DCIT, Hyderabad V. M/s GVK Industries Ltd., Secunderabad

ITA 1556/HYD/2008

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2935 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-05-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 16-10-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKARA RAO
• Assessee Lawyers: V SHIVA KUMAR
• Keywords: Business income; Deemed to accrue or arise in india; Difference of opinion; Change of opinion
• Section: 143(3); 147; 148; 12; 10; 2; 11; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER. ITA NO.1002/HYD/04 (ASSESSMENT Y EAR 1999-2000) & ITA NO.1556/HYD2008 (ASSESSMENT YEAR 2001-02 ) ASST. COMMISSIONER OF INCOME - TAX CIRCLE 1(4), HYDERABAD V/S. M/S. G.V.K. INDUSTRIES LTD., SECUNDERABAD ( PAN - AAACG 7499 J ) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI D.SUDHAKARA RAO, DR RESPONDENT BY : SHRI V.SHIVA KUMAR DATE OF HEARING 23.05.2013 DATE OF PRONOUNCEMENT O R D E R PER BENCH: THESE TWO APPEALS BY THE REVENUE ARE DIRECTED AGA INST THE ORDERS OF THE CIT(A)-II, HYDERABAD DATED 19.08.2004 FOR ASSESSMENT YEAR 1999-2000; AND OF THE CIT(A) III, HYDERABAD DATED 1 4.08.2008 FOR ASSESSMENT YEAR 2001-02. SINCE THERE ARE CERTAIN C OMMON FEATURES, THESE APPEALS WERE HEARD TOGETHER, AND ARE BEING DI SPOSED OF WITH THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.1002/HYD/2004 : ASSESSMENT YEAR 1999-2000 2. REVENUE HAS RAISED THE FOLLOWING GROUNDS IN TH IS APPEAL. 1. THE ORDER OF THE CIT(APPEALS) IS ERRONEOUS IN LAW AND FACTS 2. THE CIT(A) ERRED IN EXCLUDING THE SUM OF RS.17,7 5,851/- AS INCOM E DERIVED FROM THE BUSINESS OUT OF THE OTHER INCOME OF RS.3,52,98,874/- FOR COMPUTATION OF BOOK PROFIT. ITA NO.1002/HYD/2004 & ANR. M/S. G.V.K. INDUSTRIES LTD., SECUNDERABAD 2 3. THE DECISION OF THE ITAT, DELHI BENCH IN THE CAS E OF LALSONS ENTP. ON WHICH THE LEARNED CIT(A) RELIED, IS NOT AP PLICABLE TO THE FACTS OF THE ASSESSEES CASE. 4. THE CIT(A) ERRED IN DELETING AN AMOUNT OF RS.3 ,10,20,000/- WHILE COMPUTING THE INCOME UNDER REGULAR PROVISIONS OF THE ACT. 5. THE LEARNED CIT(A) ALSO ERRED IN DELETING THE IM PUGNED ADDITION OF RS.9,36,09,75/- AS DERIVED FROM THE BUS INESS OF POWER AND GRANT THE DEDUCTION U/S. 115JA(2)(IV). 6. THE CIT(A) OUGHT NOT TO HAVE HELD THAT THE ADDIT IONAL INCOM E DERIVED IS ALSO ONLY FROM THE POWER BUSINESS ON THE GROUND THAT THE DETAILS OF INCOM E EARNED ON ACCOUNT OF ENERGY CHARGE, FOREIGN EXCHANGE VARIATION RECOVERY IS ALSO ONE OF THE COMPONENTS OF INCOME. 2. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESEN TATIVE AND THE LEARNED COUNSEL IN DETAIL AND THE LEARNED COUNS EL HAS ALSO PLACED ON RECORD, A PAPER-BOOK CONTAINING 25 PAGES AND ALSO T HE ANNUAL REPORT ALONGWITH STATEMENT OF DETAILS DURING THE COURSE OF HEARING. THE ISSUES INVOLVED IN THIS APPEAL ARE CONSIDERED AND DECIDED HEREUNDER- 3. THE ISSUE IN DISPUTE IN GROUNDS NO.2 AND 3 IS WITH REFERENCE TO EXCLUSION OF AN AMOUNT OF RS.17,75,851 SHOWN AS RE LATED TO OTHER INCOME OF RS.3,52,98,874 FROM THE COMPUTATION OF BOOK PROF IT. THE ASSESSING OFFICER, WHILE WORKING OUT THE DEEMED INCOME UNDER S.115JA TREATED AN AMOUNT OF RS.3,52,98,854 SHOWN AS OTHER INCOME AS N OT EARNED FROM BUSINESS OF POWER GENERATION. IT IS THE CONTENTIO N OF THE ASSESSEE THAT THIS INCOME IS PART OF THE BUSINESS OF THE ASSESSEE ELIGIBLE FOR DEDUCTION UNDER S.80IA, SO THAT THE SAME CAN BE EXCLUDED FROM THE PROVISIONS OF S.115JA AS WELL. THE ASSESSING OFFICER DID NOT AGRE E AND BEFORE THE CIT(A), THE SAME CONTENTIONS WERE REITERATED. HOWE VER, IT WAS ALSO SUBMITTED THAT AN AMOUNT OF RS.17,75,951 WAS EARNED ON DEPOSITS MADE FOR PROCURING SPARES WHICH HAS A DIRECT NEXUS WI TH THE AMOUNT BORROWED. FOLLOWING THE DECISION OF THE SPECIAL BE NCH OF ITAT DELHI IN THE CASE OF LALSONS ENTERPRISES V/S. DCIT (89 ITD 25), THE LEARNED CIT(A) HAVING FOUND A DIRECT NEXUS, DIRECTED THE ASSESSING OFFICER TO EXCLUDE THE ITA NO.1002/HYD/2004 & ANR. M/S. G.V.K. INDUSTRIES LTD., SECUNDERABAD 3 SUM OF RS.17,75,851 AND COMPUTE THE BOOK PROFIT ACC ORDINGLY. THE REVENUE IS AGGRIEVED. 4. AFTER CONSIDERING THE RIVAL ARGUMENTS, WE DO NO T SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). IT IS ALREADY ON RECORD THAT THE AMOUNT OF RS.17,75,951 WAS EARNED FROM THE DEPOSITS MADE FROM THE BORROWALS ON WHICH INTEREST WAS ALSO PAID. THER EFORE, THERE WAS A NEXUS WITH THE INTEREST PAID TO THE INTEREST EARNED , AND THEREFORE, WE DO NOT SEE ANY JUSTIFICATION TO INTERFERE WITH THE ORD ER OF THE CIT(A), WHO HAS RELIED ON THE SPECIAL BENCH DECISION OF THE TRIBUNA L (DELHI) IN THE CASE OF LALSONS ENTEPRISES (SUPRA), THE PRINCIPLE OF WHICH WAS CONFIRMED BY THE HONBLE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES P. LTD. V/S. CIT(343 ITR 89). WE DO NOT SEE ANY REASON TO ALLOW THE REVENUES GROUNDS ON THIS ISSUE. ACCORDINGLY, REVENUES GROU NDS ON THIS ISSUE ARE REJECTED. 5. GROUND NO.4 PERTAINS TO DELETION OF AN AMOUNT O F RS.3,10,20,000, WHILE COMPUTING THE INCOME UNDER TH E REGULAR PROVISIONS OF THE ACT. THE ASSESSEE CLAIMED DEDUCTI ON OF RS.3,10,20,000 BEING FOREIGN EXCHANGE FLUCTUATIONS OFFERED AS INCO ME IN THE EARLIER YEAR, VIZ. ASSESSMENT YEAR 1998-99, AND ADJUSTED IN THE P RIOR PERIOD EXPENDITURE, AS AN INCOME WRONGLY OFFERED. THE ASS ESSEES CONTENTION WITH REFERENCE TO THIS DEDUCTION WAS NOT ACCEPTED B Y THE ASSESSING OFFICER ON THE REASON THAT THE ASSESSEE DID EARN ON FOREIGN EXCHANGE FLUCTUATION AND DEBT REPAYMENT TO THE ACCOUNT OF APTRANSCO, AND SINCE THE ASSESSEE HAD OFFERED THE SAME IN THE EARLIER YEAR, THE DEDUC TION THIS YEAR CANNOT BE ALLOWED. THE LEARNED CIT(A), ON NOTICING THAT THE ENTRIES HAVE BEEN REVERSED AND ACCORDING TO THE PPA, THE FOREIGN EXCH ANGE DEBT REPAYMENT HAS TO BE BORNE BY THE APSEB(PRESENT AP TRANSCO), A NY DEFICIENCY OR GAIN ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION WOULD BE TO THE ACCOUNT OF APSEB ONLY. FURTHER, CLARIFICATION GIVEN BY THE A SSESSEE THAT IN THE ASSESSMENT YEAR 2002-03, THE ASSESSEE HAD ACCOUNTED THE GAIN DERIVED ON FOREIGN EXCHANGE FLUCTUATION AS INCOME IN THAT Y EAR, WHICH INCLUDED THE ITA NO.1002/HYD/2004 & ANR. M/S. G.V.K. INDUSTRIES LTD., SECUNDERABAD 4 IMPUGNED ADDITION OF RS.3,10,20,000, WAS ALSO NOTIC ED BY THE CIT(A), WHO ACCORDINGLY DIRECTED THE ASSESSING OFFICER TO DELET E THE ADDITION. REVENUE IS AGGRIEVED. 6. AFTER CONSIDERING THE RIVAL CONTENTIONS AND EX AMINING THE DETAILS ON RECORD, WE NOTICE THAT THE ORIGINAL ASSE SSMENT IN THIS CASE WAS COMPLETED UNDER S143(3) BY THE ORDER DATED 30.03.20 01, DETERMINING THE LOSS OF THE ASSESSEE AT RS.9,37,00,379. THE ASSESSE E HAS FURNISHED THE RETURN ADMITTING LOSS AT RS.9,91,61,190 IN THE RE-A SSESSMENT PROCEEDINGS. IT IS ALSO NOTICED THAT THE ASSESSMEN T WAS REOPENED UNDER S.148 ISSUING NOTICE ON 29.01.2003 FOR THE PURPOSE OF BRINGING TO TAX THE INCOME UNDER THE MAT PROVISIONS OF S.115JA. SINCE THIS ISSUE OF DEDUCTION OF FOREIGN EXCHANGE CLAIM WAS ALSO CRYSTALISED IN T HE ORIGINAL ASSESSMENT, AND SINCE IT WAS NOT AN ISSUE FOR REOPENING THE ASS ESSMENT, WE ARE OF THE OPINION THAT THE ORDER OF THE CIT(A) IS JUSTIFIED. FURTHER, THE ASSESSEE HAS ALREADY OFFERED THE SAME AMOUNT AS INCOME IN ASSESS MENT YEAR 2002-03. THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE WI TH THE ORDER OF THE CIT(A). THIS GROUND IS REJECTED. 7. GROUNDS NO.5 AND 6 OF THE REVENUE IN THIS APPEA L PERTAIN TO NON-ALLOWANCE OF DEDUCTION OF AN AMOUNT OF RS.9,36, 09,750 UNDER S.80IA WHILE COMPUTING THE INCOME UNDER S.115JA. THE REASO N FOR ASSESSING OFFICERS DISALLOWANCE OF SAID AMOUNT WAS THAT IT HAS OFFERED THE ADDITIONAL REVENUE ON INCREASED CAPITAL COST AT RS.9,36,09,850 AS INCOME UNDER THE HEAD PRIOR PERIOD ADJUSTMENT AND SINCE IT HAS NOT BEEN CREDITED TO THE PROFIT & LOSS ACCOUNT AND ALSO THAT THE INCOME HAS NO DIRECT NEXUS WITH THE BUSINESS OF GENERATION AND DISTRIBUTION OF POWE R, THE ASSESSING OFFICER DID NOT ALLOW THE AMOUNT TO BE REDUCED UNDER CLAUSE (IV) OF EXPLANATION TO S.115JA. BEFORE THE CIT(A), THE DETAILS OF RECOVER Y MADE AND ACCOUNTED AS SALE OF ENERGY TO THE TUNE OF RS.336.61 CRORES W ERE FILED AND IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAS BEEN ACCOUN TING ITS INCOME FROM GENERATION OF POWER ON VARIOUS COMPONENTS WHICH INC LUDE RECOVERY OF CAPITAL COST, TAKING COST OF PROJECT AT RS.816 CRO RES AS APPROVED BY THE ITA NO.1002/HYD/2004 & ANR. M/S. G.V.K. INDUSTRIES LTD., SECUNDERABAD 5 GOVERNMENT. IT WAS FURTHER SUBMITTED THAT THE ASSE SSEE HAS BEEN CONTENDING THAT THE PROJECT COST SHALL BE ENHANCED TO RS.912 CRORES AND PENDING ENHANCEMENT, IT WAS ACCOUNTED AS ADDITIONAL REVENUE FROM THE INCREASED PROJECT COST AND SINCE THE AMOUNT WHICH W AS TO ACCRUE IN EARLIER YEARS HAS BEEN ACCOUNTED UNDER THE HEAD PRIOR PERIO D ADJUSTMENT, THE SAME IS PART OF SALE OF ENERGY OR GENERATION OF POW ER. THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSIONS HAS DECIDED AS UN DER- 12. I HAVE GIVEN CAREFUL CONSIDERATION TO THE ABO VE. FROM THE PERUSAL OF THE ASST. ORDER, IT IS NOTICED THAT THE DISCUSSION OF THE A.O. ON THIS ISSUE IS VERY BRIEF AND EXCEPT STATING THAT THE INCOME IS NOT DERIVED FORM BUSINESS OF POWER, NOTHING WORTHWH ILE HAS BEEN BROUGHT IN THE ASSESSMENT ORDER. FROM THE DETAILS F URNISHED BY THE APPELLANT AS DISCUSSED ABOVE, THE FACT IS TO BE CO NSIDERED WHETHER THE ADDITIONAL INCOM E ACCOUNTED FOR BY THE APPELLANT IN ITS BOOKS IS DERIVED FROM ITS POWER BUSINESS OR NOT? ONE OF THE MAJOR COMPONENT OF ADDITIONAL REVENUE IS ON ACCOUNT OF FO REIGN EXCHANGE VARIATION ON APPROVED CAPITAL COST. I OBSERVE THAT IN THE DETAILS OF INCOME EARNED ON ACCOUNT OF ENERGY CHARGES, FOREIGN EXCHANGE VARIATION RECOVERY IS ALSO ONE OF THE COMPONENTS OF INCOME. THUS, IT COULD BE SEEN THAT THE ADDITIONAL INCOM E DERIVED IS ALSO FROM POWER BUSINESS. THEREFORE, IT IS TO BE HELD THAT THE AOS VIEW THAT THE ADDITIONAL REVENUE IS NOT FROM THE BUSINESS OF POWE R IS MISPLACED. THEREFORE, THE A.O. IS DIRECTED TO CONSIDER THE IMP UGNED ADDITION OF RS.9,36,09,750 AS DERIVED FROM BUSINESS OF POWER AN D GRANT THE DEDUCTION U/S. 115JA(2)(IV) IN ADDITION TO THE DEDU CTION OF RS.62,55,35,166/- ALREADY ALLOWED. 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). IT IS THE ASSESSEES INCOME WHICH HAS VARIOUS COMPONENTS FOR WORKING OUT THE PURCHASE PRICE OF ENERGY FROM THE ASSESSEE BY THE AP TRANSCO AND O NE OF THE COMPONENTS WAS CAPITAL COST OF THE POWER PROJECT. SINCE THE AM OUNT ACCOUNTED FOR AS INCOME WAS COMPONENT OF THE ENHANCED CAPITAL COST W HICH IS DIRECTLY RELATED TO SALE OF ENERGY, WE DO NOT SEE ANY REASON TO TREAT IT AS OTHER INCOME. THE ASSESSING OFFICERS OBJECTION THAT IT HAS NOT BEEN TAKEN TO PROFIT & LOSS ACCOUNT IS NOT CORRECT, AS THE ASSESS EE HAS ADJUSTED UNDER THE HEAD PRIOR PERIOD ADJUSTMENTS AND HAS OFFERE D AS INCOME DURING THE YEAR. THIS WAS ALSO ACCEPTED IN THE REGULAR COMPUTA TION OF INCOME. ITA NO.1002/HYD/2004 & ANR. M/S. G.V.K. INDUSTRIES LTD., SECUNDERABAD 6 THEREFORE, THE ORDER OF THE CIT(A) IS UPHELD. REVEN UES GROUNDS ON THIS ISSUE ARE REJECTED. 9. IN THE RESULT, REVENUES APPEAL FOR ASSESSMENT YEAR 1999- 2000 IS DISMISSED. ITA NO.1556/HYD/2008 : ASSESSMENT YEAR 2001-02 10. REVENUE HAS RAISED THE FOLLOWING GROUNDS, WHIC H ARE MATERIAL FOR CONSIDERATION- 1, 2. THE HONBLE CIT(A) IS NOT CORRECT IN HOLDING THAT THE ASSESSEE HAD FURNISHED ALL M ATERIAL FACTS AT THE TIME OF ORIGINAL ASSESSMENT . 3. THE LEARNED CIT(A) OUGHT TO HAVE NOTICED THAT NEIT HER ASSESSEES LETTER DATED 3.9.2003 NOR ASSESSING OFFI CERS NOTICE DATED 11.8.2003 SHOWS THAT THE ASSESSEE HAD FURNISHED COPY OF P.P.A. 4. THE LEARNED CIT(A)S PRESUMPTI8ON THAT THE DISCU SSION MADE AT PARA 2.2 AN 3.1 OF ORIGINAL ASSESSMENT ORD ER SHOWS THAT THE A.O. HAS CONSIDERED THE POWER PURCHA SE AGREEMENT IS NOT CORRECT, AS MUCH AS NEITHER THE A. O. CALLED FOR THE COPY OF POWER PURCHASE AGREEMENT NOR THE ASSESSEE HAS FURNISHED THE SAME. THEREFORE IT C OULD NOT BE HELD THAT THE ASSESSEE HAD FURNISHED ALL MAT ERIAL FACTS NECESSARY. 5. THE CIT(A) OUGHT TO HAVE NOTICED THAT THE INCOME T AX REIMBURSABLE TO THE ASSESSEE IS CLEARLY A REVENUE RECEIPT LIKE SALES TAX COLLECTION AND LIABLE TO TAX AS HELD BY THE CIT(A) HIMSELF IN THE SUBSEQUENT YEAS I.E. A. Y 2002-03 TO 2005-06. SINCE IT IS NOT A CASE OF CHANG E OF OPINION THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 6. THE CIT(A) OUGHT TO HAVE NOTICED THAT AS PER EXPLANATION 1 U/S. 147 OF THE ACT M ERE PRODUCTION OF BOOKS OF ACCOUNT OR OTHER MATERIAL FROM WHICH MATE RIAL EVIDENCE COULD WITH DUE DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER WILL NOT NECESS ARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF SEC.147 OF THE ACT. 7. ITA NO.1002/HYD/2004 & ANR. M/S. G.V.K. INDUSTRIES LTD., SECUNDERABAD 7 10. BRIEFLY STATED, THE ASSESSEE COMPANY IS IN THE BUSINESS OF GENERATION AND SALE OF POWER. THE RETURN OF INCOME FOR ASSESSMENT YEAR 2001-02 WAS FILED ON 31.10.2001 CLAIMING NIL INC OME UNDER THE NORMAL PROVISIONS AND BOOK PROFIT OF RS.68,54,75,430. THE ASSESSMENT UNDER S.143(3) WAS COMPLETED ON 24.12.2003. ON THE REASO N THAT INCOME TAX RECEIVED OR RECEIVABLE, BEING REIMBURSABLE BY TRANS CO AS PER CLAUSE 3.4 OF THE POWER PURCHASE AGREEMENT WITH THE SAID COMPA NY, THE ASSESSING OFFICER WAS OF THE OPINION THAT AN AMOUNT OF RS.3,4 0,93,235 HAS NOT BEEN OFFERED AS INCOME NOR CREDITED TO THE SALES REVENUE , THEREBY THE SAME AMOUNT HAS ESCAPED ASSESSMENT. ACCORDINGLY, IN ORDE R TO BRING THE SAID AMOUNT TO TAX, THE ASSESSING OFFICER RECORDED SATIS FACTION TO THE EXTENT OF INCOME-TAX RECEIVABLE OF RSS.2.40,45,266 TO BE TREA TED AS INCOME OF THE ASSESSEE, BOTH UNDER THE NORMAL PROVISIONS AND ALSO UNDER S.115JB, A NOTICE UNDER S.148 WAS ISSUED ON 12.7.2006, I.E. AF TER FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. 11. WHILE DETERMINING TOTAL INCOME AT RS.NIL, IN T HE RE-ASSESSMENT, THE ASSESSING OFFICER MADE AN ADDITION OF RS.3.40 C RORES TO THE RETURNED INCOME UNDER THE NORMAL PROVISIONS ON THE REASON TH AT THIS AMOUNT HAS ACCRUED IN TERMS OF POWER PURCHASE AGREEMENT ENTERE D INTO WITH THE TRANSCO 12. BEFORE THE LEARNED CIT(A), IT WAS CONTENDED TH AT ALL THE INFORMATION REGARDING THE INCOME-TAX RECEIVABLE FRO M AP TRANSCO AS PER THE AGREEMENT WAS VERY MUCH THERE BEFORE THE ASSES SING OFFICER, WHILE COMPLETING THE ORIGINAL ASSESSMENT, AND NO NEW INFO RMATION HAS COME INTO THE POSSESSION OF THE ASSESSING OFFICER TO HOLD THA T INCOME HAS ESCAPED ASSESSMENT DUE TO THE FAILURE OF THE ASSESSEE TO D ISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSARY FOR COMPLETION OF THE ASSE SSMENT AS REQUIRED UNDER PROVISO TO S.147 OF THE ACT. AFTER CONSIDERI NG THE SUBMISSIONS, THE LEARNED CIT(A) UPHELD THE SAME TO HOLD THAT NOTICE ISSUED UNDER S.148 ITA NO.1002/HYD/2004 & ANR. M/S. G.V.K. INDUSTRIES LTD., SECUNDERABAD 8 WAS INVALID. THE DETAILED REASONS OF THE CIT(A) VID E PARAS 2.3 TO 2.7 ARE AS UNDER- 2.3. I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND THE REASONING GIVEN BY THE AO FOR REOPENING THE ASSESSM ENT. THE ASSESSMENT WAS COMPLETED U/ S. 143[3] ON 24/12/2003 HAS BEEN REOPENED AFTER 4 YEARS OF THE RELEVANT ASSESSMENT Y EAR AND HENCE, THE PROVISO TO SECTION 147 COMES INTO PLAY, WHICH R EADS AS UNDER. 'PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB SECTIO N [3] OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSM ENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOU R YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEA BLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF TH E FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUBSECTION (1) OF SECTION 142 OR SECTI ON 148 OR TO DISCLOSE FULLY AND TRULY ALL M ATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THA T ASSESSMENT YEAR 2.4. THE AFORESAID PROVISION STIPULATES THAT NOTICE U/ S. 148 CAN BE ISSUED AFTER THE EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR ONLY IF THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR HIS ASSESSMENT. IT IS EVIDENT FROM RECORD THAT THE RELEVANT MATERIAL FACTS AND EVIDENCE IN RESPECT OF REIMBURSEMENT OF I NCOME TAX PAID BY THE APPELLANT IN ACCORDANCE WITH THE POWER PURCHASE AGREEMENT WITH TRANSCO, WAS DISCLOSED BY THE APPELLANT TO THE AO D URING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS. A COPY OF THE S AID AGREEMENT WAS FURNISHED TO THE AO WHICH WAS CONSIDERED BY THE AO AS EVIDENT FROM HIS FINDINGS IN PARA 2.2 AND PARA 3.1 OF THE O RIGINAL ASSESSMENT ORDER U/ S~ 143[3] DATED 24/12/2003. THE APPELLANT CANNOT BE PENALIZED FOR NON CONSIDERATION OR NON APPLICATION OF THE RELEVANT INFORMATION FURNISHED BY THE AO. THE A.O. HAS NOT M ADE OUT A CASE OR INDICATED IN ANY MANNER THAT THE APPELLANT HAD FAIL ED TO DISCLOSE THE MATERIAL FACTS NECESSARY FOR ASSESSMENT DURING THE ORIGINAL ASSESSMENT PROCEEDINGS. ON THESE FACTS, RE-OPENING OF ASSESSMENT BEYOND FOUR YEARS, WHEN THE ORIGINAL ASSESSMENT IS COMPLETED U/ S 143(3) OF THE I.T. ACT, 1961, APPELLANT CANNOT BE U PHELD IN LAW. THE HEAD NOTE IN THE JUDGMENT DELIVERED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS FORAMER FRANCE [264 ITR 566[SC1, READS AS UNDER: 'REASSESSMENT--LIMITATION--LAW APPLICABLE--NO FAILU RE TO FILE RETURN OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS--NOTICE FOR REASSESSMENT--ISSUED BEYOND SEVEN YEARS--BARRED BY LIMITATION-INCOME-TAX ACT, 1961, SS. 143(3), 147, PROV. (AS AMENDED BY DIRECT TAX LAWS (AMENDMENT) ACT, 1987). ASSESSMENT PURSUANT TO FINDING OR ORDER LIMITAT ION EXTENSION OF PERIOD- DIRECTION OR FINDING IN ORDER PASSED IN APPEAL, REFERENCE OR REVISION- MUST BE WITH RESPECT TO SAME ASSESSEE AND SAME ASSESSMENT YEAR INCOMETAX ACT, 1961, S.153(3)(I I). ITA NO.1002/HYD/2004 & ANR. M/S. G.V.K. INDUSTRIES LTD., SECUNDERABAD 9 WRIT--REASSESSMENT--NOTICE WITHOUT JURISDICTION--EX ISTENCE OF ALTERNATIVE REMEDY NOT A BAR-- INCOME-TAX ACT, 1961, S. 148- CONSTITUTION OF INDIA, ART. 226. FROM THE DECISION OF THE HIGH COURT (SEE [2001J 247 ITR 436) THAT (I) SECTION 147 SUBSTITUTED IN THE INCOME-TAX ACT, 1961, BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, HAD MADE A RADICAL DEPARTURE FROM THE ORIGINAL SECTION 147, INASMUCH AS CLAUSES (A) AND (B) HAD BEEN DELETED AND UNDER THE PROVISO THERETO NOTICE FOR REASSESSME NT WOULD BE ILLEGAL IF ISSUED MORE THAN FOUR YEARS AFTER THE END OF THE AS SESSMENT YEAR, IF THE ORIGINAL ASSESSMENT WERE MADE UNDER SECTION 143(3); (II) SECTION 153 RELATED TO THE PASSING OF AN ORDER OF ASSESSMENT AN D NOT TO THE ISSUING OF A REASSESSMENT NOTICE UNDER SECTION 147/148, (III) THE DIRECTION OR FINDING CONTEMPLATED BY SECTION 153(3)(II) HAD TO BE A FIND ING IN RELATION TO THE PARTICULAR ASSESSEE AND THE PARTICULAR YEAR AND TO BE A FINDING IT HAD TO BE DIRECTLY INVOLVED IN THE DISPOSAL OF THE CASE; (IV) ON THE FACTS, THE NOTICES ISSUED UNDER SECTION 148 ON NOVEMBER 20, 1998, TO THE ASSESSEE FOR REOPENING THE ORIGINAL ASSESSMENTS FOR THE ASSESSME NT YEARS 1988-89, 1989-90 AND 1990-91, ON THE BASIS OF THE APPELLATE TRIBUNAL'S DECISION RENDERED IN THE CASE OF BUILDER CHRISTIAN RELATING TO THE ASSESSEE'S TECHNICIANS DEPUTED TO INDIA, THE INCOME OF THE AS SESSEE WAS TO BE TREATED AS FEE FOR TECHNICAL SERVICES AND NOT AS BUSINESS INCOME AS ASSESSED IN THE ORIGINAL ASSESSMENTS FOR THOSE ASSESSMENT YEARS, WE RE WITHOUT JURISDICTION AS THEY WERE BARRED BY LIMITATION IN VIEW OF THE PR OVISO TO SECTION 147, AS AMENDED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, AS THAT WAS THE PROVISION THAT WAS APPLICABLE ON NOVEMBER 20, 1998, WHEN THE REASSESSMENT NOTICES WERE ISSUED, AND ADMITTEDLY TH ERE WAS NO FAILUR~ ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRUL Y ALL MATERIAL FACTS FOR ASSESSMENT; (V) ON THE FACTS, THE NOTICES WERE BAD AS THEY WERE ONLY ON THE BASIS OF A CHANGE OF OPINION AND THE LAW THAT AN AS SESSMENT COULD NOT BE REOPENED ON A CHANGE OF OPINION WAS THE SAME BEFORE AND AFTER AMENDMENT BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, OF SE CTION 147, AND (VI) AS THE NOTICES WERE WITHOUT JURISDICTION, THE ASSESSEE SHOULD NOT BE RELEGATED TO THE ALTERNATIVE REMEDY, THE DEPARTMENT PREFERRED APPEALS TO THE SUPREME COURT. THE SUPREME COURT SAW NO REASON TO D IFFER AND DISMISSED THE APPEALS. DECISION OF THE ALLAHABAD HIGH COURT IN FORAMER V. CIT(2001) 247 ITR 436 AFFIRMED. 2.5. FROM THE ABOVE IT IS VERY CLEAR THAT RE-OPENIN G OF ASSESSMENT BEYOND FOUR YEARS IN CASE OF EARLY SCRUTINY ASSESSM ENT WHEN THERE WAS NO FAILURE ON THE PART OF THE APPELLANT TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS, CANNOT BE HELD TO BE VALID. THE LEG AL POSITION IS FURTHER EXPLAINED IN THE RECENT DECISION OF THE HON'BLE AND HRA PRADESH HIGH COURT IN THE CASE OF MAHALAXMI MOTORS LTD. VS DCIT REPORTED IN 265 ITR 53, WHEREIN THE HON'BLE HIGH COURT EXPLAINING THE S AME PRINCIPLE HAS OBSERVED AS UNDER: AS INDICATED ABOVE, IN OUR CONSIDERED VIEW, THE PE TITIONER-ASSESSEE HAD FURNISHED ALL M ATERIAL FACTS TRULY AND FULLY BEFORE THE ASSESSING AUTHORITY AT THE RELEVANT POINT OF TIME. WHEN ONCE ALL THE INFORMATION IS FURNISHED TO THE ASSESSING AUTHORITY, IT IS (OR THE ASSESSING AU THORITY TO DECIDE WHAT INFERENCE CAN REASONABLY BE DRAWN AND WHAT LEGAL IN FERENCES HAVE TO BE DRAWN ULTIMATELY. IT IS TO BE NOTED, WHERE FULL AND TRUE DISCLOSURE OF FACT S WAS MADE BY AN ASSESSEE, THE DEPARTMENT CANNOT REOP EN THE ASSESSMENT EVEN IF THERE IS LOSS OF REVENUE OR EVEN IF LEGAL INFERENCE DRAWN BY THE ITA NO.1002/HYD/2004 & ANR. M/S. G.V.K. INDUSTRIES LTD., SECUNDERABAD 10 ASSESSING AUTHORITY WAS ERRONEOUS IN THE FIRST PLAC E. EVEN MERE CHANGE OF OPINION BY THE ASSESSING AUTHORITY IS NOT ENOUGH FOR REOPENING THE ASSESSMENT. THIS VIEW HAS BEEN REITERATED BY THE SU PREME COURT IN THE DECISIONS IN CIT V. HEMCHANDRA KAR [1970] 77ITR 1; CIT V. BHANJI LAVJI [1971] 79 ITR 582 AND ITO V. LAKHMANI MEWAL DAS [1976] 103 ITR 437.' 2.6. SIMILAR VIEW WAS EXPRESSED BY HON'BLE JURISDIC TIONAL HIGH COURT IN ANOTHER DECISION IN THE CASE OF G.B.BROTHERS AND K. R.CHETTY BEEDY FACTORY (P) LTD. VS. ITO (267 ITR 774) WHEREIN HON' BLE HIGH COURT, WHILE DEALING WITH THE ANALOGOUS PROVISIONS OF SECT ION 147 (A), EFFECTIVE BEFORE 1.4.89, OBSERVED AS UNDER: ' .IN THE CASE OF PARASHURAM POTTERY WORKS CO. LT D. VS. ITO (1977) 106 ITR 1, THE SUPREME COURT STATED THAT THE DUTY OF THE ASSESSEE IN ANY CASE DOES NOT EXTEND BEYOND MAKING A TRUE AND FULL DISCLOSURE OF PRIMARY FACTS. ONCE HE HAS DONE THAT, HIS DUTY ENDS. IT IS FOR THE ITO TO DRAW THE CORRECT INFERENCE FROM THE PRIM ARY FACTS. IT IS NO RESPONSIBILITY OF THE ASSESSEE TO ADVISE THE ITO WI TH REGARD TO THE INFERENCE WHICH HE SHOULD DRAW FROM THE PRIMARY FAC TS. IF AN ITO DRAWS AN INFERENCE WHICH APPEARS SUBSEQUENTLY TO BE ERRON EOUS, MERE CHANGE OF OPINION WITH REGARD TO THAT INFERENCE WOULD NOT JUSTIFY INITIATION OF ACTION FOR RE-OPENING ASSESSMENTS. AS THE PROVISIONS CONTAINED IN THE PRESENT PROVISO TO SECTION 147 ARE SIMILAR TO THE EARLIER PROVISIONS OF SECTION 147(1), THE RATIO OF THE ABOVE DECISION WOULD BE APPLICABLE TO THE CASES REOPENED AFTER 1.4.1989 ALS O. 2.7 AFTER CONSIDERING THE ENTIRE FACTS AND CIRCUMST ANCES OF THE CASE AND THE VARIOUS JUDICIAL PRONOUNCEMENTS, I HOLD THAT THE RE OPENING OF THE ASSESSMENT IN THIS CASE IS NOT VALID IN VIEW OF EXPRESS PROVIS IONS CONTAINED IN THE PROVISO TO SECTION 147 OF THE INCOM E-TAX ACT, 1961 AS EFFECTIVE FORM 1 ST APRIL, 1989. ACCORDINGLY, I HOLD THAT THE NOTICE ISSUED BY THE A SSESSING OFFICER U/S. 148 OF THE INCOM E TAX ACT, 1961 FOR A.Y. 2001-02 IS INVALID IN LAW ON THE FACTS OF THE CASE. 13. THE LEARNED DEPARTMENTAL REPRESENTATIVE BEFORE US REITERATED THE SUBMISSIONS THAT THE ASSESSEE DID NOT BRING THE INCOME ACCRUED TO THE ASSESSEE TO THE KNOWLEDGE OF THE ASSESSING OFFICER, AND RELIED ON THE EXPLANATION TO THE PROVISO, WHICH STATES THAT PRODU CTION BEFORE THE ASSESSING OFFICER, BOOKS OF ACCOUNT OR OTHER EVIDE NCE FROM WHICH MATERIAL EVIDENCE COULD, WITH DUE DILIGENCE, BE DISCOVERED B Y THE ASSESSING OFFICER, WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN TH E MEANING OF THE PROVISO. HE REITERATED THE CONTENTIONS AS DISCUSSED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. ITA NO.1002/HYD/2004 & ANR. M/S. G.V.K. INDUSTRIES LTD., SECUNDERABAD 11 14. THE LEARNED COUNSEL RELIED ON THE ORDER OF TH E CIT(A) 15. AFTER CONSIDERING THE RIVAL CONTENTIONS, AND P ERUSING THE PAPER-BOOK PLACED BEFORE US CONTAINING PAGES 1 TO 67 AND THE ORIGINAL ASSESSMENT ORDER OF THE ASSESSING OFFICER IN THIS REGARD, WE ARE OF THE OPINION THAT THE REOPENING OF THE ASSESSMENT AFTER FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR IS BAD IN LAW, AS HELD B Y THE CIT(A). AS SEEN FROM THE SATISFACTION RECORDED FOR INITIATION OF TH E PROCEEDINGS, PARA 1 ITSELF STATES THAT ASSESSEE COMPANY IS HAVING A POWER PURCHASE AGREEM ENT WITH THE TRANSCO. AS PER CLAUSE 3.4 OF THE SAID PPA, TH E INCOME-TAX PAID BY THE ASSESSEE COMPANY HAS TO BE REIMBURSED BY THE TR ANSCO . THIS ENTIRE PARA IS ON THE BASIS OF THE PPA WHICH IS ALR EADY ON RECORD, AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS. THE SECO ND PARA OF THE RECORDING OF THE REASONS IS ON THE NOTE 9 OF SCHEDU LE M TO THE ANNUAL ACCOUNTS. THIS INFORMATION IS VERY MUCH PART OF SCH EDULE M OF THE ANNUAL ACCOUNTS AND BASED ON THE DISCUSSION MADE IN THE AS SESSMENT YEAR 2003- 04, THE ASSESSING OFFICER COMES TO AN OPINION THAT THIS AMOUNT IS TAXABLE IN THIS YEAR. HOWEVER, NO NEW INFORMATION HAS BEEN BROUGHT ON RECORD AND THE ENTIRE INFORMATION HAVING BEEN PLACED ON RE CORD BEFORE THE ASSESSING OFFICER IN THE COURSE OF ORIGINAL ASSESSM ENT, THE OPINION OF THE ASSESSING OFFICER NOW CAN ONLY BE CONSIDERED AS CHA NGE OF OPINION BASED ON THE ORDER FOR ASSESSMENT YEAR 2003-04. SINCE TH ERE IS NO FAILURE ON THE PART OF THE ASSESSING OFFICER IN DISCLOSING THE MAT ERIAL FACTS AT THE TIME OF COMPLETION OF ASSESSMENT, THE REOPENING AFTER FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR, IS CERTAINLY NOT AS PER THE PR OVISIONS OF S.147, WHICH EMPOWERS THE ASSESSING OFFICER TO REOPEN ONLY IF TH E CONDITIONS ARE SATISFIED. SINCE THE PROVISO TO S.147 IS CLEARLY APPLICABLE, WE UPHOLD THE ORDER OF THE CIT(A), AND REJECT THE GROUNDS AS RAIS ED BY THE REVENUE IN THIS APPEAL. 16. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ITA NO.1002/HYD/2004 & ANR. M/S. G.V.K. INDUSTRIES LTD., SECUNDERABAD 12 17. TO SUM UP, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 31 ST MAY, 2013 SD/- SD/- (SAKTIJIT DEY) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/- 31 ST MAY, 2013 COPY FORWARDED TO: 1. M/S. GVK INDUSTRIES LTD., PAIGAH HOUSE, 156 - 159, S.P. ROAD, SECUDNERABAD. 2. 3. 4. 5. ASST. COMMISSIONER OF INCOME-TAX CIRCLE 1(4), HYDE RABAD COMMISSIONER OF INCOME-TAX(APPEALS) II, HYDERABAD COMMISSIONER OF INCOME-TAX(A)-III, HYDERABAD. COMMISSIONER OF INCOME-TAX II, HYDERABAD 6. COMMISSIONER OF INCOME - TAX I, HYDERABAD 7. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. BVS