REDUCED TO RS 1,39,56,050. - ' - AS A RESULT OF RECTIFICATION U/S 154 CARRIED OUT ON 20.05.2009. IT HAS BEEN NOTBED THAT ASSESSEE CLAIMED DEDUCTION OF RS.51,15,845/ - UNDER SECTION 80IB ON PROFITS OF MANESAR UNIT WHICH INCLUDES INCOME OF RS.49,43,295/ - CREDITED AS OTHER INCOME IN THE PROFIT AND LOSS ACCOUNT OF THAT UNIT. ACTUALLY, THE WORD 'DERIVED FROM' USED IN SECTION 80IB IS DIRECTLY RELATED TO THE DIRECT ACTIVITIES OF THE INDUSTRIAL UNDERTAKING. THEREFORE, OTHER INCOME OF RS.49,43,295/ - DID NOT FORM PART OF INCOME FROM DIRECT ACTIVITIES AND WHICH DID NOT QUALIFY FOR DEDUCTION U/S 80IB. LN VIEW OF THE ABOVE FACTS I HAVE REASON TO BELIEVE THAT THE ASSESSEE COMPANY HAS FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS IN ITS RETURN OF INCOME FOR THE A.Y. 2006 - 07 BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE AS THE ASSESSEE HAD CL AIMED EXCESS DEDUCTION UNDER SECTION 80IB OF THE L.T. ACT. FURTHER THE ASSESSEE RECEIVED RS.4,63,38,480/ - AS SUBSIDY FOR SETTING UP OF NEW UNIT/ACQUIRING NEW FIXED ASSETS IN MANESAR UNIT AND ACCOUNTED FOR THE SUBSIDY IN THE BOOKS OF ACCOUNT AS CAPITAL REC EIPT WHEREAS AS PER PROVISIONS OF SECTION 43(1) WITH EXPLANATION 10, ASSESSEE WAS REQUIRED TO REDUCE THE COST OF ASSETS ACQUIRED FOR THE UNIT. AS PER PROVISIONS OF SECTION 32 READ WITH SECTION 43(1), THE COST OF ASSETS MEANS ACTUAL COST TO THE ASSESSEE RED UCED BY THAT PORTION OF COST WHICH WAS MET DIRECTLY OR INDIRECTLY BY ANY OTHER PERSON. THUS, SUBSIDY OF LOAN RAISED FOR PURCHASE OF PLANT AND MACHINERY/ ASSETS WOULD MEAN THE COST OF NEW FIXED ASSETS WAS MET BY BANKS/FINANCIAL INSTITUTIONS AND THEREFORE, T HE ASSESSEE WAS REQUIRED TO REDUCE THE COST OF ASSETS BY THE AMOUNT MET BY THE BANKS/FINANCIAL INSTITUTIONS FOR CALCULATING THE DEPRECIATION THEREUPON. BUT THE ASSESSEE HAD CLAIMED THE DEPRECIATION ON THE PLANT & MACHINERY WITHOUT REDUCING THE COST MET BY THE BAR - KS AND FINANCIAL INSTITUTION. THUS, THE ASSESSEE HAS CLAIMED EXCESS DEPRECIATION OL RS.1,06,92,601/ - AND CARRIED OVER EXCESS W.D.V. TO THE EXTENT OF RS. 2,57,45.879/ - IN THE NEXT YEAR. BESIDES, BUILDING COSTING RS. 2,70,28,773/ - AND MACHINERY COSTIN G RS.9,20,91,867/ - WAS TRANSFERRED IN MANESAR UNIT FROM CAPITAL WORK IN PROGRESS WHEREIN INTEREST OF RS.5,07,689/ - ON BORROWED FUNDS WAS CAPITALIZED WHEREAS IT WAS REQUIRED TO BE CAPITALIZED PAGE 5 OF 8 BY TAKING RATE OF INTEREST @ 12% OF TOTAL INVESTMENT EN MACHINERY AND BUILDING AMOUNTING TO RS.1 1,91,20,6407 - WHICH WORKS OUT AT RS.1,42,94,476//. IN VIEW OF THE ABOVE FACTS, I HAVE REASON TO BELIEVE THAT THE ASSESSEE COMPANY HAS FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS IN ITS RETURN OF INCOME FOR THE A.Y. 2005 - 06 BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE. IT HAS FURTHER BEEN NOTICED THAT BUILDING ACCOUNTS REVEALS THAT ASSESSEE PURCHASED A LAND FOR RS. 5 LACS AND CLAIMED DEPRECIATION ON IT. AS PER PROVISIONS OF I.T. ACT., NO DEPRECIATION IS ADMISS IBLE ON THE VALUE OF LAND. MOREOVER, ASSESSEE HAS CLAIMED DEPRECIATION ON SAHARA MALL PURCHASED ON 31.03.2006 FOR RS.49,10,873/ - . SINCE THE BUILDING WAS NOT UTILIZED DURING THE YEAR THE DEPRECIATION CLAIMED BY THE ASSESSEE IS NOT ALLOWABLE AS THE SAME WAS NOT PUT TO USE AS THE SAME WAS PURCHASED ON THE LAST DAY OF THE YEAR. THUS, THE ASSESSEE CLAIMED EXCESS DEPRECIATION AMOUNTING TO RS. 2, 70,543 / - ON THIS ACCOUNT/IN VIEW OF THE ABOVE FACTS, I HAVE REASON TO BELIEVE THAT THE ASSESSEE COMPANY HAS FAILED TO D ISCLOSE FULLY AND TRULY ALL MATERIAL FACTS IN ITS RETURN OF INCOME FOR THE A.Y. 2005 - 06 OF REASON OF THE FAILURE ON THE PART OF THE ASSESSEE. IN ADDITION TO THE ABOVE, IT HAS ALSO BEEN NOTICED THAT THE ASSESSEE WHILE COMPUTING BOOK PROFIT UNDER SECTION 11 5JB HAS REDUCED RS.13133066/ - ON ACCOUNT OF ADJUSTMENT OF DEPRECIATION CREDITED IN THE PROFIT AND LOSS ACCOUNT SINCE THE SAID AMOUNT WAS ALLOWED AS DEDUCTION FROM BOOK PROFITS BY CLAIMING DEPRECATION IN THE PROFIT AND LOSS ACCOUNT IN EARLIER YEAR, ITS WRIT TEN BACK TO THE PROFIT AND LOSS ACCOUNT WOULD CONSTITUTE PART OF BOOK PROFITS FOR THE YEAR UNDER CONSIDERATION. BY DOING SO, TAX WAS UNDER CHARGED BY RS.8,27,621/ - . IN VIEW OF THE ABOVE FACTS, I - HAVE REASON TO BELIEVE THAT THE ASSESSEE COMPANY HAS FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS IN ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2005 - 06 BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE AS THE ASSESSEE HAD CLAIMED EXCESS ALLOWANCE AS PROVIDED AS PER SECTION 35D OF THE I.T. ACT. IN VIE W OF THE ABOVE NARRATED FACTS AND CIRCUMSTANCES, I HAVE REASON TO; BELIEVE THAT TAXABLE INCOME AMOUNTING TO RS. 2,62,32,919/ - HAS ESCAPED ASSESSMENT FOR THE ASSESSMENT YEAR 2006 - 07. ISSUE NOTICE U/S 148 OF THE IT ACT. 9. THE LD CIT(A) HAS DEALT WITH THIS IS SUE VIDE PARA NO. 6. 2 OF HIS ORDER 6.2. AS FAR AS THE CHALLENGE TO THE REASSESSMENT ON THE BASIS OF CHANGE OF OPINION IS CONCERNED, IT IS EVIDENT THAT THE APPELLANT HAS MADE FULL DISCLOSURE AS REGARDS AMOUNT OF SUBSIDY IN CLAUSE 14 OF THE NOTES FORMING PART OF AUDIT REPORT (PAGE 41 OF THE P APER BOOK). VIDE LETTERS DATED 16.09.2008, 20.10.2008 AND 18.11.2008 (PAGES 12 - 14, 26 - 27 & 36 - 39 OF PAPER BOOK) SUBMITTED BY THE APPELLANT BEFORE THE AO DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, THE APPELLANT HAD SUBMITTED THE DETAILS OF OTHER INCOMES CREDITED IN THE P&L ACCOUNT ALONGWITH THE DETAILS OF PARTIES FROM WHOM SUCH INCOMES WERE RECEIVED, DETAILS OF ADDITION TO THE FIXED ASSETS AND DETAILS OF SUBSIDY RECEIVED/RECEIVABLE. THEREFORE, ALL THE DETAILS AND INFORMATION WERE PROVIDED BY THE A PPELLANT AT THE TIME OF ORIGINAL ASSESSMENT AND WERE AVAILABLE BEFORE THE AO AT THE TIME OF PASSING THE ASSESSMENT ORDER. THE AO HAS MENTIONED THE FACT IN THE ASSESSMENT ORDER THAT VARIOUS ISSUES WHICH CAME UP FOR DISCUSSION DURING THE ASSESSMENT PROCEEDIN GS PAGE 6 OF 8 WERE DISCUSSED. IT IS, THEREFORE, CLEAR THAT THE AO, AFTER CONSIDERING THE DETAILS FURNISHED BY THE ASSESSEE AND TAKING INTO ACCOUNT THE INFORMATION CONTAINED IN THE RETURN AND ACCOMPANYING DOCUMENTS, HAS SHOWN DUE APPLICATION OF MIND TO ALL THE ISSUES BUT DID NOT CONSIDER IT APPROPRIATE TO MAKE ANY DISALLOWANCE OF DEDUCTION U/S 80IB OF THE ACT OR DEPRECIATION RELATABLE TO SUBSIDY. WHEN ALL THE PRIMARY FACTS NECESSARY FOR ASSESSMENT WERE FULLY AND TRULY DISCLOSED IN THE ASSESSMENT PROCEEDINGS AND THERE W ERE ALSO NO NEW FACTS WHICH CAME TO THE POSSESSION OF THE AO, THEN IT WAS NOT OPEN FOR THE AO TO COMMENCE THE REASSESSMENT PROCEEDINGS U/S 147. A METICULOUS EXAMINATION OF THE RECORDS INDICATES THAT THE REASSESSMENT HAS BEEN DONE ON THE BASIS OF THE PRE - EX ISTING MATERIAL AND NOTHING NEW HAD COME TO THE NOTICE OR POSSESSION OF THE AO AT A SUBSEQUENT POINT OF TIME. IT IS CLEAR FROM THE ORDER THAT THIS WAS A SIMPLE CASE WHEREIN THE EARLIER ORDER HAD BEEN RECONSIDERED/REVIEWED AND THAT BEING THE POSITION, IT WO ULD COME SQUARELY WITHIN A SITUATION OF 'CHANGE OF OPINION' WHICH HAVING REGARD TO THE WELL CRYSTALLIZED LAW ON THE POINT IS NOT PERMISSIBLE. THE HON'BLE HIGH COURT OF DELHI IN CIT VS. EICHER LTD. (249 ITR 310) HAS HELD THAT WHERE ASSESSEE HAD MADE FULL AN D TRUE DISCLOSURE OF ALL MATERIAL FACTS AND ASSESSING OFFICER, WHILE PASSING ORIGINAL ASSESSMENT ORDER, CHOSE NOT TO GIVE ANY FINDING IN REGARD TO A PARTICULAR ISSUE AND LATER ON TOOK A DIFFERENT VIEW ON SAME FACTS, IT CLEARLY AMOUNTED TO A CHANGE OF OPINI ON AND SAME COULD NOT FORM BASIS FOR ASSESSING OFFICER TO REOPEN ASSESSMENT OF ASSESSEE. IN CIT VS. KELVINATOR OF INDIA LTD. (256 ITR 1), THE HON'BLE FULL BENCH OF DELHI HIGH COURT CONSIDERED A CASE OF REOPENING OF ASSESSMENT U/S 147 WITHIN 4 YEARS FROM TH E END OF THE ASSESSMENT YEAR. THE COURT HELD THAT WHEN A REGULAR ORDER OF ASSESSMENT IS PASSED IN TERMS OF SECTION 143 (3) OF THE ACT, A PRESUMPTION CAN BE RAISED THAT SUCH AN ORDER HAS BEEN PASSED ON APPLICATION OF MIND. IT WAS HELD THAT IF IT BE HELD THA T 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 PREMIUM TO AN AUTHORITY EXERCISING QUASI - JUDICIAL FUNCTION TO TAKE BENEFIT OF ITS OWN WRONG. IT WAS HELD THAT SECTION 147 OF THE ACT DOES NOT POSTULATE CONFERMENT OF POWER UPON THE ASSESSING OFFICER TO INITIATE REASSESSMENT PROCEEDINGS UPON A MERE CHANGE OF OPINION. ON FURTHER APPEAL BY THE DEPA RTMENT, THE HONABLE SUPREME COURT (320 ITR 561) HAS HELD THAT THE AO DEEMED TO HAVE APPLIED HIS MIND IF FACTS ARE ON RECORD AND REOPENING U/S 147 ON CHANGE OF OPINION IS NOT PERMISSIBLE EVEN WITHIN 4 YEARS. IT HAS BEEN HELD THUS: 'THOUGH THE POWER TO REOPEN UNDER THE AMENDED S. 147 IS MUCH WIDER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS 'REASON TO BELIEVE' FAILING WHICH S. 147 WOULD GIVE ARBITRARY POWERS TO THE AO TO RE - OPEN ASSESSMENTS ON THE BASIS OF 'MERE CHANGE OF OPINION', WHICH CANNOT BE PER SE REASON TO RE - OPEN. ONE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW AND POWER TO RE - ASSESS. THE AO HAS NO POWER TO REVIEW; HE HAS THE POWER TO RE - ASSESS. BUT RE - ASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CERTAIN PRE - CONDITION AND IF THE CONCEPT OF 'CHANGE OF OPINION' IS REMOVED, AS CONTENDED ON BEHALF OF THE DEPARTMENT, THEN, IN THE GARB OF RE - OPENING THE ASSESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF 'CHANGE OF OPINION' AS AN IN - BUILT TEST TO CHECK ABUSE OF POWER BY THE AO. HENCE, AFTER 1.4.1989, THE AO HAS POWER TO RE - OPEN, PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST PAGE 7 OF 8 HAVE A LIVE LINK WIT H THE FORMATION OF THE BELIEF. THIS IS SUPPORTED BY CIRCULAR NO.549 DATED 31.10.1989 WHICH CLARIFIED THAT THE WORDS 'REASON TO BELIEVE' DID NOT MEAN A CHANGE OF OPINION. THEREFORE, ON CONSIDERATION OF ALL THE FACTS BY THE AO, WHEN NO ADVERSE VIEW WAS TAKEN BUT THE ASSESSMENT WAS FURTHER REOPENED ON THE SAME FACTS ON RECORDS, THE SAME AMOUNTS TO CHANGE OF OPINION AND IT IS NOT PERMISSIBLE IN LAW TO REOPEN THE ASSESSMENT AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF KELVINATOR INDIA LTD. (SUPRA). HENCE, ON BOTH THE GROUNDS OF CHANGE OF OPINION AND DISCLOSURE OF ALL MATERIAL FACTS BY THE APPELLANT, THE ORDER UNDER APPEAL IS NOT LEGALLY SUSTAINABLE IN VIEW OF THE PROVISIONS TO SECTION 147 OF THE ACT. CONSEQUENTLY, THE ASSESSMENT ORDER PASSED BY THE AO IS A NNULLED. ONCE THE ASSESSMENT IS ANNULLED ON LEGAL GROUND, THERE IS NO NECESSITY TO DECIDE THE ISSUES INVOLVED ON MERITS AS HELD IN THE DECISION OF SPECIAL BENCH OF HONBLE ITAT, NAGPUR IN THE CASE OF RAHULKUMAR BAJAJ VS. ITO REPORTED IN 69 ITD AT PA GE 1. IT MAY BE MENTIONED THAT ON THE ISSUE OF DISALLOWANCE OF DEPRECIATION ON SUBSIDY AMOUNT, THE APPELLANT HAS ALREADY ACCEPTED THE LEGAL POSITION AND ADMITTED THE DISALLOWANCE OF DEPRECIATION IN A.Y. 2009 - 10 AS STATED IN MY ORDER DATED 21.1 2.2012 IN APPEAL NO. 278/2011 - 12. THE AO, MAY THEREFORE, CARRY OUT NECESSARY RECTIFICATION FOR ALL THE YEARS INVOLVED BY DISALLOWING DEPRECIATION ON THE AMOUNT OF SUBSIDY ACTUALLY RECEIVED IN VARIOUS YEARS. THE DETAILED WORKING OF DISALLOWANCE OF DEPRECIAT ION FOR RELEVANT YEARS IS GIVEN BY THE APPELLANT IN TABLE REPRODUCED AT PAGE NO. 7 OF THE AFORESAID ORDER FOR A.Y. 2009 - 10. 10. WE HAVE ALSO PERUSED THE DECISION OF THE COORDINATE BENCH WHEREIN, FOR IDENTICAL REASONS THE REOPENING HAS BEEN QUASHED. ON APPRECI ATION OF THE ABOVE FACTS, IT IS APPARENT THAT REASONS RECORDED DO NOT SPEAK ABOUT FAILURE ON THE PART OF THE ASSESSEE FULLY AND TRULY MATERIAL FACTS WITH RELATION TO ITS INCOME. IT IS ONLY ON APPRECIATION OF THE SAME FACTS, WHICH WERE ALREADY THERE IN THE RETURN OF INCOME AS WELL AS DURING THE ORIGINAL ASSESSMENT PROCEEDINGS. THEREFORE, REOPENING MERELY ON THE SAME MATERIAL WITHOUT ANY TANGIBLE MATERIAL COMING INTO THE POSSESSION OF THE ASSESSING OFFICER AND IN VIEW OF THE ABOVE JUDICIAL PRECEDENTS WE ARE N OT INCLINED TO UPHOLD THE REOPENING PROCEEDINGS. FURTHERMORE, THE REVENUE HAS STATED THAT HON'BLE SUPREME COURT HAS HELD THAT REOPENING OF THE CASES BASED ON THE FACTUAL ERROR POINTED OUT BY THE AUDIT PARTY IS PERMISSIBLE IN LAW. THE REVENUE HAS STRONGLY R ELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN CIT VS. PVS BEEDIES PVT. LTD 237 ITR 13. IN THE PRESENT CASE, THE REVENUE PARTY HAS OBJECTED THAT SUBSIDY RECEIVED BY THE ASSESSEE SHOULD HAVE GONE TO REDUCE THE COST OF THE PLANT AND MACHINERY. IT WA S FURTHER STATED THAT ASSESSEE HAS CLAIMED DEDUCTION U/S 80IB ON OTHER INCOME AS WELL AS CLAIMED DEDUCTION ON INTEREST, WHICH IS CAPITAL EXPENDITURE. ANOTHER OBJECTION WAS WITH RESPECT TO COMPUTATION OF BOOKS PROFIT WITH RESPECT TO THE SUBSIDY. ON EXAMINAT ION OF ALL THESE POINTS, WE ARE OF THE OPINION THAT THESE ARE ALL THE POINTS INVOLVING LEGAL ISSUE AND ARE NOT FACTUAL ERRORS. IN VIEW OF THIS, THE RELIANCE PAGE 8 OF 8 PLACED BY THE REVENUE ON THE ABOVE DECISION IS ERRONEOUS. IN VIEW OF THIS, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 11. IN THE RESULT APPEAL OF THE REVENUE AS WELL AS CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PR ONOUNCED IN THE OPEN COURT ON 0 8 / 08 / 2017 . - S D / - - S D / - ( BHAVNESH SAINI ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 8 / 08 / 2017 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI