Orissa Sponge Iron & Steel Limited, Kolkata V. DCIT,Circle-1(2), Bhubaneswar

ITA 21/CTK/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5987 (ITAT-CUTTACK)
• Duration Of Justice: 3 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 05-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Business income; Depreciation; Search and seizure; Principle of natural justice; Rule of consistency; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings; Set aside
• Section: 147; 139; 143(3); 142(1); 143(1); 195; 250; 201; 143(2); 113; 153

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BEFORE AND ARUN KHODPIA, ACCOUNTANT MEMBER Orissa Sponge Iron & Steel Limited.,OSIL House, Gangadhar Meher Marg, Bhubaneswar. PAN/GIR No. (Appellant Per Bench This is 11.12.2018 of the ld CIT(A) the assessment year 2012 2. None represented on behalf of the assessee and Shri M.K.Gautam, ld CIT DR appeared on behalf of the revenue. 3. The appeal of was initially fixed for hearing on 24.10.2019 but due to strike of Bar IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI GEORGE MATHAN, JUDICIAL AND ARUN KHODPIA, ACCOUNTANT MEMBER ITA No.21/CTK/2019 Assessment Year : 2012-13 Orissa Sponge Iron & Steel Limited.,OSIL House, Gangadhar Meher Marg, Bhubaneswar. Vs. DCIT, Circle Bhubaneswar PAN/GIR No.AAACO 2568 G (Appellant) .. ( Respondent Assessee by : None (written submission filed) Revenue by : Shri M.K.Gautam, CIT Date of Hearing : 18/8 Date of Pronouncement : 18/8 O R D E R an appeal filed by the assessee against the order dated 11.12.2018 of the ld CIT(A)-1, Bhubaneswar in Appeal No.0113/17 the assessment year 2012-13. None represented on behalf of the assessee and Shri M.K.Gautam, ld CIT DR appeared on behalf of the revenue. The appeal of the assessee had been filed on 6 was initially fixed for hearing on 24.10.2019 but due to strike of Bar Page1 | 26 IN THE INCOME TAX APPELLATE TRIBUNAL, JUDICIAL MEMBER AND ARUN KHODPIA, ACCOUNTANT MEMBER DCIT, Circle-1(2), Bhubaneswar Respondent) : None (written submission filed) M.K.Gautam, CIT DR 8/ 2022 8/2022 against the order dated 1, Bhubaneswar in Appeal No.0113/17-18 for None represented on behalf of the assessee and Shri M.K.Gautam, ld he assessee had been filed on 6.2.2019. The appeal was initially fixed for hearing on 24.10.2019 but due to strike of Bar ITA No.21/CTK/2019 Assessment Year : 2012-13 Page2 | 26 Association, the hearing was adjourned. Thereafter, the hearing was fixed on 4.12.2019, 7.1.2020, 11.2.2020, 17.3.2020, 15.6.2020, 10.7.2020, 14.8.2020, 2.9.2020, 21.9.2020, 21.102020, 22.10.2020, 20.11.2020 and 14.12.2020. Every time, the assessee sought adjournment. The notices have been sent through ld CIT DR on multiple occasion. However, a written submission dated 13.8.2020 has been filed by the assessee, which is extracted below: “I The Assessee/ Appellant is a limited company, engaged in the business of manufacturing and sale of sponge iron. The registered office of the company is registered at OSIL House, Bhubaneswar. II. The appellant company had installed a 24 MW Captive Power Plant utilizing Waste Heat Recovery Boiler (in short "WHRB") and Fluidized Bed Combustion Boiler (in short FBCB) in the plant site of the company in Palaspanga, Keonjhar District. The project cost was Rupees Eighty Crores which was financed by a loan of Rupees Forty Crores from Indian Renewable Energy Development Agency Ltd (in short "IREDA"). III. IREDA is a Mini Ratna (Category - 1) Government of India Enterprise under the control of Ministry of New and Renewable Energy (in short "MNRE") for promoting, developing and extending financial assistance for setting up projects relating to new and renewable sources of energy with energy conservation and efficiency. The main objectives of IREDA (as visible from Pg.213 of the Paper Book- II are To give financial support to specific projects and schemes for generating electricity and or energy through new and renewable sources and conserving energy through energy efficiency. To maintain its position as a leading organization to provide innovative financing in renewable energy and energy efficiency/conservation projects. To increase IREDA's share in the renewable energy sector by way of innovative financing. Improvement in the efficiency of services provided to customers through continual improvement of systems, processes and resources. To strive to be a competitive institution through customer satisfaction. IV. That, the Assesse / Appellant has preferred the aforementioned appeal challenging the Impugned Order dated December 11, 2018, passed by the Ld. Commissioner of Income Tax (Appeals) - 1, Bhubaneswar (in short "Ld.CIT(A)") under section 250 of the Income Tax Act, 1961 (a copy of which is attached herewith at Pgs.12-15 of the Paper Book I) - wherein the Ld.CIT(A) has ITA No.21/CTK/2019 Assessment Year : 2012-13 Page3 | 26 erroneously held that the Assessing Officer (in short "A.O.") was justified in making the impugned disallowance of depreciation of Rs.7,06,55,817/- from the income of the Appellant and assessing the total loss at Rs. 63,92,80,048/- vide the impugned Assessment Order dated October 5, 2017 (a copy of impugned assessment order is attached herewith at Pgs. 16-19 of the Paper Book I). V. That, before challenging the impugned addition/disallowance on account of depreciation made by the Ld. A.O. and sustained by the Ld.CIT(A) the following list of dates and events arc of importance: Year 1979 Orissa Sponge Iron Limited was incorporated as a public limited company in 1979 under the provisions of the Companies Act, 1956. The company was promoted by Torsteel Research Foundation in India (TRF1) in a joint sector with Industrial Promotion and Investment Corporation of Orissa Limited (IPICOL), a wholly-owned company of the State Government of Orissa to set up the first commercial coal-based sponge iron plant in India in the backward district of Keonjhar, Orissa. The company has been renamed as Orissa Sponge Iron & Steel Ltd (in short "OSIL") on 18th November 2005. Year 1992 OSIL set up its project and engineering division at Bhubaneswar in 1992 to enable setting up of sponge iron plants in the country based on its patented process known as "OSIL Process" which was widely accepted and recognized as one of the leading coal-based sponge iron technology in the world. The technology was adopted for use in projects funded by IDBI, World Bank's International Financial Corporation (in short "IFC") and German Development Bank (in short "DEG"). 02,01.2006 A Loan Agreement was entered into between Orissa Sponge Iron & Steel Limited (OSIL) as a borrower and the Indian Renewable Energy Development Agency Limited (IREDA) as a lender for a loan of Rupees Four Thousand Lakhs (Rs.400,000,000/-) at the rate of ten per cent (upon hypothecation of immovable property) for setting up of 24 MW Captive Plant utilising Waste Heat Recovery Boiler and Fluidized Bed Combustion Boiler in the village of Tangarani. P.O. Palaspanga, Keonjhar District, in the state of Orissa (A copy of the said loan agreement dt.2.1.2006 is attached herewith at pages 59 to 67 of the PB) The estimated total cost of the project was Rs. 8007.09 Lakhs (as visible from Schedule 111 of the Loan Agreement) and the aforementioned Renewable / Energy Saving devices, i.e., the Waste Heat Recovery Boiler and Fluidized Bed Combustion Boiler so used for generation of power arc eligible for depreciation at the rate of eighty per cent as per Entry-IIl(8)(ix) and/or Entry-III(8)(xiii) of Appendix-I of Income Tax Rules, 1962 under the Head of 'Energy Saving Devices' and/or 'Renewable Energy Devices' respectively (a copy of the relevant excerpts of the said Appendix I is attached herewith at Pages 72-73 of the Paper Book I). 14.09.2013 The Appellant e-filed the return of income for the relevant assessment year 2012-13 dated September 14, 2013, declaring a loss of Rs.76,33,67,330/-. The case was however selected for scrutiny under "CASS" where notice u/s 143(2) stood issued along with several other notice(s) u/s 142(1) of the Act. The details vis-a-vis the depreciation claimed was sought for by the assessing officer during ITA No.21/CTK/2019 Assessment Year : 2012-13 Page4 | 26 the assessment proceedings - to which, vide Replies dated December 18, 2014, and January 16, 2015 (attached herewith at Pages 1 - 2 and Pages 31-168 of the Paper Book II) the Assessee / Appellant provided the necessary documents in that regard. 30.01.2015 Upon a perusal of the written submissions that were filed, along with the books of accounts the evidential vouchers and registers that were produced by the Assessee / Appellant during the regular assessment. The assessing officer duly examined all aspects to pass the original assessment order u/s 143(3) of the Act on January 30, 2015 - by determining the total loss at Rs. 60,13,01,083/- and by making several additions/ disallowances. However no addition/disallowance for the depreciation claimed was made (a copy of the original assessment order passed u/s 143(3) of the Act is attached herewith at Pages 169 - 178 of the Paper Book II). Aggrieved by the additions/disallowances made during the regular assessment, the Assessee/ Appellant preferred an appeal before the Ld.CIT(A) - where - against the part relief provided to the Assessee / Appellant by the Ld.CIT(A) the matter further travelled by way of a Revenue appeal up to this Hon'ble ITAT. The various additions/disallowances deleted by the Ld.CIT(A) was thus affirmed by this Hon'ble ITAT (in favour of the Assessee / Appellant) vide Order dated January 17, 2018, in ITA No. 415/CTK/14-15 (a copy of which is attached herewith at Pages 191- 198 of the Paper Book II). 3.2017 Notice u s 148 dated March 22. 2017 (a copy of which is attached herewith at Pages 199 of the Paper Book II was issued. In compliance to the same, the assessee/ Appellant reiterated its original Return, showing Nil income (a copy of the response is attached herewith at page 200 of the PB-II). 11.12.2018 On appeal the ld CIT(A) vide the impugned order dt.11.12.18 (a copy of which is attached herewith at page 12-15 of the PB I) confirmed the action of the AO by erroneously holding that the depreciation @ 80 percent on energy saving devices is eligible if the equipment is named in Entry III (8) (ix) in Appendix 1 of the Income Tax Rule 1962. In support, reliance was made by the ld CIT(A) to the decision of the Hon’ble Madras H.C. in the case of Adar Tea Products Co. (Mad) 221 CTR 597 ( a copy of which is attached herewith in the Compilation of Case Laws and Statutory Provisions) which was also relied upon the A.O at the time of framing the 143(3)/174 assessment. Aggrieved by the Impugned Order of the Ld.CIT(A), the Assessee / Appellant is in appeal before the Hon'ble Bench (a copy of the Form No.36 with the Grounds of Appeal are attached herewith at Pages 1-10 of the Paper Book 1) SUBMISSIONS OF THE ASSESSEE / APPELLANT: VI. The Assessee / Appellant prays and submits that OSIL has rightly claimed the depreciation @ 80 per cent on the Renewable / Energy Saving Devices utilised for the Captive Power Plant, i.e., the Waste Heat Recovery Boiler (in short the 'WHRB') and the Fluidized Bed Combustion Boiler (in short the 'FBCB'). VII. It is submitted that both devices, i.e. the FBCB and WHRB - feature in the Depreciation Schedule found in Appendix 1 of the Income Tax Rules, 1962 qua the Energy Saving devices specified in Entry III (8)(ix) and/or the Renewable Energy Devices specified in Entry III (8)(xiii) (a copy of the relevant excerpts of the ITA No.21/CTK/2019 Assessment Year : 2012-13 Page5 | 26 Appendix I are attached herewith at Pages 72-73 of the Paper Book I). This is evident from the basic understanding of the functions of both these types of equipment that clearly exhibit their utilisation of thermal energy - to run the captive power plant (that was set up by way of the Loan Agreement dt.02.06.2006 between OSIL and IREDA). a) The Waste Heat Recovery Boiler - This equipment covers various kinds of waste heat generated from the production process of steel, non-ferrous metal, chemical, cement etc. - where they convert such recovered heat into useful and effective thermal energy. In the case of the Assessee / Appellant, the Waste Heat Recovery Boiler utilises the waste heat (being off-gas) that is produced from the generation of sponge iron. The same is thus converted into thermal energy that is utilised for the running of the thermal power plant. The same is an 'Energy Saving Device' since the Device recovers the waste heat from a process with a gas or liquid back to the system as an extra energy source. It is thus eligible to depreciation at the rate of 80% under Entry III (8)(ix) of Appendix 1 of the Income Tax Rules, 1962 (See Rule 5(1A)). Further, the Device is also labelled as a 'Renewable Energy Device' since 'off-gas' that is produced as a by-product of an industrial process is often considered as waste and let loose into the environment. This equipment is thus also entitled to depreciation at the rate of 80% under Entry III (8)(xiii) of Appendix 1 of the Income Tax Rules, 1962 (See Rule 5(1 A)). b) A Fluidized Bed Combustion Boiler - utilises the fluidized-bed combustion process, where a bed of crushed solid particles (in this case coal fines) is made to behave like a fluid by an airstream passing from the bottom of the bed at sufficient velocity to suspend the material in it. The combustion process of these coal fines generators thermal energy that is then utilised for the powering the Captive Power Plant. This is thus an energy saving device since Fluidised bed combustion is a considered alternative to conventional firing systems in light of the multiple benefits it offers, such as compact boiler design, fuel flexibility, higher combustion efficiency and reduced emission of noxious pollutants such as SO x and NO x . and the same is thus entitled to depreciation at the rate of 80% under Entry III (8)(ix) of Appendix 1 of the Income Tax Rules, 1962 (See Rule 5(1 A)), further it is also a 'Renewable Energy Device' since these coal fines, are often regarded as wastes because they fail to participate in various processes when applied as a direct fuel source - the same would thus also entitle this equipment to depreciation at the rate of 80% under Entry III (8)(xiii) of Appendix 1 of the Income Tax Rules, 1962 (See Rule 5(1 A)). VIII. It is based on the renewable nature of the captive power plant (with the utilisation of the WHRB and FBCB) that the IREDA has provided the loan via the Loan Agreement dt.02.01.2006 to OSIL. It is submitted that the main objectives of the IREDA (as has already been reiterated above) specifics the providing of financial support to only specific projects and schemes for the generation of electricity and/or energy through renewable sources and conserving energy through energy efficiency (See in this regard Page 213 of the Paper Book II). IX. Therefore under section 2(11) r.w.s. 32 of the Income Tax Act r.w. Entry III (8)(ix) and Entry III 8(xiii) in Appendix 1 of the Income Tax Rules, 1962 - it is clearly stated that for such Plant and Machinery utilised for the generation of power, depreciation is allowed @ 80 per cent. Hence the depreciation accounted ITA No.21/CTK/2019 Assessment Year : 2012-13 Page6 | 26 for @ 80 per cent by the Assessee / Appellant vis-a-vis the aforementioned two types of equipment, is in order. X. Thus the Impugned Order passed by the Ld. CIT(A) in upholding the impugned disallowance on account of depreciation claimed is illegal, arbitrary, erroneous, bereft of jurisdiction and unsustainable in Law. Against the Impugned Order of the Ld. CIT(A), the Assessee / Appellant is making the following submissions on jurisdiction and merits, in a ground wise manner: I. For that the assessment order dated 05.10.2017 passed bv the Ld. Assessing Officer and the Impugned Order dated 11.12.2018 of the Ld.CIT(Appeals) is against Natural Justice, unjustified, erroneous, arbitrary, contrary to fact and bad in Law (See Ground No. 1 of this Appeal). This ground in general in nature. II. For that notice issued u/s 148 of the Income Tax Act, 1961 is unjustified in facts and in law since the I.d.A.O. has failed to prove the existence of a 'Reason to believe' based on tangible material that the income of the Assessee has escaped assessment. The Ld.A.O. has therefore operated on a mere 'change in opinion' that is impermissible in law See Ground So.2 and 3 of this Appeal) a. Sec 147 of the I.T.Act, 1961 reads as follows: "147. 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 (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.........................................................." b. A bare perusal of Sec. 147 would make it evident that to validly establish jurisdiction for reopening assessment proceedings, the fundamental requirement of the Section is the existence of a 'Reason to Believe' that any income chargeable to tax has escaped assessment. It is only then that the Assessing Officer may, subject to the provisions of section 148 to 153 of the Act assess or reassess such income. This power to reopen assessment is available in either case, namely, while a Return has been either accepted under section 143(1) of the I.T. Act or a scrutiny assessment has been framed under section 143(3) of the I.T. Act. In the second case, however, i.e., when the assessment u/s 143(3) stands completed - then there is an additional requirement for the Ld. A.O. to take an action after the expiry of four years - ITA No.21/CTK/2019 Assessment Year : 2012-13 Page7 | 26 which is to show that there has been a failure on the part of the Assessee to 'fully and truly' disclose the material facts that are necessary for his/her assessment. This additional requirement is however not applicable in the case at hand since the Impugned Order in Original u/s 143(3)/147 has been passed within 4 years from the end of the relevant AY in question. c. Since the 'Reason to believe' is the foremost criteria for reopening of an assessment and should be interpreted in the right perspective - the 'Reason to Believe' cannot be substituted for a 'Reason to Suspect'. There must thus be a direct/live nexus between the material coming to the notice of the assessing officer and the subsequent formation of belief based on such material to show that there has indeed been an escapement of the assessee's income. d. The scope and ambit of the phrase 'Reason to Believe' is now well settled and trite Law. wherein various decisions (including those of the Hon'ble Apex Court) have time and again held that the reason for the formation of belief must have a rational connection with the information received. Rational connection postulates that there must be some direct nexus or live link between the material coming to the notice of the income tax officer and the formation of the belief that there has been an escapement of income of the assessee from assessment in the particular year. It is to be borne in mind that not any and every material; howsoever farfetched which would warrant the formation of a belief relating to escapement of the income of the assessce from an assessment. e. In the instant case, the Ld.A.O. has formed 'Reason to believe' based on Income Tax Return and the Audited Financials of OSIL for the year ending 31.03.2012 - both of which were already on record right from the day one when the return was originally filed and during the time of regular scrutiny assessment as well. This is visible from a perusal of the Reasons Recorded provided for by the Department vide Communication dt. 16.08.2017 (found at Page 201 of the Paper Book II) that reads as follows: During the F/Y 2011-12 relevant to A/Y 2012-13 the company in its profit loss account for the year ending 31 s ' March 2012 had claimed depreciation as per Income Tax Act ofRs.8,64,31,320/- on assets of power division which was also allowed in the scrutiny assessment. As per tax audit report of form No.3CD in annexure - J (C) the assessee had claimed depreciation @ 80% on the entire assets of power division including building. As per the depreciation schedule the assessee had claimed and was allowed @80% are not covered under the category specified as energy saving devices in appendix - 1 under rule of Income Tax Rules 5, 1962. Depreciation allowed in excess of admissible depreciation of Rs. 7.06,55,817/- (86431315-15775498) should be disallowed was required to be added back to the total income " [Emphasis Supplied] f. It is submitted that during the regular assessment proceedings, in response to the specific questionnaire u/s 142(1) of the Act, dt. 18.12.2014 (attached herewith at pages 1-2 of the Paper Book II) - the Assessee / Appellant has vide Reponses dated 07.01.0215 and 16.01.2015 (attached at Pages 3-30 and 31- 168 of the Paper Book II) provided the necessary details of the depreciation ITA No.21/CTK/2019 Assessment Year : 2012-13 Page8 | 26 claimed by way of the Depreciation Chart (forming part of the Audited Financials) (found at Page 52 of the Paper Book II) and the Depreciation Chart forming part of the Computation of Income (found at Pages 8 - 11 of the Paper Book II) - wherefrom the depreciation claimed against each device in each division has been exhibited. The said information thus formed part of the regular assessment proceedings that culminated into the passing of the regular assessment order u/s 143(3) of the Act dt.31.01.2015 (attached herewith at Pgs.169-178 of the Paper Book II). It is submitted that there has been no change in the facts and figures of the case when the matter stood reopened by the Ld.A.O. u/s 147/148 of the Act. g. Thus all the material that was necessary to form an opinion regarding the rate of depreciation was already available with the Department at the time of the regular 143(3) assessment. There was no fresh tangible material based on which the Ld.A.O. could now have formulated a "Reason to believe that ar. '.aim of depreciation has escaped assessment during the AY in question.. The AO was seemingly in a hurry to reopen the assessment proceedings before the expiry of 4 years from the end of the relevant AY in question (which would have otherwise entailed the fulfillment of the additional requirement of showing that there has not been a ‘full and true’ disclosure of the material facts by the Assessee/ Appellant). The Ld.A.O. has however erred in failing to notice that the issue relating to depreciation had already been dealt in the regular assessment passed u/s 143(3) of the Act and that the reopening of assessment in this case sans any such tangible material available on record that would result in the formation of a 'Reason to Believe' that the income of the Assessee/Appellant had escaped assessment, thus amounts to a 'mere change of opinion' that is impermissible in law. h. It is submitted that 'Belief must be held in good faith; it cannot be merely a pretence. The expression 'Believe' in Section 147 requires an objective satisfaction based on definite material and information, i.e., there must be live link/nexus between the information, the assessee and the excess claim allowed. The absence of any such tangible material in the case at hand shows that no such live link/causal nexus can be established to arrive at a 'reason to believe' that the Assessee/Appellant Co.'s income has escaped assessment - which therefore renders the very initiation of the reassessment proceedings u/s 148 of the Act to be non-est. The formation of belief in this manner is a mandatory condition for acquiring valid jurisdiction to issue a notice u/s 148. The above submissions of the Assessee Co. are supported by the following decisions: - Calcutta Discount 1961 41 ITR 191(SC) '37: The notices issued by the Income Tax Officer in the case before us undoubtedly fulfil conditions (2) and (3). Notices of reassessment were served before the expiry of eight years of the end of the relevant years of assessment. The Income Tax Officer also recorded his reasons in the reports submitted by him to the Commissioner and the Commissioner was satisfied that they were fit cases for the issue of such notices. The dispute in the appeal relates merely to the fulfilment of the two branches of the first condition and that immediately raises the question about the true import of the expression "has reason to believe" in s. 34(1)(a). The expression " reason to believe "postulates belief and the existence of reasons for that belief. The belief must be held in good faith: it cannot be merely a pretence. The expression does not mean a purely subjective satisfaction of the ITA No.21/CTK/2019 Assessment Year : 2012-13 Page9 | 26 Income Tax Officer: the forum of decision as to the existence of reasons and the belief is not in the mind of the Income Tax Officer. If it be asserted that the Income Tax Officer had reason to believe that income had been under assessed by reason of failure to disclose fully and truly the facts material for assessment, the existence of the belief and the reasons for the belief, but not the sufficiency of the reasons, will be justifiable. The expression therefore predicates that the Income Tax Officer holds the belief induced by the existence of reasons for holding such belief. It contemplates existence of reasons on which the belief is founded, and not merely a belief in the existence of reasons inducing the belief; in other words, the Income Tax Officer must on information at his disposal believe that income has been under assessed by reason of failure fully and truly to disclose material facts necessary for assessment. Such a belief, be it said, may not be based on mere suspicion; it must be founded upon information. Emphasis Supplied ITO VS Lakmani Mewal Das, 1976, 103 ITR 437 (sc) "As stated earlier, the reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the and truly all Material facts. It is no doubt true that the court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income-tax Officer on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. " [Emphasis Supplied] Sheo Nath Singh v. AACIT, 972 SCR (I) 175 (SC) "10: There can be no manner of doubt that the words "reason to believe" suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the Income Tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The Income Tax Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the Section. The court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the court." [Emphasis Supplied] S. Narayanappa and Ors. vs. Commissioner of Income Tax, Bangalore, AIR 1967 SC 523: "3.......It is true that two conditions must be satisfied in order to confer jurisdiction on the Income-tax Officer to issue the notice under s. 34 in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year. The first condition is that the Income-tax Officer must have reason to believe that the income, profits or gains chargeable to income-tax had been under-assessed. The second condition is that he must have reason to believe that such "under-assessment" had occurred by reason of ITA No.21/CTK/2019 Assessment Year : 2012-13 Page10 | 26 either (i) omission or failure on the part of an assessee to make a return of his income under s. 22, or (ii) omission or failure on the part of the assessee to disclose fully and truly all the material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer acquires jurisdiction to issue a notice under the section. -'4. The belief must be held in good faith : it cannot be merely a pretence. To put it differently it is open to the Court to examine the question whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section. To this limited extent the action of the ITO in starting proceedings under s.34 of the Act is open to challenge in a court of law. CIT vs. Lucas TVS Ltd. reported in (2001) 249 ITR 306 (SC) held the following: "If there is no failure on part of assessee to disclose fully and truly material facts, wrong interpretation of accounts by AO leading to relief cannot be a ground for reopening and, thus, cannot confer jurisdiction on AO. The reason for the formation of the belief must have a rational connection with the information received. Rational connection postulates that there must be direct nexus or live link between the material coming to the notice of the Income -tax Officer and the formation of the belief that there has been escapement of income of the assessee from assessment in the particular year because of his failure to disclose fully and truly material facts. It is to be borne in mind that it is not any and every material, howsoever vague and indefinite or distant remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment." [Emphasis Supplied] The decision of the S.C. in the case of CIT vs. Kelvinator India Ltd., [2010] 320 ITR 561 (SC) which held that: "........Hence after April 1, 1989, the Assessing Officer has the power to reopen an assessment, provided there is "tangible material" to come to the conclusion that there was escapement of income from assessment. Reason must have a link with the formation of the belief." [Emphasis Supplied] Ganga Saran & Sons (P.) Ltd. v. ITO [1981] 130 ITR 1 (SC): "6.......... The important words under section 147(a) are "has reason to believe" and these words are stronger than the words "is satisfied". The belief entertained by the ITO must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The Court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the ITO in coming to the belief, but the Court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the ITO could not have reason to believe that any part of the income of ITA No.21/CTK/2019 Assessment Year : 2012-13 Page11 | 26 the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid. " i. It is submitted that upon having already dealt with the depreciation claimed on the Plant and Machinery during the regular assessment u/s 143(3) - where the Assessee / Appellant has provided the necessary details vis-a-vis the depreciation claimed (vide Response dt.07.01.2015 and 16.01.2015, see in specific Pages 8-11 and Pages 52 - 56 of the Paper Book II) - the A.O. has then passed the order of regular assessment u/s 143(3) of the Act after a thorough perusal and examination of the ITR and the audited financials of OSIL, where after having made a sufficient and elaborate examination of the issue of depreciation - the A.O. has proceeded to make certain disallowances in the Order passed u/s 143(3) (attached herewith at Pages 169-178 of the Paper Book II), that did not include the issue of depreciation claimed on plant and machinery. Therefore, the reopening of the assessment on the same issue of the depreciation claimed is nothing but a 'change of opinion' - where the Ld.A.O. had at the time of initiating reassessment proceedings u/s 147/148 of the Act categorically stated in his 'Reasons Recorded' that it is only upon a perusal of the ITR and the Tax Audit Report of OSIL for the year ended 31.03.2012 that he has formulated his 'Reason to Believe' that the Assessee had been allowed depreciation at the enhanced rate, which is inadmissible and thus ought to be disallowed (a copy of the Reasons Recorded is attached herewith at Page 201 of Paper Book II). j. Reopening of assessment proceedings sans the existence of any such 'Reason to Believe' that has been arrived at by establishing a live link/nexus between the tangible material and the income of the assessee which has escaped assessment - and which is based purely on a mere 'change of opinion' is impermissible in law, as has been held in the following decisions: - Deputy Commissioner of Income Tax v. Sun Pharmaceutical Industries Ltd [2020] 117 taxmann.com 116 (SC) wherein it was held as under: "12.4 Therefore, the Assessing Officer formed a belief that SPI & SPS which had manufactured the products developed at R&D facility of the petitioner-SPIL, the expenditure of such R&D is debited in the books of account of SPIL, which reduces its profit and the profit of SPS &SPI is inflated to that extent. It was also urged before us that allocation amongst various units of M/s. Sun Pharmaceutical Industries Limited was the question raised vide communication dated 2nd August 2007 at the time of scrutiny assessment. However, this was not in respect of allocation between M/s. SPIL [the petitioner] and M/s. Sun Pharmaceutical Industries (SPI). It is further urged that on analyzing the impounded material and on going through the survey report, huge amount is believed to have escaped assessment. 12.5 We are of the opinion that the ground on which reopening is sought, is essentially in respect of allocation of R&D expenses and the details furnished in the reasons recorded essentially are concerning allocating between SPI and SPS (Sikkim) and it is apparent from the record that SPS was not even in existence during the year under question. ITA No.21/CTK/2019 Assessment Year : 2012-13 Page12 | 26 12.6 When on R&D expenses of the company issue has been scrutinized extensively during the year under question, we are unhesitatingly of the opinion that this ground is nothing but an attempt to review its own decision and Assessing Officer have under scrutiny assessment dealt with the same in the previous years as well as in the year under question extensively, but, the same was also carried to CIT (A) which had finalized the said issue of allocation of R&D expenses by re- allocating 12.5% of all R&D expenditure as relating to formulations during the year under question, as detailed hereinabove while dealing with the same. And therefore, without going into the larger issue of as to whether a particular angle, if is missed out in a question determined on scrutiny in a regular assessment, whether re- opening on such left out angle is permissible or not, as far as this ground is concerned, in wake of the reasonings given in the records of reasoning; particularly emphasizing on SPS which never existed and when all other angles otherwise are examined sufficiently and elaborately, this appears to be an attempt pure and simple to review its own order alongwith other materials found in relation to the first issue. Therefore, the notice for re-opening on this count shall need to fail." [Emphasis Supplied] In Champ Energy Ventures (P.) Ltd. V. Income Tax Officer, Ward -1(2), Pune [2019] 102 taxmann.com 374 (Bombay), the Hon'ble Bombay High Court quashed the reopening notice on the ground that issue was already considered during regular assessment by the assessing officer, and therefore reopening would be based on mere change of opinion. The relevant excerpt is as under: "9. The Assessing Officer had thus, called upon the assessee to justify the expenditure towards provision for warranty and the assessee had made a detailed representation. According to the assessee, such claim was genuine. After such exercise, Assessing Officer passed the order of assessments which, she made non- disallowance towards the expenditure in question. In other words, the assessed claim was accepted. In absence of any tangible material out side of assessment record, it would not be open for the Assessing Officer to re-open the assessment on the said ground. Any attempt on her part would be based on a mere change of opinion as held by the Hon 'ble Supreme Court in the case of CIT v. Kelvinator of India Ltd. [201OJ 187 Taxman 312/320 ITR 561 has held that even post the amendments in Section 147 of the Act w.e.fi 01.04.1989, the concept of change of opinion, continues to hold the field. In the result, the impugned notice is quashed and set aside. 10. Petition is disposed of. " [Emphasis Supplied] Commissioner of Income Tax, Delhi Vs. Kelvinator of India Limited, (supra) 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 re-open. We must also keep in mind the conceptual difference between Bower to review and power to re-assess. The AO has no power to review, he has the power to reassess. But reassessment 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 ITA No.21/CTK/2019 Assessment Year : 2012-13 Page13 | 26 abuse of power by the Assessing Officer. Hence, after I st April, 1989, Assessing Officer 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 have a live link with the formation of the belief. " [Emphasis Supplied] Uni VTL Precision (P.) Ltd. vs. DCIT, [2020] 113 taxmann.com 533 (Bombay): "2. The reasons in support of the impugned notice proceeds on the basis that income chargeable to tax has escaped assessment in view of issue of shares to the existing shareholders. The genuineness of the transaction of issuing shares is doubted in the reasons thus leading to a belief that income chargeable to tax has escaped assessment. The impugned notice is beyond a period of four years from the end of the relevant Assessment Year and therefore governed by first proviso of Section 143(3) of the Act. The very issue on which the Assessing Officer has come to a reason to believe that income chargeable to tax has escaped assessment were subject matter of examination leading to an order dated 5 February 2015 under Section 143(3) of the Act. Thus, there was no failure on the part of the Petitioner to disclose truly and fully all material facts necessary for the assessment. Besides, it is submitted that this is a clear case of change of opinion, as the Assessing Officer had already taken a view on the facts alleged in the reasons. 3. Prima facie there is a merit in the contentions of the Petitioner. The impugned notice is without jurisdiction being hit by the first proviso of Section 147 of the Act. Besides, it also appears to be a case of change of opinion by the Assessing Officer as this very issue was the subject matter of regular assessment proceedings under Section 143(3) of the Act." [Emphasis Supplied] k. To conclude, the reopening of assessment proceedings u/s 147/148 of the Act, must be based on such tangible material that shows that the Assessee / Appellant has failed to disclose a material fact during the already concluded assessment - which in turn leads the formation of a 'Reason to Believe' (by establishing a live link/causal nexus) that the income of the Assessee / Appellant has escaped assessment. This is however not the case at hand, where the reopening of the concluded assessment proceedings in the case of OS1L is based on material that already formed part of the Departmental record during the scrutiny assessment, where the Ld.A.O. has after conducting a sufficient and elaborate examination on the issue of 'depreciation' has then gone on to pass the original assessment order u/s 143(3) of the Act dt.31.01.2015 by accepting the Asecssee / Appellant's claim of depreciation. Therefore, the initiation of the proceedings u/s 147 of the IT Act, 1961 by the Ld. A.O. is unlawful as the jurisdictional requirements for invoking Section 147 has not been satisfied. The basis of the belief should be discernible from the material on record that must show that the assesses has withheld facts that evidence that the income of the assessee has escaped assessment- and which must be available with the AO when he recorded reasons. A mere change of opinion cannot constitute a reason to believe. ITA No.21/CTK/2019 Assessment Year : 2012-13 Page14 | 26 1. It is further submitted that it is also settled law that when the necessary investigation and enquiry has been made at the scrutiny assessment stage that culminated in the passing of the assessment order u/s 143(3) and no addition/disallowance and/or specific mention/observation on the said issue has been made in the said order, then even in such cases, as long as a sufficient and elaborate enquiry stands conducted at the scrutiny assessment stage, then the fact that no mention of the issue exists in the assessment order u/s 143(3) would not make the reopening of assessment u/s 147/148 of the Act, as valid. m. Attention in this regard is directed to the following decisions that have held the reassessment proceedings to be invalid in case an issue or query is raised and answered by the assessee in the original assessment proceedings and the assessing officer does not make any mention/observation and addition/disallowance w.r.t. that issue in the assessment order. See: l. The Hon'ble Delhi High Court in the case of CIT vs. Usha International Ltd. reported in [2012] 348ITR 48S (Del) held that: "13. It is, therefore, clear from the aforesaid position that: (1) Reassessment proceedings can be validly initiated in case return of income is processed under Section 143(1) and no scrutiny assessment is undertaken. In such cases there is no change of opinion; (2) Reassessment proceedings will be invalid in case the assessment order itself records that the issue was raised and is decided in favour of the assesse. Reassessment proceedings in the said cases will be hit by principle of "change of opinion ". (3) Reassessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer does not make any addition in the assessment order. In such situations it should be accepted that the issue was examined but the Assessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because the Assessing Officer had formed an opinion in the original assessment, though he had not recorded his reasons. 23. On the first question referred to this Full Bench as to the meaning of the term "change of opinion", I have nothing to add to the draft proposed. As to the first part of the second question my answer would be that the assessment proceedings cannot be validly reopened under section 147 of the Act even within four years, if an assessee has furnished full and true particulars at the time of original assessment with reference to the income alleged to have escaped assessment, if the original assessment was made under section 143(3). My answer to the second part of the second question is that the issue is concluded by the judgment of the Full Bench of this court in Kelvinator (supra). 25 My answer to the third question is this. So long as the assessee has furnished FULL AND TRUE at the time of original assessment and so long as the assessment order is framed under section 143(3) of the Act, it matters little that the AO did not ITA No.21/CTK/2019 Assessment Year : 2012-13 Page15 | 26 ask any question or query with respect to one entry or note but had raised queries and questions on other aspects. Again the answer to this question stands concluded by the judgment of the Full Bench of this court in Kelvinator (supra). My answer to question No. (iv), in respectful agreement with the judgment of the Full Bench of this court in Kelvinator (supra), is a limited answer. It is that section 114(e) of the Evidence Act can be applied to an assessment order framed under section 143(3) of the Act, provided that there has been a full and true disclosure of all material and primary facts at the time of original assessment. In such a case if the assessment is reopened in respect of a matter covered by the disclosure, it would amount to change of opinion. I do not in the circumstances consider it necessary to answer the broad question as to what are all the circumstances under which section 114(e) of the Evidence Act can be applied." [Emphasis Supplied] The Hon'ble Delhi High Court in the case of Allied Strips Ltd. vs. ACIT, CCIS, WP(C) 2526/2015 held the following: "10. It is clear from the above, that the present case is one of change of opinion. The questionnaire and particularly question B.l specifically raise the issue with regard to share capital. It requires the petitioner to give a list, source, genuineness, identity of the share holders along with confirmation copies of the ledger account of the party including confirmation of the mode, date, address and acknowledgement of return, etc. from the said party along with source and relevant bank entries. The said information was provided by the assessee. After receipt of the said information, Assessing Officer did not think it fit to make an addition and, under these circumstances, no addition itself amounts to forming an opinion as has been held in Usha International Ltd. (supra). 11. Therefore, in our view, the present exercise of issuing the notice under Section 148 of the Act would amount to nothing but a change of opinion, which is not permissible. 16. Thus the petition is liable to succeed. The writ petition is allowed and the impugned notice under Section 148 of the Act dated 27.03.2014 and all proceedings consequent thereto including the order dated 23.02.2015 are quashed /set aside. There shall be no order as to costs. " [Emphasis Supplied] The Hon'ble Bombay High Court in the case of Asian Paints Ltd. vs. Deputy Commissioner Of Income-Tax And Another reported in [2009] 308ITR 195 (Bom) held the following: "8. In the order rejecting the objection filed by the petitioner to the notice under section 148, respondent No. 1 has observed "verification of assessment record reveals that the said details were called for but inadvertently the same were not taken into account while framing the assessment and. therefore, it cannot be said that there is a change of opinion." According to respondent No. 1. thus, the relevant material was available On record, but he failed to apply his mind to that material in making the assessment order. The question is can respondent No.1 take recourse to the provision of section 147 for his own failure to apply his mind to the material which according ITA No.21/CTK/2019 Assessment Year : 2012-13 Page16 | 26 to him, is relevant and which was available on record. We find that this situation has been considered by the Full Bench of the Delhi High Court in its judgment in the case of CIT v. Kelvinator of India Ltd. [2002] 256ITR 1 and the Full Bench has observed thus (page 19) : "The said submission is fallacious. An order of assessment can be passed either in terms of sub-section (1) of section 143 or sub-section (3) of section 143. When a regular order of assessment is passed in terms of the said sub-section (3) of section 143 a presumption can be raised that such an order has been passed on application of mind. It is well known that a presumption can also be raised to the effect that in terms of clause (e) of section 114 of the Indian Evidence Act judicial and official acts have been regularly performed. If it be held that 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 a premium to an authority exercising quasi-judicial function to take benefit of its own wrong." 9. It is clear from the observations made above that the Full Bench of the Delhi High Court has taken a view that in a situation where according to the Assessing Officer he failed to apply his mind to the relevant material in making the assessment order, he cannot take advantage of his own wrong and reopen the assessment by taking recourse to the provisions of section 147. We find, ourself, in respectful agreement with the view taken by the Full Bench of the Delhi High Court." [Emphasis Supplied] In the decision of the Hon'ble Delhi High Court in the matter of SABH Infrastructure Ltd. vs. ACIT, [2018] 99 taxmann.com 409 (Delhi) it was held that when the assessing officer was satisfied with the details provided by the asscssee during the scrutiny assessment, then the reopening of assessment proceedings based on the very same information provided during the scrutiny assessment by the assessee was impermissible in law: "13. In fact, the petitioner, after initially submitting the details of the companies and the shares subscribed to, further provided confirmations from the said companies. The petitioner also submitted copies of the balance-sheets of the said companies for the relevant assessment years showing that these amounts were duly reflected therein. The said companies were also assessed to tax. Thus, it appears that the Assessing Officer was satisfied with the details and information provided by the petitioner. 14. A perusal of the order disposing of the objections reveals that it proceeds on the basis that the information sought by the petitioner which formed the basis for the reasons to believe, including the evidence collected, was required to be provided only in the further assessment proceedings. The said order overlooks the fact that the reasons for reopening do not mention as to what fact or information was not disclosed by the petitioner. This is very vital and in fact goes to the root of the matter. An allegation that the companies are paper companies without further facts is by itself insufficient to reopen assessments that stand closed after passing of orders under section 143(3) of the Act. ITA No.21/CTK/2019 Assessment Year : 2012-13 Page17 | 26 15. The assessment proceedings, especially those under section 143(3) of the Act, have to be accorded sanctity and any reopening of the same has to be on a strong and sound legal basis. It is well-settled that a mere conjecture or surmise is not sufficient. There have to be reasons to believe and not merely reasons to suspect that income has escaped assessment. In this case, the reasons failed to mention what facts or information was withheld by the petitioner. Merely relying upon the statement of Mr. Navneet Kumar Singhania that the companies in question were "paper companies", by itself is insufficient to reopen the assessment, unless the Assessing Officer had further information that these companies were non-existent after making further inquiries into the matter. It is clear that the Assessing Officer did not make any inquiry or investigation, if these companies were in fact "paper companies". No effort has been made to establish the connection between the statement of Mr. Navneet Kumar Singhania and the five companies. " [Emphasis Supplied] For that the Ld.CIT(A) has erred in ignoring the fact that that depreciation @ 80% claimed by OSIL on the very same plant and machinery (i.e.) the Energy Saving and/or the Renewable Energy Devices being the Waste Heat Recovery Boiler and the Fluidized Bed Combustion Boiler had been accepted and allowed by the Department in the earlier years as well as in subsequent assessment years (See Ground 3 of this Appeal) It is submitted that at the time of hearing before the Ld.CIT(A), the Assessee/Appellant had submitted adequate proof of its justification for claiming depreciation @ 80% on this particular block of assets since the same falls under the permissible category of Energy Saving Devices and /or Renewable Energy Devices as found in Entry III (8) of Appendix I of the Income Tax Rules, 1962. The Assessee / Appellant had also submitted that since the claim of depreciation has been allowed in the previous and subsequent AYs, then when the Department has allowed the depreciation on facts that are identical to the AY 2012-2013 in previous and subsequent AYs the position cannot be changed for this particular AY alone. In this regard, the assessment orders for AYs 2010-2011, 2011-2012, 2013-2014 and 2014-2015 had been provided (a copy of these assessment orders are annexed herewith at Pagcs.31-51 of the Paper Book I). It is therefore submitted that when the depreciation on the Energy Saving Devices/Renewable Energy Devices being the Waste Heat Recovery Boiler (WHRB) and the Fluidized Bed Combustion Boiler (FBCB) had been allowed at the enhanced rate in various previous assessment years and subsequent assessment years on the same facts as existed in AY 2012-2013, then the case of the Assessee for the AY 2012-2013 cannot be held to be the contrary vis-a-vis the said issue. It is submitted that although in taxation matters, the strict rule of Res Judicata as envisaged by Section 11 of the Code of Civil Procedure, 1908 has no application. However, by applying the 'Rule of Consistency' - when it is visible that the claim of the assessee has been allowed in the previous and subsequent assessment years by the Department resulting in the Department lining the position of allowing depreciation at the rate of 80% of the concerned plant and machinery, then the position cannot be altered for the A.Y. 2012-13 alone when there is no change at all in the factual position for that AY. It is submitted that such earlier and subsequent decisions, where the Department has allowed OSIL's claim for depreciation on these Energy Saving Devices / ITA No.21/CTK/2019 Assessment Year : 2012-13 Page18 | 26 Renewable Energy Devices should have been a cogent factor in the determination of the same point in the AY 2012-2013 - meaning, that the Department could not have deviated from the 'Rule of Consistency' by disallowing OSIL's claim for depreciation for AY 2012-2013 when the same has been allowed for the previous and subsequent AYs. This could have especially not have been done, by way of initiating reassessment proceedings u/s 147/148 - since there is no fresh material that the Ld.A.O. has shown to have existed on record to establish a 'Reason to Believe' that the income of the Assessee/Appellant had escaped assessment. The judicially developed 'Rule of Consistency' and the requirement to follow the same is buttressed by the various decisions of the Hon'ble S.C, and other High Courts and Tribunals, as detailed below: The decision of the Hon'ble S.C. in Radhasoami Satsan g vs. CIT (1992) 193 ITR 321. The relevant excerpt of which is quoted as under: "13. We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. 14. On these reasonings in the absence of any material change justifying the revenue to take a different view of the matter—and if there was no change it was in support of the assessee—we do not think the question should have been reopened and contrary to what had been decided by the Commissioner in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under sections 11 and 12." [Emphasis Supplied] The aforesaid decision of Radha Saomi (Supra) has been referred to in the following matters: (i) Deputy Commissioner of Income Tax, Circle 17(1), New Delhi v. Moet Hennessy (I) (P.) Ltd [2020] 114 taxmann.com 733 (Delhi - Trib.) (ii) Bodal Chemicals Ltd. V Additional Commissioner of Income Tax, Ahmedabad [2019] 112 taxmann.com 217 )Ahmedabad - Trib.) (iii) Sundaram Asset Management Company Ltd. v. Deputy Commissioner of Income Tax LTU, Chennai (2019) 111 taxmann.com 11 (Ch)] (iv) Bata India Ltd vs DCIT (2019) 111 taxmann.com 453 (Kol,.Trib) Gopal Das Estates and housing (P.) Ltd v. Commissioner of Income Tax [2019] 103 taxmann.com 334 (Delhi) ITA No.21/CTK/2019 Assessment Year : 2012-13 Page19 | 26 (v) Tata Consultancy Services Ltd. v. Commissioner of Income Tax, LTU, Mumbai [2019] 108 taxmann.com 41 (Mumbai) (vii) Principal Commissioner of Income Tax v. Haryana State Industrial and Infrastructure Development Corpn. Ltd [2019] 108 taxmann.com 540 (Punjab & Haryana) (viii) TTK Prestige Limited v. Deputy Commissioner of Income Tax, Circle 7(1)(1), Bengaluru [2018] 97 taxmann.com 112 (Karnatka) (ix) Deputy Commissioner of Income Tax, 10(1)(2), Mumbai v. Hinduja Ventures Ltd. [2019] 104 taxmann.com 302 (x) Deputy Commissioner of Income Tax, Circle - 4, Guwahati V. ATC Realtors (P.) Ltd. [2019] 108 taxmann.com 383 (Guwahati - Trib.) The Order of the Hon'ble S.C. in CIT Kolkata vs. PFH Mall, Order dt.04.09.2010 in C.A. No.6311/20102 which held: "The question which arises for determination in these appeals is "whether the income in question is liable to be taxed as business income or as income from house property"? From the records, we find that, for the earlier Assessment Year 2001-2002, the Income Tax Appellate Tribunal [for short, 'ITAT) has taken the view that income in question is business income. This view has been upheld by the High Court in these cases. In civil appeal arising out ofS.L.P. (C) No.6756 of 2009, no ground has been taken to challenge the decision of the High Court on its finding concerning Assessment Year 2001-2002. Applying the rule of consistency, these civil appeals filed by the Department are dismissed with no order as to costs." [Emphasis Supplied] Therefore the claim of depreciation on the Energy Saving Devices / Renewable Energy Devices by the Assessee / Appellant stands accepted by the Department in the various assessment years (both prior and subsequent) and the issue has thus attained finality by applying the 'Rule of Consistency' - and cannot be subject to Departmental challenge in light of the aforementioned judicial pronouncements. IV. For that the Ld. CIT(A) has erred in failing to consider that the Assessee / Appellant has explained with adequate proof and justification that the charging depreciation (a 80 % on the particular block of assets is correct as it falls under the Head of Energy Saving Devices/ Renewable Energy Devices as mentioned in Entry III (81 in Appendix 1 of the Income Tax Rules. 1962 (See Ground No.4,5,6) t. It is submitted that the issue on merits, already stands discussed by the Assessee Appellant in the initial section of this submission, where the Assessee/Appellant has submitted that based on the loan agreement dt.2.1.2006 entered into with Indian Renewable Energy Development Agency (in short IREDA attached herewith at pages 59 to 67 of the PB I-a 24 MW Captive Power Plant was set up, utilizing the Energy saving /renewable devices being a )waste heat Recovery Boiler (in short the 'WHRB') and b) the Fluidized Bed Combustion Boiler (in short the 'FBCB') in Palspanga, Keonjhar District. The total project cost was Rs. 80 Crores, where the 40 Crores was funded by IREDA. u. Before justifying the scope and ambit of the depreciation claimed at the rate of 80% on the two types of Equipment, i.e., the FBCB and WHRB. It is pertinent to understand the scope and ambit of the IREDA's objective and functioning. In this regard, it is submitted that IREDA is a Mini Ratna (Category - I) Government of India Enterprise under the administrative control of Ministry of New and Renewable ITA No.21/CTK/2019 Assessment Year : 2012-13 Page20 | 26 Energy (in short "MNRE"). IREDA is a Public Limited Government Company established as a Non-Banking Financial Institution in 1987 engaged in promoting, developing and extending financial assistance for setting up projects relating to new and renewable sources of energy and energy efficiency/conservation. A brief note on IREDA has been excerpted at Page 213 of the Paper Book II. . The sectors which are eligible for loan assistance by IREDA are as follows: Wind Energy Hydro Power Solar Energy Biomass including Bagasse & Industrial Cogeneration Biomass Power Generation Waste to Energy Energy Efficiency and Energy Conservation Bio-fuel / Alternate Fuel including Ethanol & Bio-Diesel Hybrid Projects with RE Technologies New & Emerging Renewable Energy Technologies The above is visible from the Financing Norms and Schemes issued by the IREDA which has been made part of the Paper Book II at Pages 214 to 293 (See in specific Internal Pg.3). The Appellant is covered under the category of "Waste to Energy"; "Energy Efficiency" & "Energy Conservation" due to the following reasons: a. 'Waste to Energy" and/or "Energy Efficiency & Energy Efficiency & Energy Conservation" and/or "New and Emerging Renewable Energy Technologies" vis-a- vis The Waste Heat Recovery Boiler (WHRB), since it utilizes waste heat i.e., off-gas as its fuel from the sponge iron reactor for generating power which otherwise would have been wasted. The Waste Heat Recovery Boiler is an Equipment that covers various kinds of waste heat generated from the production process of steel, non-ferrous metal, chemical, cement etc and then converts such recovered heat into useful and effective thermal energy. In the case of the assessee.appellant, the waste heat recovery boiler utilizes the waste heat (i.e. off-gas )that is produced from the generation of sponge iron. The same is thus converted into thermal energy that is utilised for the running of the thermal power plant. The same is thus an Energy Saving Device and a Renewable Energy Device since 'off-gas' that is produced as a by-product of an industrial process is often considered as waste and discarded. This equipment is thus entitled to depreciation at the rate of 80% under Entry III (8)(ix) and/or Entry III (8)(xiii) of Appendix 1 of the Income Tax Rules, 1962 (See Rule 5(1 A)). AND b. 'Waste to Energy" and/or "Energy Efficiency & Energy Efficiency & Energy Conservation" and/or "New and Emerging Renewable Energy Technologies" vis-a- vis The Fluidized Bed Combustion Boiler (FBCB) - since the burning of coal fines (an otherwise discarded material) to create sponge iron, generates thermal energy and has multiple benefits over the conventional firing systems, such as - compact boiler design, fuel flexibility, higher combustion efficiency and reduced emission of noxious pollutants such as SO, and NO x . The Fluidized Bed Combustion Boiler (FBCB) utilises the fluidized-bed combustion process, where a bed of crushed solid particles (in this case coal fines) is made to behave like a fluid by an airstream passing from the bottom of the bed at sufficient ITA No.21/CTK/2019 Assessment Year : 2012-13 Page21 | 26 velocity to suspend the material in it. The combustion process of these coal fines generates thermal energy that is then utilised for the powering the Captive Power Plant. Considering that the same is both an Energy Saving Device and a Renewable Energy Device due to multiple benefits it has against the conventional coal firing systems, the same is thus entitled to depreciation at the rate of 80% under Entry III (8)(ix) of Appendix 1 and/or Entry III (8)(xiii) of Appendix 1 of the Income Tax Rules, 1962 (See Rule 5(1 A)). w. It is submitted that as per IREDA's Financing Norms (attached herewith at Pages 214-293 of the Paper Book II) - the loan exposure under the "Waste to Energy" category is limited up to 50 per cent of the project cost (See in specific Page 218 of the Paper Book II) - thus out of the total project cost of Rs 80 Crores, an amount of Rs. 40 Crores had been financed by IREDA as a term loan carrying an interest rate of 10 per cent (See Page 67 of the Paper Book I for the rate of interest). At this juncture, it is pertinent to mention that had there been no Energy Saving / Renewable aspect to the OSIL's project - then it could not have been financed by IREDA which is a government of India enterprise. x. It is thus submitted that both devices, i.e. the FBCB and WHRB - feature in the depreciation schedule of the Income Tax Act 1961 qua the Energy Saving Renewable Devices specified in Entry III (8Xix) and or in Entry III (8Kxiii) respect Appendix 1 of the Income Tax Rules. 1962 (The relevant exceperts of which is attached herewith at pages 72-73 of the PB I. This is evident from the basic understanding of the functions of both these types of equipment that clearly exhibit their utilisation of thermal energy – to run the captive power plant. Hence the depreciation accounted for @ 80 per cent by the assessee/appellant vis-va-vis the aforementioned two types of equipment, is in order. For that the Ld.CIT(A) has erred in disallowing the Assessee / Appellant's claim for depreciation by affirming the Ld.A.O.'s reliance on the case "CIT v/s Adar Tea Products Co (Mad) 221 CTR 597". This decision of the Hon'ble Madras H.C. is not applicable in the present case as the nature of business and specification of assets are different. (See Ground No. 5) y. It is submitted that the Ld.A.O. has vide the Impugned Order in Original passed u/s 143(3)/147 of the Act (attached herewith at Pages 16-19 of the Paper Book I) disallowed the claim of depreciation of Rs.7,06,55,817/- on the aforementioned Energy Saving / Renewable Devices, i.e., The Waste Heat Recovery Boiler and The Fluidized Bed Combustion Boiler - by relying upon the case of the Madras High Court in CIT vs. Adar Tea Products Co (Mad) 221 CTR 597 by opining that only the "Energy Saving Devices" specifically mentioned under Entry III (8) (ix) in Appendix 1 to the Income Tax Rules, 1962 are eligible for depreciation at the enhanced rate of 80 per cent, and since the types of Equipment shown in the Depreciation Schedule submitted by the Assessee / Appellant did not find a place in the aforementioned Entry III under the Head of "Energy Saving Devices" - the deprecation claimed was disallowed. The Ld.CIT(A) has further erred in upholding the reasoning adopted by the Ld.A.O. by also once again placing reliance on the decision of Adar Tea Products (supra). A copy of the Impugned Order dt. 11.12.2018 is attached herewith at Pages 12-15 of Paper Book I). Z. In brief, the holding of Adar Tea Products (supra) is that the definition of 'Energy Saving Devices' in Depreciation Table appended to Income-tax Rules, 1962 (Old Appendix I) is restrictive/exhaustive. The device in question (therein) was a ITA No.21/CTK/2019 Assessment Year : 2012-13 Page22 | 26 "Fluid Bed Drier" on which the assessee (therein) had claimed depreciation. The assessing officer had however opined that a "Fluid Bed Drier" is not enumerated as an Energy Saving Device in Appendix I of the Income-tax Rules, 1962 - and thus disallowed the depreciation. The matter travelled all the way up to the IT AT stage, where the assessee was granted relief. Aggrieved, the Department preferred an appeal before the Madras H.C. which upheld the stance of the Revenue by holding as follows: "The word 'being' as used in the Depreciation Table means, energy saving devices 'which are' the devices mentioned therein. Further, in the same Table, the subject category in (8)(\x) has the caption 'Specialised boilers and furnaces' and the word 'drier' is not used. In the same Table, the words "ventilator used with anesthesia apparatus" and the words "ventilators other than those used with anesthesia" are used with reference to 'life saving... being...'. If 'being' is to be treated as like or including, then it was not necessary to specifically mention “ventilators used with anesthesia apparatus” and ventilators other than those used with anesthesia”. So it does appear that the depreciation table enumerates and exhausts those equipments for which depreciation is admissible at the rtes mentioned. Under the head renewal energy devices, the solar crop driers as well as solar water heaters' are included. So, if 'driers' were meant to be included, they would have been specifically indicated therein. " [Para 13] Thus the Hon'ble H.C. has held that the phrase "being" found in Appendix I, Entry III(8)(ix) has to be read as Energy Saving Devices which arc the types of equipment named "thereunder". Therefore, it would appear that 'being' is more like 'namely'. And therefore, unless the Device / Equipment is not specifically mentioned in the exhaustive list of Devices / Equipment specified in the Entry III(8)(ix) of Appendix I - then depreciation on the same cannot be claimed. . It is however submitted that the facts of the case in Adar Tea Products (supra) and that of the Assessee / Appellant herein are different. The nature of the business and the specification of assets in both instances are different. Thus the case of Adar Tea Products (supra) is distinguishable on facts and inapplicable to the case at hand. Attention in this regard is directed to the following chart that highlights the factual differences in both cases: CIT vs. Adar Tea Products Co. (Mad) 221 CTR 597 Assessee /Appellant's case 1. Depreciation was claimed on the "Fluid Bed Dryer" that was utilised for drying tea leaves, etc. Depreciation is being claimed on the " Waste Heat Recovery Boiler" and the "Fluidized Bed Combustion Boiler" that was utilised for operating the 24MW Captive Power Plant 2. A Fluid Bed Dryer is a kind of equipment which can be used for applications like drying of powders, mixing of powders and agglomeration. This is efficiently employed for applications in chemical, pharmaceutical, dye tuff, foodstuff, dairy and various other process industries. Fluid bed dryers are often employed with the spray dryers and A Waste Heat Recovery Boiler is an equipment that utilises various kinds of waste heat generated from the production process of steel, non-ferrous metal, chemical, cement etc., and converts such recovered waste heat into useful and effective thermal energy. A Fluidized Bed Combustion Boiler utilises ITA No.21/CTK/2019 Assessment Year : 2012-13 Page23 | 26 granulation systems for effective drying, mixing, granulation, finishing and cooling of powdered substances. These are often preferred over rotary dryers for drying and cooling a wide range of polymer materials which require precise control of residence time and temperature for effective processing. the fluidized-bed combustion process, where a bed of crushed solid particles (in this case coal fines, which would have otherwise been discarded) is made to behave like a fluid by an airstream passing from the bottom of the bed at sufficient velocity to suspend the material in it. The combustion process of these coal fines generates thermal energy that is then utilised for the powering the Captive Power Plant. A Fluid Bed Dryer may not lead to energy saving but it always effective for drying processes as it is easy to maintain and generates high heat and has low capital cost as compared to other drying machines Both the Waste Heat Recovery Boiler and the Fluidized Bed Combustion Boiler operate as Energy Saving and Renewable Energy devices. The waste heat recovery boiler recovers the waste heat (i.e. off-gas) that is produced from the generation of sponge iron. The same is thus converted into thermal energy that is utilized for the running of the thermal power plant. The Fluidised Bed Combustion Boiler that generates thermal energy via the burning of coal fines (an otherwise discarded product) is a considered alternative to conventional firing systems in light of the multiple benefits it offers, such as - compact boiler design, fuel flexibility, higher combustion efficiency and reduced emission of noxious pollutants 4. In Appendix 1 Entry III (8) (ix), the item mentioned is "Fluidized Bed Boiler" and the Entry starts as "Energy Saving Devices, being" - hence the depreciation at the enhanced rate of 100 per cent was not allowed on the "Fluid Bed Dryer" by the Hon'ble Madras H.C. by holding that the Depreciation Table (in Appendix I) was exhaustive, and to claim depreciation the particular device must find specific mention in the said Depreciation Table. Vis-a-vis the "Fluidised Bed Combustion Boiler," the same is found under Entry III 8 (ix) A of the Depreciation Table, under the Head of 'Energy Saving Devices'. Vis-a-vis the "Waste Heat Recovery Boiler" – the same is found under Entry III 8 (ix) C of the Depreciation Table, under the Head of 'Energy Saving Devices'. Furthermore, both Equipments are also entitled to claim depreciation at the rate of 80% under Entry III (8)(xiii)(q) under the Head of 'Renewable Energy Devices' 5. In this case, the Hon'ble Madras H.C. has observed that there is no decision / technical assessment in the favour of the assessee that a "Fluidized Bed Dryer" is an Energy Saving Device. See in this regard Para 2 r/w 7 r/w 14 of the In the case at hand, the claim of depreciation vis-a-vis the aforementioned Devices has been allowed by the Department in the previous and subsequent AYs (i)Thus when the Department has allowed ITA No.21/CTK/2019 Assessment Year : 2012-13 Page24 | 26 Decision, as quoted hereunder : "2.........But, the appeal filed against the assessment orders in this case was allowed by the Commissioner of Income-tax (Appeals), relying on Asstt. CIT v. Bijoy Nagar Tea Co. Ltd. [2002] 253 ITR 71 (Income-tax Appellate Tribunal, Calcutta 'B' Bench) and the Assessing Officer was directed to allow 100 per cent depreciation. The Tribunal also dismissed the appeal filed by the revenue. So, the present tax case appeal has been filed. 7. The order in Bijoy Nagar Tea Co. Ltd. 's case (supra) has been produced. It is a short order, wherein while the Tribunal holds that it is not possible for "to go into the technicalities of finding the difference between a drier and a bouiler, they were of the opinion that there is no reason why depreciation at the rate of 100 percent should not be given to fluid bed type drier also. The conclusion is not satisfactory. In .In Bijoy Nagar Tea Co. Ltd. 's case (supra), no technical assessment has been made as to whether a fluidised bed drier is energy efficient. That is the criterion for inclusion the depreciation on facts that are identical to the AY 2012-2013 both in previous AYs (AY 2010-2011, 2011-2012) and subsequent AYs ( AY 2013-2014 and 2014-2015) - without any such Departmental challenge - then the position has attained finality and cannot be changed for this particular AY alone in light of the 'Rule of Consistency' as iterated by the Hon'ble S.C. in Radhasoami Satsang vs. CIT (1992) 193 ITR 321, CIT Kolkata vs. PFH Mall, Order dt.04.09.2010 in C.A. No 6311/20102 etc. 6. Lastly, although the Madras H.C. has rightly observed that the ratio of the decision of the Hon'blc S.C. in Bombay Chemical (P) Ltd. vs. CCE, AIR 1995 SC 1469 - which holds that "the test of strict construction of exemption notification applies at the entry, that is, whether a particular good is capable of falling in one or the other category but once it falls then the exemption notification has to be construed broadly and widely". And the ratio of the decision of the Hon'ble S.C. in CIT vs. Staw Board Manufacturing Ltd., 1989 SCR (2) 772 that has held that "// is necessary to remember that when a provision is made in the context of a law providing for concessional rates of tax for the purpose of encouraging an industrial- activity a liberal construction should be put upon the language of the statute." In the case at hand, both the "Waste Heat Recovery Boiler" and the "Fluidized Bed Combustion Boiler" that was utilised for operating the 24MW Captive Power Plant - find mention in the Entry III 8 (ix) of the Depreciation Table, under the Head of 'Energy Saving De jvices' of Appendix I of the Income Tax Rules, 1962 (under Entry III 8 (ix) A and Entry III 8 (ix) C respectively). Further as an alternate to the above, the Assesscc / Appellant can also claim depreciation @ 80% under Entry III (8)(xiii)(q) of Appendix I under the Head of 'Renewable Energy Devices' However, even if we arc to assume that the both these Equipments do not find a specific mention in the said Entry III (8) (ix) of the Appendix I - as has been alleged by the Ld.A.O. and the Ld.CIT(A) - then in such a case, the decision of the Adar Tea Products (supra) will still not be applicable to the case at hand since both Waste Heat ITA No.21/CTK/2019 Assessment Year : 2012-13 Page25 | 26 The Hon'ble Bench opined that while it may be possible (in the context of encouraging industries to adopt energy saving measures) to bring into the category such devices that arc remotely Energy Saving Devices, the same cannot be applied in the case at hand, since a 'Dryer' of any kind is no where listed as an Energy Saving Device. (See Para 21 of the decision of the Madras H.C). Recovery Boiler" and the "Fluidized Bed Combustion Boiler" do find a generic mention under Entry III (8) (ix) of the Appendix I meaning that the case of the Assessee / Appellant stands covered by the two decisions of the Hon'blc S.C. in the cases of CIT vs. Staw Board Manufacturing Ltd., 1989 SCR (2) 772, and Bombay Chemical (P) Ltd. vs. CCE, AIR 1995 SC 1469 since the both these Equipments perfectly fall within the category of 'Energy Saving Devices' and once that is the case then the interpretation of the said Head has to be done liberally even if the exact name / nomenclature of the Equipment docs not find mention. See in this regard Para 5 of CIT vs. Staw Board Manufacturing Ltd.. 1989 SCR <2> "2 and Para 8 of Bombay Chemical (P) Ltd. m CCE. AIR 1995 SC 1469 Thus for the aforementioned reasons, the Assessee / Appellant Prays for the deletion of the disallowance of the depreciation of Rs.7,06,55,817/- which has been rightly claimed by the Assessee / Appellant under Entry III (8) (ix) of Appendix 1 to Income Tax Rules, 1962.” 4. In the grounds of appeal filed before the Tribunal in Ground No.2, the assessee has challenged the reopening of assessment. On perusal of second set of appeal folder belonging to Accountant Member, it shows that said ground is not pressed. Further, in the written submission filed in para II (a to m), the assessee has given detailed arguments in regard to reopening. In the written submission filed by the assessee dated 16.1.2020, in para 5, the assessee also challenges the reopening. However, in the grounds of appeal filed before the ld CIT(A), it is noticed that the issue of reopening has not been challenged, though in the said ground, the assessee mentions section 147 r.w.s 143(3) of the Income tax Act. It is ITA No.21/CTK/2019 Assessment Year : 2012-13 Page26 | 26 clear that the issue of reopening has not been adjudicated by the ld CIT(A). This is being so, we restore this issue back to the file of the ld CIT(A) for adjudicating the ground of reopening. 5. In the result, the appeal of the assessee is partly allowed for statistical purposes. Order dictated and pronounced in the open court on 18/8/2022. Sd/- sd/- (Arun Khodpia) (George Mathan) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack; Dated 18/8/2022 B.K.Parida, SPS (OS) Copy of the Order forwarded to : By order Sr.Pvt.secretary ITAT, Cuttack 1. The Appellant : Orissa Sponge Iron & Steel Limited.,OSIL House, Gangadhar Meher Marg, Bhubaneswar 2. The Respondent: DCIT, Circle-1(2), Bhubaneswar 3. The CIT(A)—1, Bhubaneswar 4. Pr.CIT-,1, Bhubaneswar. 5. DR, ITAT, Cuttack 6. Guard file. //True Copy//