Ratnagiri Gas & Power Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 4113/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4824 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 10-07-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 22-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VED JAIN MRS RANO JAIN
• Keywords: Reopening of assessment; Rectification of order; Search and seizure; Question of law; Tangible material; Difference of opinion; Accommodation entries; Reason to believe; Change of opinion; Revenue expenditure; Reassessment proceedings; Capital expenditure
• Section: 143(3); 115JB; 147; 148; 263

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F: NEW DELHI BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER AND SMT BEENA A PILLAI, JUDICIAL MEMBER ITA NO. 4113/DEL/2014 (ASSESSMENT YEAR: 2007 - 08 ) RATNAGIRI GAS & POWER PVT LTD, NTPC BHAWAN, CORE - 7, INSTITUTIONAL AREA, LODHI ROAD, NEW DELHI PAN:AADCR1375F VS. DCIT, CIRCLE - 15(1), NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VED JAIN, MRS. RANO JAIN, ADV REVENUE BY: SHRI ATIQ AHMED, SR. DR SHRI ASHISH CHADHA, CA DATE OF HEARING 10/07 / 2017 DATE OF PRONOUNCEMENT 29 / 08 / 2017 O R D E R PER PRASHANT MAHARISHI, A. M. 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT(A) - XVIII, NEW DELHI DATED 20.06.2014 FOR ASSESSMENT YEAR 2007 - 08. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND CIRCUMSTANCES OF T HE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] IS BAD, BOTH IN THE EYE OF LAW AND ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN CONFIRMING THE INITIATION OF THE PROCEEDINGS UNDER SECTION 147, READ WITH SECTION 148 AND THE REASSESSMENT ORDER PASSED IN CONSEQUENT THERETO. 3. ON THE F ACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN REJECTING THE CONTENTION OF THE ASSESSEE THAT THE INITIATION OF PROCEEDINGS UNDER SECTION 147 WAS BAD IN THE EYE OF LAW AS NEITHER THE CONDITIONS HAVE BEEN SATISF IED NOR THE PROCEDURE PRESCRIBED UNDER THE STATUTE HAVE BEEN COMPLIED WITH. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN CONFIRMING THE REOPENING OF ASSESSMENT COMPLETED UNDER SECTION 143(3) ON TH E BASIS OF RETURN OF INCOME FILED BY THE ASSESSEE WITHOUT THERE BEING ANY EXTERNAL INFORMATION AND WITHOUT ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE COMPUTATION OF INCOME. PAGE 2 OF 10 5. ON THE FACTS AND C IRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN REJECTING THE CONTENTION OF THE ASSESSEE THAT THE REOPENING OF ASSESSMENT IS BAD IN LAW AND LIABLE TO BE QUASHED AS THE SAME HAS BEEN DONE ON THE BASIS OF CHANGE OF OPINION, WHICH AMOUNTS TO REVIEW OF ORDER, NOT PERMISSIBLE UNDER THE LAW. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE INCOME OF RS.40,96,000 BE TAXED AT THE RATE OF 30% UNDER NORMAL PROVISI ON AS AGAINST OFFERED BY THE ASSESSEE AT THE RATE OF 10% UNDER SECTION 115JB OF THE ACT. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN REJECTING THE CONTENTION OF THE ASSESSEE THAT INTEREST EARNED DURING THE CONSTRUCTION OF THE PROJECT WILL GO TO RE COST OF CONSTRUCTION AND NOT TAXABLE AS INCOME. 8. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ABOVESAID IGNORING THE FACT THAT THE SAID INTEREST IS RELATED TO THE CONSTRUCTION PERIOD AND AS INEXTRICABLY LINKED TO THE EXPENSES RELATED TO CONSTRUCTION. 9. IN THE ALTERNATIVE AND WITHOUT PREJUDICE, THE LEARNED CIT(A) HAS ERRED IN REJECTING THE CONTENTION OF THE ASSESSEE THAT ALL THE EXPE NSES INCURRED AFTER SETTING UP OF THE BUSINESS ARE ALLOWABLE EXPENSES AND IN VIEW OF THE EXPENDITURE INCURRED DURING THE YEAR BEING INCOME, NO AMOUNT WILL BE CHARGEABLE TO TAX. 3. THE BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE IS A PRIVATE LTD COMPANY PRO MOTED BY NTPC LTD AND GAIL LTD FOR THE PURPOSE OF THE BUSINESS OF POWER PROJECTS OF DABOL POWER PVT. LTD. THE COMPANY FILED ITS RETURN OF INCOME ON 29.03.2009 DECLARED TOTAL INCOME OF RS. 4096000/ - U/S 115JB OF THE ACT. THE ASSESSMENT U/S 143(3) WAS PASSED ON 15.10.2009 AND FURTHER THE CASE WAS REOPENED U/S 148 OF 30.03.2012. SUBSEQUENTLY, THE ASSESSMENT U/S 143(3) READ WITH SECTION 147 OF THE ACT WAS PASSED WHEREIN THE AO MADE AN ADDITION OF RS. 4096000/ - U/S 115JB OF THE ACT AND DIRECTED TO LEVY TAX @30% AND NOT @10%. THE FIRST REASON OF THE AO IS THAT SINCE THE ASSESSEE HAS FILED RETURN OF INCOME DECLARING INCOME OF RS. 4096000/ - AND HENCE, SAME SHOULD BE CHARGEABLE TO TAX @30%. THE ASSESSEE PREFERRED APPEAL BEFORE THE LD CIT(A) WHO DISMISSED THE APPEAL OF THE ASSESSEE HOLDING THAT IT IS U/S 115JB BUT THE ABOVE INCOME SHOULD BE TAXED AT NORMAL @30%. THEREFORE, THE ASSESSEE IS IN APPEAL BEFORE US. BEFORE US THE ASSESSEE HAS CHALLENGED THE ABOVE ADDITION ON SEVERAL COUNTS AND THE LD AR HAS SUBMITTED HIS SUB MISSION AS UNDER: - 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 20.06.2014 PASSED BY THE LD. CIT(A), WHEREBY THE LD. CIT(A) HAS UPHELD THE REOPENING OF ASSESSMENT AND HAS DISMISSED THE APPEAL OF ASSESSEE ON MERITS AS WELL. PAGE 3 OF 10 2. THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 29.03.2009, DECLARING AN INCOME OF RS.40,96,000/ - UNDER THE PROVISIONS OF SECTION 115JB OF THE ACT (COMPUTATION OF INCOME ENCLOSED AT PB 2). THEREAFTER, THE CASE OF ASSESSEE COMPANY WAS SELECTED FOR SCRUTINY, AND AFTER EXAMINING THE DETAILS FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT, THE RETURNED INCOME OF THE ASSESSEE WAS ACCEPTED, AND THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT VIDE ORDER DATED 15.10.2009 (ENCLOSED AT PB 44). 3. SUBSEQUENTLY , A NOTICE U/S 148 OF THE ACT WAS ISSUED TO THE ASSESSEE COMPANY ON 30.03.2012 (ENCLOSED AT PB 45), RECORDING REASONS IN THIS REGARD THAT AN INCOME OF RS.2,72,27,000/ - HAD ESCAPED ASSESSMENT (COPY OF REASONS RECORDED ARE ENCLOSED AT PB 47). 4. THE AO COMP LETED THE REASSESSMENT PROCEEDINGS AT THE INCOME OF RS.40,96,000/ - ONLY, HOWEVER, HE HELD THAT THE SAID INCOME IS TO BE TAXED AT THE RATE OF 30% UNDER THE NORMAL PROVISIONS OF THE ACT AND NOT AT THE RATE OF 10%, AS OFFERED BY THE ASSESSEE U/S 115JB OF THE ACT. THE AO HAS GIVEN HIS FINDINGS IN THIS REGARD AT THE LAST PAGE OF THE ASSESSMENT ORDER. 5. THE LD. CIT(A) HAS FURTHER HELD THE REASSESSMENT PROCEEDINGS TO BE VALID BY STATING THAT THE SAME WAS IN ACCORDANCE WITH LAW AND HAS ALSO SUPPORTED THE ORDER OF THE AO THAT THE AMOUNT OF RS.40,96,000/ - WAS TO BE TAXED AT THE NORMAL RATE OF 30%, AND NOT AT THE RATE OF 10% AS PER THE PROVISIONS OF SECTION 115JB. THE FINDINGS OF THE LD. CIT(A) IN RESPECT OF THE LEGALITY AS WELL MERITS OF THE CASE ARE AT PAGE 17 - 19 IN PARA 5 TO 7 OF ITS ORDER. 6. IN THIS REGARD, IT IS SUBMITTED THAT THE ASSESSEE COMPANY WAS UNDER A CONSTRUCTION PHASE OF ITS POWER PLANT AND THE BUSINESS OF THE ASSESSEE HAD NOT COMMENCED IN THE YEAR UNDER CONSIDERATION. 7. DURING THE YEAR UNDER CONSI DERATION, ASSESSEE COMPANY HAD EARNED AN INCOME OF RS.3,13,23,000/ - . OUT OF THE TOTAL AMOUNT OF RS.3,13,23,000/ - , AN AMOUNT OF RS.2,72,27,000/ - WAS TRANSFERRED BY THE ASSESSEE COMPANY TO THE IEDC (INCIDENTAL EXPENDITURE DURING CONSTRUCTION) ACCOUNT, AND TH E BALANCE AMOUNT OF RS.40,96,000/ - WAS TRANSFERRED TO THE PROFIT AND LOSS ACCOUNT. THIS FACT IS EVIDENT FROM SCHEDULE P (PB 19) AND SCHEDULE T (PB 24), WHEREIN THE SAID AMOUNTS ARE INDICATED. 8. THE AO HAD REOPENED THE CASE OF THE ASSESSEE COMPANY ALLEGING THAT THE ENTIRE INTEREST INCOME WAS TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES, AND THEREFORE, THE INCOME OF RS.2,72,27,000/ - WAS REQUIRED TO BE ADDED BACK TO THE INCOME OF THE ASSESSEE. THE RELEVANT EXTRACT OF THE REASONS RECORDED BY THE AO I S REPRODUCED HEREUNDER FOR THE SAKE OF READY REFERENCE:] THE ENTIRE INTEREST INCOME IS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AT NORMAL RATE APPLICABLE FOR THE RELEVANT ASSESSMENT YEAR. HENCE, AMOUNT OF RS.2,72,27,000/ - REQUIRES TO BE ADDED B ACK TO THE TOTAL INCOME OF THE ASSESSEE AS INTEREST INCOME. PAGE 4 OF 10 IN VIEW OF THE ABOVE, I AM SATISFIED HAVING REASON TO BELIEVE THAT THE INCOME TO THE EXTENT OF RS.2,72,27,000/ - HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147. IT IS A FIT CASE FOR ISSUE OF NOTICE U/S 148 OF THE IT ACT, 1961. 9. IT IS PERTINENT TO MENTION HERE THAT THE AO, HOWEVER, HAS COMPLETED THE REASSESSMENT PROCEEDINGS VIDE ORDER DATED 06.03.2013, WHEREIN HE HAS ACCEPTED THE RETURNED INCOME OF THE ASSESSEE OF RS.40,96,000/ - . THE AO, WHILE DECIDING THE ISSUE OF TAXABILITY OF ENTIRE INTEREST INCOME, HAS HELD AS UNDER: 'THE ABOVE SUBMISSIONS OF THE ASSESSEE HAS BEEN DULY CONSIDERED AND IN VIEW OF THE VARIOUS COURT DECISIONS QUOTED BY THE ASSESSEE COMPANY THE CONTENTION OF THE ASSESSEE COMPANY TO DEDUCTED THE INTEREST INCOME FROM THE COST INCURRED DURING THE CONSTRUCTION OF THE PLANT AS THE SAME BEING CAPITAL IN NATURE IS ACCEPTED 10. A PERUSAL OF THE ABOVE EXTRACT OF AOS ORDER WOULD SHOW THAT THE AO HAS ACCEPTED THE FACT THAT THE ASSE SSEE HAS RIGHTLY DEDUCTED THE INTEREST INCOME OF RS.2,72,27,000/ - FROM THE COST INCURRED DURING THE CONSTRUCTION OF THE PLANT. IT IS A SETTLED LAW THAT IF AFTER ISSUING A NOTICE UNDER SECTION 148, THE AO ACCEPTS THE CONTENTION OF THE ASSESSEE AND HOLDS THA T THE INCOME, WHICH HE HAS INITIALLY FORMED REASON TO BELIEVE HAD ESCAPED ASSESSMENT, HAS AS A MATTER OF FACT NOT ESCAPED ASSESSMENT, IT IS NOT OPEN TO HIM TO INDEPENDENTLY ASSESS SOME OTHER INCOME. RELIANCE IN THIS REGARD IS PLACED ON THE JUDGMENT OF HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF RANBAXY LABORATORIES LTD. V. CIT [2011] 336 ITR 136, WHEREIN THE COURT HAS HELD AS UNDER: SECTION 147 HAS THIS EFFECT THAT THE ASSESSING OFFICER HAS TO ASSESSEE OR REASSESS THE INCOME ('SUCH INCOME') WHICH ESC APED ASSESSMENT AND WHICH WAS THE BASIS OF THE FORMATION OF BELIEF AND IF HE DOES SO, HE CAN ALSO ASSESS OR REASSESS ANY OTHER INCOME WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE DURING THE COURSE OF THE PROCEEDINGS HOWEVER, IF AFTER ISSUING A NOTICE UNDER SECTION 148, HE ACCEPTED THE CONTENTION OF THE ASSESSEE AND HOLDS THAT THE INCOME WHICH HE HAS INITIALLY FORMED A REASON TO BELIEVE HAD ESCAPED ASSESSMENT, HAS AS A MATTER OF FACT NOT ESCAPED ASSESSMENT, IT IS NOT OPEN TO HIM INDEPENDENTLY T O ASSESS SOME OTHER INCOME. IF HE INTENDS TO DO SO, A FRESH NOTICE UNDER SECTION 148 WOULD BE NECESSARY, THE LEGALITY OF WHICH WOULD BE TESTED IN THE EVENT OF A CHALLENGE BY THE ASSESSEE.' 11. THE ABOVE JUDGMENT OF THE JURISDICTIONAL HIGH COURT HAS RECENTL Y BEEN AGAIN FOLLOWED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT(EXEMPTION) V. MONARCH EDUCATIONAL SOCIETY [2016] 387 ITR 416, WHEREIN ITS WAS HELD AS UNDER: 6. HOWEVER, IN THE COURSE OF THE REASSESSMENT PROCEEDINGS, AS IS EVIDENT FROM THE ASSESSMENT ORDER DATED DECEMBER 10, 2010 PASSED BY THE ASSESSING OFFICER, THE SUM THAT WAS SOUGHT TO BE ADDED TO THE INCOME OF THE ASSESSEE WAS NOT THE AFOREMENTIONED PAGE 5 OF 10 SUM OF RS 16,61,000 BUT A SUM OF 26,10,000 WHICH ACCORDING TO THE ASSESSING OFFICER REP RESENTED THE UNSECURED LOANS THAT WERE UNABLE TO BE EXPLAINED BY THE ASSESSEE. IN OTHER WORDS, THE ADDITION SOUGHT TO BE MADE TO THE INCOME OF THE ASSESSEE WAS NOT BASED ON THE ACCOMMODATION ENTRIES WHICH FORMED THE SUBJECT MATTER OF THE REASONS TO BELIEVE FOR ISSUANCE OF THE NOTICE UNDER SECTION 148 OF THE ACT. 8. THE ISSUE URGED BY THE REVENUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THIS COURT IN RANBAXY LABORATORIES LTD. V. CIT [2011] 336 ITR 136 (DELHI) WHICH HAS BEEN FOLLOWED IN CI T V. SOFTWARE CONSULTANTS [2012] 341 ITR 240 (DELHI). IN SUM, IF NO ADDITION IS MADE ON THE BASIS OF THE REASONS TO BELIEVE RECORDED BY THE ASSESSING OFFICER FOR REOPENING THE ASSESSMENT UNDER SECTION 148 OF THE ACT, RESORT CANNOT BE HAD TO EXPLANATION 3 T O SECTION 147 OF THE ACT TO MAKE AN ADDITION ON ANY OTHER ISSUE NOT INCLUDED IN THE REASONS TO BELIEVE FOR REOPENING THE ASSESSMENT. NO SUBSTANTIAL QUESTION OF LAW ARISES. THE APPEAL IS DISMISSED. 12. FURTHER RELIANCE IN THIS REGARD IS PLACED ON THE FOLL OWING JUDGMENTS: DELHI HIGH COURT IN THE CASE OF CIT V. SOFTWARE CONSULTANTS [2012] 341 ITR 240 AS THE AO DID NOT MAKE ANY ADDITION FOR THE REASONS RECORDED AT THE TIME OF ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT. THIS POSITION IS NOT DISPUTED AND D ISTURBED BY THE COMMISSIONER OF INCOME TAX IN HIS ORDER UNDER SECTION 263 OF THE ACT. SEQUITUR IS THAT THE ASSESSING OFFICER COULD NOT HAVE MADE AN ADDITION ON ACCOUNT OF SHARE APPLICATION MONEY IN THE ASSESSMENT PROCEEDINGS UNDER SECTION 147/148. ACCORDIN GLY, THE ASSESSMENT ORDER IS NOT ERRONEOUS. THUS, THE COMMISSIONER OF INCOME TAX COULD NOT HAVE EXERCISED JURISDICTION UNDER SECTION 263 OF THE ACT - DECIDED AGAINST THE REVENUE. DELHI HIGH COURT IN THE CASE OF CIT V. ADHUNIK NIRYAT ISPAT LTD. IN ITA NO . 2090 OF 2010 DATED 28.07.2011 SINCE THE GROUNDS FOR REOPENING THE REASSESSMENT DO NOT EXIST ANY LONGER AND NO ADDITIONS WERE ULTIMATELY MADE ON THAT ACCOUNT, THE ADDITIONS IN RESPECT OF OTHER ITEMS WHICH WERE NOT PART OF 'REASONS TO BELIEVE' CANNOT BE MA DE. - DECIDED IN FAVOR OF ASSESSEE. ITAT DELHI IN THE CASE OF SHANKER GAS AND MFG. CO. PVT. LTD. V. ITO IN ITA NO. 4429/DEL/2013 DATED 25.05.2016 REOPENING OF ASSESSMENT - ACCOMMODATION ENTRIES RECEIPT - HELD THAT: - NO ADDITION HAS BEEN MADE IN RESPECT OF THE ACCOMMODATION ENTRY FROM M/S. ZIGMA TELECOM PRIVATE LIMITED AND THE ADDITIONS MADE ARE IN RESPECT OF THE PARTIES, WHICH ARE NOT MENTIONED IN REASONS RECORDED BY THE ASSESSING OFFICER. THUS, RESPECTFULLY FOLLOWING THE RATIO OF THE JUDGMENT OF THE HON BLE DELHI HIGH COURT IN THE CASE OF RANBAXY LABORATORIES LTD (2011 (6) TMI 4 - DELHI HIGH COURT ), WE ARE OF THE OPINION THAT THE REASSESSMENT PROCEEDINGS ARE INVALID IN LAW, THEREFORE, WE THE QUASH THE REASSESSMENT PROCEEDINGS IN THE CASE OF THE PAGE 6 OF 10 ASSESSEE INITIATED BY THE ASSESSING OFFICER. - DECIDED IN FAVOUR OF ASSESSEE. 13. THEREFORE, SINCE THE INCOME WHICH THE AO HAD ALLEGED IN THE REASONS RECORDED TO HAVE ESCAPED ASSESSMENT, HAS NOT BEEN ADDED TO THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERA TION, THE ACTION OF THE AO IN RAISING AN ADDITIONAL DEMAND ON OTHER ISSUE IS BAD IN LAW AND CONTRARY TO THE ABOVE JUDICIAL PRONOUNCEMENTS. 14. FURTHER, IT IS SUBMITTED THAT THE REOPENING HAS BEEN MADE BY THE AO ONLY ON THE BASIS OF RE - EXAMINATION OF RECORD S, BY POINTING OUT THAT THE INCOME OF RS.40,96,000/ - IS TO BE TAXED AT THE NORMAL RATE OF 30% AND NOT AT THE RATE OF 10% ADOPTED BY THE ASSESSEE AS PER THE PROVISIONS OF MAT U/S 115JB OF THE ACT. 15. IN THIS REGARD, IT IS PERTINENT TO MENTION HERE THAT THE ASSESSEE HAD ALREADY BEEN ASSESSED U/S 143(3) OF THE INCOME TAX ACT, 1961 VIDE ORDER DATED 15.10.2009 (ENCLOSED AT PB 44). IN THE INCOME TAX COMPUTATION FORM ATTACHED ALONG WITH THE ASSESSMENT ORDER PASSED U/S 143(3), THE AO HAS ACCEPTED THE FACT THAT THE INCOME OF RS.40,96,000/ - IS TO BE ASSESSED U/S 115JB OF THE ACT. 16. THEREAFTER, IN THE INTIMATION RECEIVED BY THE ASSESSEE U/S 143(1) OF THE ACT, AGAIN THE AO HAS COMPUTED THE TAX AT THE RATE OF 10% ONLY, AS PER THE PROVISIONS OF SECTION 115JB OF THE ACT . IT IS IMPORTANT TO MENTION HERE THAT AFTER RECEIVING THE INTIMATION U/S 143(1) OF THE ACT, THE ASSESSEE COMPANY FILED VARIOUS LETTERS / REMINDER LETTERS ON 16.06.2009, 05.10.2009, 15.06.2010 AND 02.08.2010, ADDRESSED TO THE AO, FOR RECTIFICATION OF THE I NTIMATION / ORDER PASSED BY THE AO, AS THE AO HAD NOT GIVEN THE ASSESSEE THE CREDIT OF FULL AMOUNT OF TDS DEDUCTED OF RS.76,05,482/ - . IN REPLY TO THE VARIOUS LETTERS FILED BY THE ASSESSEE, THE AO PASSED A RECTIFICATION ORDER ON 26.03.2011, WHEREIN THE CRED IT OF THE WHOLE AMOUNT OF TDS WAS GIVEN TO THE ASSESSEE. IN THE SAID RECTIFICATION ORDER AS WELL, THE TAX WAS COMPUTED BY THE AO AT THE RATE OF 10% ONLY, AS PER THE PROVISIONS OF MAT. 17. THEREFORE, A PERUSAL OF THE ABOVE FACTS CLEARLY SHOW THAT THE AO HAD APPLIED HIS MIND, NOT ONLY ONE, BUT MANY TIMES TO THE FACTS OF ASSESSEES CASE. THE ACTION OF THE AO IN RAISING THE ADDITIONAL DEMAND ON THE ASSESSEE COMPANY BY ADOPTING A RATE OF 30% ON THE SAID INCOME OF RS.40,96,000/ - IS MERELY A CHANGE OF OPINION. IT IS A SETTLED LAW THAT MERE CHANGE OF OPINION OF THE AO CANNOT FORM THE BASIS FOR ISSUING OF A NOTICE UNDER SECTION 147 / 148 OF THE ACT. THIS ISSUE IS COVERED BY THE JUDGMENT OF APEX COURT IN THE CASE OF CIT V. KELVINATOR OF INDIA LTD. [2010] 320 ITR 561, WHEREIN THE SUPREME COURT HAS HELD AS UNDER: '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 RE - OPEN 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 POWER TO REVIEW AND POWER TO RE - ASSESS. THE ASSESSING OFFICER HAS NO POWER TO REVIEW; HE HAS THE POWER TO REASSESS. BUT RE - A SSESSMENT 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 REOPENING THE ASSESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CO NCEPT OF 'CHANGE OF OPINION' AS PAGE 7 OF 10 AN IN - BUILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER. HENCE, AFTER 1ST APRIL, 1989, ASSESSING OFFICER HAS POWER TO RE - OPEN, PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMEN T OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. OUR VIEW GETS SUPPORT FROM THE CHANGES MADE TO SECTION 147 OF THE ACT, AS QUOTED HEREINABOVE. UNDER THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, PARLIAMENT NOT ONLY DELETED THE WORDS 'REASON TO BELIEVE' BUT ALSO INSERTED THE WORD 'OPINION' IN SECTION 147 OF THE ACT. HOWEVER, ON RECEIPT OF REPRESENTATIONS FROM THE COMPANIES AGAINST OMISSION OF THE WORDS 'REASON TO BELIEVE', PARLIAMENT RE - INTRODUCED THE SAID EXPRESSION AND DELETED THE WORD 'OPINION' ON THE GROUND THAT IT WOULD VEST ARBITRARY POWERS IN THE ASSESSING OFFICER. WE QUOTE HEREINBELOW THE RELEVANT PORTION OF CIRCULAR NO. 549 DATED 31ST OCTOBER, 1989, WHICH READS AS FOLLOWS: '7.2 AMENDMENT MADE BY THE AMENDING ACT, 1989, TO REINTRODUCE THE EXPRESSION REASON TO BELIEVE' IN SECTION 147. - A NUMBER OF REPRESENTATIONS WERE RECEIVED AGAINST THE OMISSION OF THE WORDS REASON TO BELIEVE' FROM SECTION 147 AND THEIR SUBSTITUTION BY THE OPINION' OF THE ASSESSING OFFICER. IT WAS POINTED OUT THAT THE MEANING OF THE EXPRESSION, REASON TO BELIEVE' HAD BEEN EXPLAINED IN A NUMBER OF COURT RULINGS IN THE PAST AND WAS WELL SETTLED AND ITS OMISSION FROM SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO REOPEN PAST AS SESSMENTS ON MERE CHANGE OF OPINION. TO ALLAY THESE FEARS, THE AMENDING ACT, 1989, HAS AGAIN AMENDED SECTION 147 TO REINTRODUCE THE EXPRESSION HAS REASON TO BELIEVE' IN PLACE OF THE WORDS FOR REASONS TO BE RECORDED BY HIM IN WRITING, IS OF THE OPINION'. O THER PROVISIONS OF THE NEW SECTION 147, HOWEVER, REMAIN THE SAME.' FOR THE AFORE - STATED REASONS, WE SEE NO MERIT IN THESE CIVIL APPEALS FILED BY THE DEPARTMENT, HENCE, DISMISSED WITH NO ORDER AS TO COSTS. 18. FURTHER RELIANCE IN THIS REGARD IS PLACED ON THE RECENT JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF TECHNICO AGRI SCIENCES LTD. V. ACIT IN WRIT PETITION NO. 11658/2016 DATED 07.02.2017, WHEREBY IT WAS CONCLUDED AS UNDER: VALIDITY OF REOPENING OF ASSESSMENT - ELIGIBILITY TO CLAIM EX EMPTION UNDER SECTION 10 - HELD THAT: - THE ASSESSEE HAS PLACED ON RECORD THE REPLIES MADE TO THE QUERIES ON EACH OF THE ASPECTS AS WELL AS THE DOCUMENTARY EVIDENCE SPANNING SEVERAL ANNEXURES TO THE LETTER. IT IS QUITE EVIDENT THAT THE AOS, UPON PROPER INQU IRY AND INVESTIGATION INTO THESE MATERIALS, WERE SATISFIED AS TO THE NATURE OF THE PETITIONERS ACTIVITIES AND IT WAS ELIGIBLE TO CLAIM EXEMPTION UNDER SECTION 10 OF THE ACT. PAGE 8 OF 10 IT HAS BEEN REPEATEDLY HELD IN SEVERAL DECISIONS, BOTH BEFORE AND AFTER THE RULING OF THE SUPREME COURT IN COMMISSIONER OF INCOME TAX V. KELVINATOR OF INDIA LTD (2010 (1) TMI 11 - SUPREME COURT OF INDIA) THAT A NOTICE FOR RE - OPENING THE ASSESSMENT IS PERMISSIBLE ONLY WHEN IT: (I) DOES NOT AMOUNT TO CHANGE OF OPINION; (II) IS BAS ED ON TANGIBLE MATERIAL/EVIDENCE BUT IS NOT OPPOSED TO THE EXISTING RECORD AND (HI) POINTS TO SUPPRESSION OF MATERIAL FACTS BY THE ASSESSEE IN THE ORIGINAL RETURN. IN THE PRESENT CASE, NONE OF THESE ELEMENTS EX FACIE EXIST TO JUSTIFY THE IMPUGNED NOTICE. IT IS THEREFORE QUASHED AS ARE ALL PROCEEDINGS EMANATING FROM THE IMPUGNED NOTICE. - DECIDED IN FAVOR OF ASSESSEE. 1 9 . FURTHER RELIANCE IN PLACED ON THE FOLLOWING JUDGMENTS: DELHI HIGH COURT IN THE CASE OF LEAR AUTOMOTIVE PVT. LTD. V. DCIT IN ITA NO. 1 14/2016 DATED 18.05.2016 VALIDITY OF REOPENING OF ASSESSMENT - TRADE DISCOUNT GIVEN BY THE APPELLANT TO MAHINDRA & MAHINDRA LIMITED (MML) FOR OBTAINING EXCLUSIVE VENDOR STATUS WAS IN THE NATURE OF A CAPITAL EXPENDITURE AND NOT A REVENUE EXPENDITURE - HELD THAT: - THE IT AT APPEARS TO HAVE OVERLOOKED THE FACT THAT SPECIFIC QUERIES WERE RAISED BY THE AO DURING THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS AS REGARDS THE AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND M&M WHICH IS REFERRED TO IN PARA 1 2 OF THE NOTES TO THE ACCOUNTS. QUERY NO. 36, AS ALREADY EXTRACTED HEREINBEFORE, WAS SPECIFIC TO THE ISSUE. THE REPLY DATED 28TH JULY 2008 BY THE ASSESSEE TO THE ABOVE QUESTIONNAIRE WAS A FAIRLY DETAILED ONE. INTER ALIA IT WAS POINTED OUT THAT THIS WAS MER ELY A COMMERCIAL ARRANGEMENT ENTERED INTO BETWEEN THE MANAGEMENT OF BOTH THE COMPANIES, PROVIDING FOR A COMMITTED OVERRIDING VOLUME DISCOUNT BY THE APPELLANT. WHILE THE AO COULD HAVE INSISTED ON SEEING THE AGREEMENT, HE APPEARS TO HAVE BEEN SATISFIED WITH THE ABOVE DETAILED REPLY OF THE ASSESSEE EXPLAINING THE NATURE OF THE AGREEMENT. MERELY BECAUSE THE AO DID NOT ASK FOR THE COPY OF THE AGREEMENT TO BE PRODUCED CANNOT LEAD TO THE INFERENCE THAT HE HAD NO OCCASION TO FORM AN OPINION THEREON. SUCH A CONCLUS ION DRAWN BY THE IT AT IS BELIED BY THE ABOVE SPECIFIC QUERY RAISED BY THE AO ON THE AGREEMENT AND THE DETAILED EXPLANATION OFFERED BY THE ASSESSEE IN RESPONSE THERETO. THIS COURT IS SATISFIED THAT THERE WAS OCCASION FOR THE AO IN THE ORIGINAL ASSESSMENT PROCEEDINGS, TO FORM AN OPINION ON THE QUESTION OF THE NATURE OF THE AGREEMENT BETWEEN THE ASSESSEE AND THE MM. THE AO DID FORM AN OPINION THEREON AND AFTER RAISING A SPECIFIC QUERY AND EXAMINING THE REPLY THERETO OF THE ASSESSEE. THE ORIGINAL ASSESSMENT W AS COMPLETED AFTER ACCEPTING THE EXPLANATION OFFERED BY THE ASSESSEE. THE REASONS TO BELIEVE DID NOT REFER TO ANY FRESH TANGIBLE MATERIAL THAT CAME TO PAGE 9 OF 10 THE NOTICE OF THE AO AFTER THE PASSING OF THE ORIGINAL ASSESSMENT ORDER. IT MAY BE RECALLED THAT THE ASSE SSMENT PROCEEDING UNDER SECTION 143 (3) OF THE ACT WAS COMPLETED AFTER SCRUTINIZING THE DOCUMENTS PRODUCED BY THE ASSESSEE AND AFTER SPECIFIC QUERIES WERE PUT TO THE ASSESSEE WHICH WERE REPLIED TO BY THE ASSESSEE TO THE SATISFACTION OF THE AO. - DECIDED IN FAVOUR OF ASSESSEE DELHI HIGH COURT IN THE CASE OF UNITECH HOLDINGS LTD. V. DCIT IN WRIT PETITION NO. 12325/2015 DATED 04.05.2016 REOPENING OF ASSESSMENT - PURCHASE OF SHARES - HELD THAT: - THE TRANSACTION DATED 31ST MARCH, 2010 RELATING TO TRANSFER OF INVESTMENTS IN THE THREE COMPANIES AGGREGATING TO 41,15,79,320/ - WAS A SUBJECT MATTER OF ENQUIRY BY THE AO. THE AO HAVING ENQUIRED INTO THE TRANSACTION OF SALE AND PURCHASE, AND HAVING EXAMINED THE VALUES AT WHICH THE TRANSACTIONS HAD TAKEN PLACE HAD NOT RAISED ANY FURTHER ISSUE WITH REGARD TO THE TRANSACTIONS IN QUESTION. IT PLAINLY FOLLOWS FROM THE ABOVE THAT AO HAD SATISFIED HIMSELF AS TO THE ENTIRE TRANSACTION OF PURCHASE OF SHARES INCLUDING THE CONSIDERATION THEREOF WHICH WAS DULY REFLECTED IN THE STATEMENT FURNISHED BY THE ASSESSEE. ALTHOUGH THE WORKING RELATING TO THE BOOKS VALUE OF THE SHARES - ASSUMING THAT THAT IS RELEVANT - IS NOT AVAILABLE, IT MUST BE PRESUMED THAT THE AO HAD SATISFIED HIMSELF AS TO THE VALUE OF THE TRANSACTION AND ALSO THAT THE SAME WERE HELD AS INVESTMENTS BY THE ASSESSEE. THIS IS SO BECAUSE THE TRANSACTION ITSELF HAD BEEN ENQUIRED INTO AND THE VALUE AT WHICH THE SHARES ARE TRANSFERRED AS WELL AS THE NATURE OF THOSE ASSETS IN THE HANDS OF THE ASSESSEE - WHETHER HELD AS INVE STMENTS OR AS STOCK IN TRADE - WERE PLAINLY THE MOST IMPORTANT ASPECTS OF THE TRANSACTION. THUS, IT MUST BE ACCEPTED THAT THE AO, AFTER APPLICATION OF MIND, HAD ACCEPTED THAT THE SHARES IN QUESTION WERE ACQUIRED BY ASSESSEE FROM M/S UNITECH LIMITED AT THEI R COST PRICE AND WERE HELD AS INVESTMENTS BY THE ASSESSEE. IT HAS BEEN HELD IN A NUMBER OF DECISIONS THAT ONCE IT IS SHOWN THAT THE AO HAD ENQUIRED INTO THE TRANSACTIONS, IT MUST BE ASSUMED THAT HE HAD EXAMINED THE RELEVANT ASPECTS EVEN THOUGH THE SAME HAV E NOT BEEN EXPRESSLY REFERRED TO IN THE ASSESSMENT ORDER. IN THIS VIEW, WE ARE UNABLE TO ACCEPT THAT AO HAD NOT FORMED AN OPINION AS TO VARIOUS ASPECTS OF THE TRANSACTION IN QUESTION, INCLUDING ITS VALUE INSOFAR AS IT IS RELEVANT FOR ASSESSING THE ASSESSEE 'S INCOME. CONSEQUENTLY, WE MUST ACCEPT THE CONTENTION THAT THE IMPUGNED NOTICES HAVE BEEN OCCASIONED BY A CHANGE OF OPINION. IT IS TRITE THAT A MERE CHANGE OF OPINION CANNOT CONSTITUTE A REASON FOR RE - OPENING THE ASSESSMENT. REOPENING QUASHED - DECIDED IN FAVOUR OF ASSESSEE 20. THEREFORE, IN VIEW OF THE FACTS OF ASSESSEES CASE AS WELL AS THE ABOVE JUDICIAL PRONOUNCEMENTS, IT IS CLEARLY EVIDENT THAT THE CASE OF THE ASSESSEE COMPANY HAS BEEN REOPENED BY THE AO MERELY ON THE BASIS OF CHANGE OF OPINION, AND THUS, THE SAID ACTION OF THE AO IS BAD IN LAW AND PAGE 10 OF 10 THE ORDER PASSED BY THE AO AND SUSTAINED BY THE LD. CIT(A) SHOULD BE QUASHED AS SUCH. 4. THE LD DR RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 5. WE HAVE CAREFULLY PERUSED THE REASONS OF THE REOPENING WHE REIN IT IS STATED THAT REOPENING HAS BEEN MADE ON PERUSAL OF THE SCHEDULE P UNDER THE HEAD OTHER INCOME. THE ORIGINAL ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED ON 15.10.2009 AT AN INCOME OF RS. 4096000/ - IN THE ORIGINAL RETURN OF INCOME. THE ASSESSEE HAS SHOWN THE TOTAL INCOME OF RS. 31323000/ - AND OUT OF WHICH RS. 27227000/ - AS TRANSFER OF IEDC AND RS. 4096000/ - WAS OFFER FOR TAXES @ 10%. THE CLAIM OF THE REVENUE IS THAT THE ASSESSEE SHOULD HAVE OFFERED THE ENTIRE SUM OF RS. 2727272000/ - AS TOTAL INCO ME OF THE ASSESSEE AS INTEREST INCOME. HOWEVER, IN THE ASSESSMENT PROCEEDINGS ONLY RS. 4096000/ - WAS MADE. IN VIEW THE ABOVE WE CAREFULLY CONSIDERED THE ORDERS OF THE LOWER AUTHORITIES AND WE ARE OF THE VIEW THE ABOVE ADDITION OF RS. 4096000/ - U/S 115JB OF THE ACT WOULD REQUIRED TO BE DEDUCTED TAX @10% ONLY. IN VIEW OF THIS APPEAL OF ASSESSEE IS ALLOWED. ORDER PRO NOUNCED IN THE OPEN COURT ON 2 9 / 08 / 2017 . - S D / - - S D / - ( BEENA A PILLAI ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 9 / 08 / 2017 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI