DCIT 1(1), MUMBAI V. BSES LTD ( NOW RELIANCE INFRASTRUCTURE LTD, MUMBAI

ITA 6296/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55350 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 20-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR B SENTHIL KUMAR
• Keywords: Reopening of assessment; Business income; Audit objection; Wholly owned subsidiary; Tangible material; Difference of opinion; Revised return; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 115JB; 80IB; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI D BENCH BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER & SHRI T.R.SOOD, ACCOUNTANT MEMBER I.T.A.NOS.6295 & 6296/MUM/2010 A.YRS. 2002-03 & 2004-05 ASST. COMMISSIONER OF I.T., RANGE 10(1), MUMBAI. VS. M/S. BSES LTD. (NOW RELIANCE INFRASTRUCTURE LTD.) SANTACRUZ (E), MUMBAI 400 055. PAN: AACCR7446 Q AND I.T.A.NOS.5537 & 5538/MUM/2010 A.YRS. 2002-03 & 2004-05 RELIANCE INFRASTRUCTURE LTD., (ERSTWHILE RELIANCE ENERGY LTD.) MUMBAI. VS. ASST. COMMISSIONER OF I.T., RANGE 10(1), MUMBAI (APPELLANT) (RESPONDENT) REVENUE BY : DR. B. SENTHILKUMAR. CIT DR ASSESSEE BY : SHRI JITENDRA SANGHAVI. DATE OF HEARING: 19-09-2011 DATE OF PRONOUNCEMENT: 30-09-2011 O R D E R PER T.R.SOOD, AM: THESE CROSS APPEALS ARE HEARD TOGETHER AND ARE BEI NG DISPOSED OF BY THIS COMMON ORDER. 2. I.T.A.NOS.6295 & 6296/M/10 (REVENUES APPEALS): IN BOTH THESE APPEALS, IDENTICAL GROUNDS HAVE BEEN RAISED BY THE REVENUE WHICH ARE AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS IN LAW, THE LD.CIT(A) HAS ERRED IN CANCELING THE NOTIC E U/S. 148 ITA NOS.6295,6296 & 5537 OF 10 2 AND THE ASSESSMENT MADE U/S. 143(3) R.W.S. 147 OF T HE ACT HOLDING THAT THE RE-ASSESSMENT PROCEEDINGS INITIATE D BASED MERELY ON CHANGE OF OPINION. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN LAW IN NOT APPRECIATING THE FACT THAT EXPLANATION 2(C) TO SECTION 147 OF THE ACT SQUARELY APPLIES TO THIS CASE AND THE AO WAS JUSTIFIED IN RE-OPENING OF THE ASSESSMENT. 3. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO BE RESTORED. 2. AFTER HEARING BOTH THE PARTIES, WE FIND THAT ORI GINALLY ASSESSMENT WAS COMPLETED U/S.143(3) FOR A.Y 2002-03 ON 30-1-05 AND FOR A.Y 2004-05 ON 24-3-06. NOTICE U/S.148 WAS SERV ED ON 26-3-2009 I.E. BEYOND FOUR YEARS FOR A.Y 2002-03 AND WITHIN F OUR YEARS FOR A.Y 2004-05. THE REASONS RECORDED FOR ISSUE OF NOTICE A RE NOTED AT PAGE-2 OF THE ASSESSMENT ORDER FOR A.Y 2002-03 WHICH ARE A S UNDER: IN THIS CASE THE ASSESSEE HAS FILED THE RETURN OF INCOME FOR A.Y.200203 ON 31/10/2002 DECLARING TOTAL INCOME AT RS.NIL AND TAXABLE INCOME U/S 1 I5JB AT RS. NIL. THE REVISED R ETURN OF INCOME WAS FILED ON 6/12/2002 DECLARING TOTAL AT RS. 14,69 ,84,848/ AND TAXABLE INCOME U/S.115JB AT RS.NIL. ASSESSEE HAD AG AIN REVISED RETURN DECLARING TOTAL INCOME AT RS.NIL ON 30/03/20 04. AT THE TIME OF THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS AGAIN SUBMITTED FOR REVISED COMPUTATION OF INCOME BY REVISING THEIR CLA IM U/S.80IA TO RS. 546,26,0/233/- ON THE BASIS OF THE ORDER OF MERC DA TED 31 ST MAY,2004. THE ASSESSMENT ORDER U/S.143(3J OF THE AC T HAS BEEN PASSED ON 31/01/2005 ASSESSING THE TOTAL INCOME UND ER NORMAL PROVISIONS OF THE ACT AT RS.41, 17,22,260/ AND U/S .115JB OF THE ACT AT RS. 387,72,26,464/. IN THE SAME ASSESSMENT ORDE R, THE ASSESSEE HAS BEEN ALLOWED THE DEDUCTION U/S.80IB OF THE ACT AT RS.173,98,367/-(IN RESPECT OF PROFIT FROM ELASTIMOL D BUSINESS,) AND ALSO DEDUCTION U/S.80IA OF THE ACT AT RS.354,00, 75 ,084/-(IN RESPECT OF PROFIT FROM GENERATION ACTIVITY). AFTERWARDS, THE O RDER DID 13. 12.2006 GIVING EFFECT TO THE CIT(A)S ORDER DTD. 23.03.2006 HAS BEEN PASSED IN THE ASSESSEES CASE AND IN THE SAME ORDER, THE ASSE SSEE HAS BEEN ALLOWED THE U/S 80IB OF THE ACT AT RS.173,98, 367 ( IN RESPECT OF PROFIT FROM ELASTIMOLD BUSINESS) AND ALSO (DEDUCTION U/S 8 01A OF THE ACT AT RS.385,97,04,385/-(IN RESPECT OF PROFIT FROM GENERA TION ACTIVITY). SECTION 80IA (10) OF THE ACT. 196] PROVIDES THAT WH ERE IT APPEARS TO THE ASSESSING OFFICER THAT OWING TO THE CLOSE CONNE CTION BETWEEN THE ASSESSEE CARRYING ON THE ELIGIBLE BUSINESS TO WHICH THIS SECTION APPLIES MID ANY OTHER PERSON, OR FOR ANY OTHER REASON, THE COIN-SE OF BUSINESS BETWEEN THEM IS SO ARRANGED THAT THE BUSINESS TRANS ACTED BETWEEN ITA NOS.6295,6296 & 5537 OF 10 3 THEM PRODUCED TO THE ASSESSEE MORE THAN THE ORDINAR Y PROFITS WHICH MIGHT BE EXPECTED TO ARISE IN SUCH ELIGIBLE BUSINES S FOR THE PURPOSES OFT THE DEDUCTION UNDER THIS SECTION, TAKE THE AMO UNT OF PROFITS AS MAY BE REASONABLY DEEMED TO HAVE BEEN DERIVED THERE FROM. TARIFF FOR PURCHASE OF SALE OF POWER IS DETERMINED ON THE BASIS GOVERNMENT OF INDIA UNDER ITS NOTIFICATION NO.S0 2 51(E) DATED 30 TH MARCH, 1992 ISSUED UNDER THE PROVISIONS OF ELECTRIC ITY ACT, 1948. TARIFF STRUCTURES, BOTH FOR THE CENTRAL SECTOR AND INDEPEN DENT POWER PRODUCER (IPPS,), WERE DETERMINED ON COST PLUS PROF IT BASIS. PROFIT WAS DETERMINED ON THE RETURN OF EQUITY BAS IS WHICH WAS TO HE COMPUTED ON THE PAID UP AND SUBSCRIBED CAPITAL RELA TABLE TO THE GENERATING UNIT AT THE RATE OF 16 PERCENT OF SUCH C APITAL. IN THIS CASE, THE ASSESSEE HAS CLAIMED THE DEDUCTION U/S.80IA OF THE ACT IN RESPECT OF GENERATION OF POWER FROM ITS POWER UNIT LOCATED AT DAHANU. WHILE FILING THE RETURN OF INCOME FOR A. Y. 2002-03, THE ASSESSEE WAS AWARE THAT THE PROFIT SHOULD NOT EXCEED THE 16% OF ITS CA PITAL/ DURING THE PREVIOUS YEAR IN VIEW OF THE PRINCIPLES WHICH ARE T HE BASIS FOR FIXATION OF TARIFF. HOWEVER, THE ASSESSEE HAS CLAIMED THE DE DUCTION U/S.80IA OF/HE ACT ON THE PROFITS OF DAHANU UNIT WHICH EXCEE DED 16% OF THE CAPITAL. SINCE THE ASSESSEE WAS AWARE OF THE TARIFF REGULATION OF RESTRICTING ITS PROFITS TO 16% IN VIEW OF THE ACT (SUPRA), THE C/AIM OF THE DEDUCTION FILED BY THE ASSESSEE AND THIS FACT S HOULD ALSO HAVE BEEN BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. MAHARASHTRA ELECTRICITY REGULATORY COMMISSION (MERC ) IN ITS ORDER IN CASE NO.18 OF 2003 CALCULATED CLEAR PROFIT OR REAS ONABLE RATE OF RETURN ON THE ASSESSEES CAPITAL FOR BOTH GENERATI ON AND DISTRIBUTION OF POWER. ON PERUSAL OF ASSESSEES RECORDS FOR A. Y.200203, IT IS OBSERVED THAT INCORRECT COMPILATION OF PROFITS WITHOUT TAKING INT O CONSIDERATION THE TARIFF REGULATION WHICH PROVIDES FOR CLEAR PROFIT A ND REASONABLE RATE OF RETURN ON CAPITAL BASE METHOD HAS RESULTED IN ESCAP EMENT OF INCOME TO THE EXTENT OF RS. 245.93 CRORES, WHICH IS WORKED OUT AS UNDER :- (RUPEES IN CRORE) REASONABLE PROFIT ALLOWED BY MERC WHILE CALCULATING TARIFF 235 NET POWER TRANSFERRED FROM GENERATED UNIT 3442 TOTAL SALES IN LICENSE AREA 5776 RATA REASONABLE PROFIT 140.04 AVAILED AFTER RESTRICTING TO AVAILABLE TOTAL INCOM E 492.78 EXCESS 801A DEDUCTION AVAILED 245.93 THEREFORE, I HAVE REASON TO BELIEVE THAT IN THE CAS E OF THE ASSESSEE, THE INCOME OF THE ASSESSEE CHARGEABLE TO LAX TO THE EXTENT OF RS. 245.93 CRORES HAS ESCAPED THE ASSESSMENT FOR A. Y. 2002-03. THIS ESCAPEMENT OF INCOME IS FOR REASON OF THE FAILURE O N THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACT NECESSARY FOR THE ASSESSMENT FOR THE ASSESSMENT YEAR 2002-03. ISSUE NOTICE U/S 148 OF THE ACT. THE REASONS FOR A.Y 2004-05 ARE SIMILAR. ITA NOS.6295,6296 & 5537 OF 10 4 3. THE LD. CIT(A) CANCELLED THE RE-ASSESSMENT PROCE EDINGS FOLLOWING THE ORDER OF THE EARLIER YEAR. 4. BEFORE US, LD. COUNSEL OF THE ASSESSEE SUBMITTE D THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN I.T.A.NOS.4629 & 4630/M/2009 FOR A.YRS. 200 1-02 AND 2003- 04, WHEREIN ALSO REOPENING WAS MADE AFTER FOUR YEAR S IN A.Y 2001-02 AND WITHIN FOUR YEARS FOR A.Y 2003-04. A COPY OF TH E ORDER IS FILED AT PAGES 219 TO 241 OF THE PAPER BOOK. 5. ON THE OTHER HAND, LD. DR STRONGLY SUPPORTED THE ORDER OF THE AO. 6. AFTER CONSIDERING THE SUBMISSIONS, WE FIND THAT THE ISSUE REGARDING THE REOPENING HAS BEEN ADJUDICATED BY THE TRIBUNAL IN A.YRS. 2001-02 AND 2003-04 IN I.T.A.NOS.4629 & 4630/MUM/09 VIDE PARAS 9 TO 11 WHICH ARE AS UNDER: 9. WE HAVE CONSIDERED RIVAL CONTENTIONS AND EXAMIN ED THE RECORD. IN ORDER TO APPRECIATE THE ISSUE, IT IS NECESSARY TO R EPRODUCE THE REASONS FOR REOPENING THE ASSESSMENT, AS RECORDED BY THE ASSESS ING OFFICER FOR ASSESSMENT YEAR 2001-02. SIMILAR REASONS WERE ALSO RECORDED FOR AY 2003-04. REASONS RECORDED FOR AY 2001- 02 ARE AS UN DER:- IN THIS CASE, THE ASSESSEE HAS FILED TH E RETURN OF INCOME FOR AY 2001-02 ON 31.10.2001 DECLARING TOTAL INCOME AT NI L AND TAXABLE INCOME U/S.115JB AT RS 3,41,86,93,066/-. THE ASSESSMENT OR DER U/S 143(3) OF THE ACT HAS BEEN PASSED ON 23.03.2004 ASSESSING THE TOT AL INCOME UNDER NORMAL PROVISIONS OF THE ACT AT RS 38,31,48,980 AND U/S 115JB OF THE ACT AT RS 3,41,95,51,266. IN THE SAME ASSESSMENT ORDER, THE ASSESSEE HAS BEEN ALLOWED THE DEDUCTION U/S 80IA OF THE ACT AT R S 1,46,72,642 (IN RESPECT OF PROFIT FROM ELASTIMOLD BUSINESS) AND ALS O AT RS.3,14,31,23,593 IN RESPECT OF PROFIT FROM GENERATION ACTIVITY. SECT ION 80IA(10) OF THE I.T. ACT, 1961 PROVIDES THAT WHERE IT APPEARS TO THE AO THAT, OWING TO THE CLOSE CONNECTION BETWEEN THE ASSESSEE CARRYING ON T HE ELIGIBLE BUSINESS TO WHICH THIS SECTION APPLIES AND ANY OTHER PERSON, OR FOR ANY OTHER REASON, THE COURSE OF BUSINESS BETWEEN THEM IS SO A RRANGED THAT THE BUSINESS TRANSACTED BETWEEN THEM PRODUCED TO THE AS SESSEE MORE THAN THE ORDINARY PROFITS WHICH MIGHT BE EXPECTED TO ARI SE IN SUCH ELIGIBLE BUSINESS, THE AO SHALL, IN COMPUTING THE PROFITS AN D GAINS OF SUCH ELIGIBLE BUSINESS FOR THE PURPOSES OF THE DEDUCTION UNDER TH IS SECTION, TAKE THE AMOUNT OF PROFITS AS MAY BE REASONABLY DEEMED TO HA VE BEEN DERIVED ITA NOS.6295,6296 & 5537 OF 10 5 THEREFROM. TARIFF FOR PURCHASE OF SALE OF POWER IS DETERMINED ON THE BASIS OF THE NORMATIVE PARAMETERS DETERMINED BY THE GOVT. OF INDIA UNDER ITS NOTIFICATION NO.SO 251(E) DATED 30.3.1992 ISSUED UN DER THE PROVISIONS OF ELECTRICITY ACT, 1948. TARIFF SITUATES, BOTH FOR TH E CENTRAL SECTOR AND INDEPENDENT POWER PRODUCERS (IPPS), WERE DETERMINED ON COST PLUS PROFIT BASIS. PROFIT WAS DETERMINED ON THE RETURN ON EQUITY BASIS WHICH WAS TO BE COMPUTED ON THE PAID UP AND SUBSCRI BED CAPITAL RELATABLE TO THE GENERATING UNIT AT THE RATE OF 16 PER CENT OF SUCH CAPITAL. IN THIS CASE, THE ASSESSEE HAS CLAIMED THE DEDUCTIO N U/S 80IA OF THE ACT IN RESPECT OF GENERATION OF POWER FROM ITS POWER FR OM ITS POWER UNIT LOCATED AT DAHANU. WHILE FILING THE RETURN OF INCOM E FOR A.Y 2001-02, THE ASSESSEE WAS AWARE THAT THE PROFIT SHOULD NOT EXCEE D THE 16% OF ITS CAPITAL DURING THE PY IN VIEW OF THE PRINCIPLES WHI CH ARE THE BASIS FOR THE FIXATION OF TARIFF. HOWEVER, THE ASSESSEE HAS CLAIM ED THE DEDUCTION U/S 80IA OF THE ACT ON THE PROFITS OF DAHANU UNIT WHICH EXCEEDED 16% OF ITS CAPITAL. TOUGH THE MERC ORDER IN CASE NO.18 OF 2003 WAS NOT PASSED TILL THE DATE OF PASSING OF THE ORDER U/S 143(3) OF THE ACT IN THE ASSESSEES CASE, HOWEVER, SINCE THE ASSESSEE WAS AWARE OF THE TARIFF REGULATION OF RESTRICTING ITS PROFITS TO 16% IN VIEW OF THE ACT ( SUPRA), THE CLAIM OF DEDUCTION U/S 80IA SHOULD HAVE BEEN ACCORDINGLY RES TRICTED IN THE RETURN OF INCOME FILED BY THE ASSESSEE AND THIS FACT SHOUL D ALSO HAVE BROUGHT TO THE NOTICE OF THE AO DURING THE COURSE OF ASSESSMEN T PROCEEDINGS. THUS, I AM OF THE VIEW THAT THE CLAIM OF EXCESS DEDUCTION U/S 80IA OF THE ACT IS BECAUSE OF FAILURE ON THE PART OF THE ASSESSEE, BY NOT DISCLOSING THESE FACTS TRULY AND FULLY. MAHARASHTRA ELECTRICITY REGU LATORY COMMISSION (MERC) IN ITS ORDER IN THE CASE NO.18 OF 2003 CALCU LATED CLEAR PROFIT OR REASONABLE RATE OF RETURN ON THE ASSESSEES CAPITA L FOR BOTH GENERATION AND DISTRIBUTION OF POWER. ON PERUSAL OF ASSESSEES RECORDS FOR AY 2001- 02, IT IS OBSERVED THAT INCORRECT COMPUTATION OF PR OFITS WITHOUT TAKING INTO CONSIDERATION THE TARIFF REGULATION WHICH PROVIDES FOR CLEAR PROFIT AND REASONABLE RATE OF RETURN ON CAPITAL BASE METHOD HA S RESULTED IN ESCAPEMENT OF INCOME TO THE EXTENT OF RS 177.08 CRO RES, WHICH IS WORKED OUT AS UNDER: RS IN CRS REASONABLE PROFIT ALLOWED BY MERC WHILE CALCULATING TARIFF 230 NET POWER TRANSFERRED FROM GENERATED UNIT 3231 TOTAL SALES IN LICENSE AREA 5415 PRORATE REASONABLE PROFIT 137.23 80IA DEDUCTION COMPUTED 480.41 80IA AVAILED AFTER RESTRICTING TO AVAILABLE TOTAL I NCOME 314.31 EXCESS 80IA DEDUCTION AVAILED 177.08 THEREFORE, I HAVE REASON TO BELIEVE THAT IN THE CAS E OF THE ASSESSEE, THE INCOME OF THE ASSESSEE CHARGEABLE TO TAX TO THE EXT ENT OF RS 177.08CRORES HAS ESCAPED THE ASSESSMENT FOR AY 2001 -02. THIS ESCAPEMENT OF INCOME IS BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACT NECESSARY FOR THE ASSESSMENT FOR THE ASSESSMENT YEAR 2001-02 ISSUE NO TICE U/S 148 OF THE ACT. 10. AS CAN BE SEEN FROM THE ABOVE, THE ASSESSING OF FICERS REASON TO BELIEVE ARISES FROM THE INTERPRETATION OF SECTION 8 0IA(10) AND FURTHER THE DETERMINATION OF PROFITS AS REASONABLE RATE OF RETU RN ON CAPITAL ON THE BASIS OF ELECTRICITY ACT 1948 AND MERC ORDER WHICH ADMITTEDLY WAS ISSUED AFTER COMPLETION OF ASSESSMENT ORDER. THESE ISSUES ARE DEALT WITH AS UNDER ITA NOS.6295,6296 & 5537 OF 10 6 10.1 ISSUE OF APPLICABILITY OF SECTION 80IA(10) THE PROVISION OF SECTION 80IA(10) RELIED UPON BY THE ASSESSING OFFICER IS AS UNDER:- 10. WHERE IT APPEARS TO THE ASSESSING OFFICER THAT , OWING TO THE CLOSE CONNECTION BETWEEN THE ASSESSEE CARRYING ON THE ELI GIBLE BUSINESS TO WHICH THIS SECTION APPLIES AND ANY OTHER PERSON, OR FOR ANY OTHER REASON, THE COURSE OF BUSINESS BETWEEN THEM IS SO ARRANGED THAT THE BUSINESS TRANSACTED BETWEEN THEM PRODUCES TO THE ASSESSEE MO RE THAN THE ORDINARY PROFITS WHICH MIGHT BE EXPECTED TO ARISE I N SUCH ELIGIBLE BUSINESS, THE ASSESSING OFFICER SHALL, IN COMPUTING THE PROFITS AND GAINS OF SUCH ELIGIBLE BUSINESS FOR THE PURPOSES OF THE D EDUCTION UNDER THIS SECTION, TAKE THE AMOUNT OF PROFITS AS MAY BE REASO NABLY DEEMED TO HAVE BEEN DERIVED THEREFROM. 10.1.2 AS CAN BE SEEN FROM THE PROVISION, THE ASSES SING OFFICER CAN ONLY INVOKE THIS PROVISION ONLY WHEN THERE IS A CLOSE CO NNECTION BETWEEN THE ASSESSEE CARRYING ON THE ELIGIBLE BUSINESS AND ANY OTHER PERSON OR FOR ANY OTHER REASON, THE COURSE OF BUSINESS BETWEEN TH EM IS SO ARRANGED THAT THE BUSINESS TRANSACTED BETWEEN THEM PRODUCES TO THE ASSESSEE MORE THAN THE ORDINARY PROFITS. THIS SUB-SECTION PO STULATES THAT THERE SHOULD BE CLOSE CONNECTION BETWEEN THE ASSESSEE AND ANY OTHER PERSON. IN THIS CASE, THE ASSESSEE IS GENERATING AND ALSO T RANSMITTING IN ITS BUSINESS ONLY. THERE ARE NO TRANSACTIONS WITH ANY O THER PERSON. AS SUBMITTED BY THE LEARNED COUNSEL, SECTION 80IA(10) HAS NO RELEVANCE TO THE ASSESSEES BUSINESS TRANSACTIONS IN GENERATION AND TRANSMISSION OF POWER. ACCORDINGLY, WE ARE OF THE VIEW THAT INVOKIN G THE PROVISIONS OF SECTION 80IA(10) DOES NOT ARISE IN THIS CASE. AS AL READY STATED ELSEWHERE IN THE FACTS OF THE CASE, THE ASSESSING OFFICER ORI GINALLY HAS INVOKED SECTION 80IA(8) WHICH IS THE CORRECT PROVISION APPL ICABLE TO THE TRANSACTIONS OF THE ASSESSEE. SECTION 80IA(8) IS AS UNDER: 8.WHERE ANY GOODS OR SERVICES HELD FOR THE PURPOSE S OF THE ELIGIBLE BUSINESS ARE TRANSFERRED TO ANY OTHER BUSI NESS CARRIED ON BY THE ASSESSEE, OR WHERE ANY GOODS OR SERVICES HEL D FOR THE PURPOSES OF ANY OTHER BUSINESS CARRIED ON BY THE AS SESSEE ARE TRANSFERRED TO THE ELIGIBLE BUSINESS AND, IN EITHER CASE, THE CONSIDERATION, IF ANY, FOR SUCH TRANSFER AS RECORDE D IN THE ACCOUNTS OF THE ELIGIBLE BUSINESS DOES NOT CORRESPOND TO THE MARKET VALUE OF SUCH GOODS OR SERVICES AS ON THE DATE OF THE TRA NSFER, THEN, FOR THE PURPOSES OF THE DEDUCTION UNDER THIS SECTION, T HE PROFITS AND GAINS OF SUCH ELIGIBLE BUSINESS SHALL BE COMPUTED A S IF THE TRANSFER, IN EITHER CASE, HAD BEEN MADE AT THE MARK ET VALUE OF SUCH GOODS OR SERVICES AS ON THAT DATE : PROVIDED THAT WHERE, IN THE OPINION OF THE ASSESSIN G OFFICER, THE COMPUTATION OF THE PROFITS AND GAINS OF THE ELIGIBL E BUSINESS IN THE MANNER HEREINBEFORE SPECIFIED PRESENTS EXCEPTIONAL DIFFICULTIES, THE ASSESSING OFFICER MAY COMPUTE SUCH PROFITS AND GAINS ON SUCH REASONABLE BASIS AS HE MAY DEEM FIT. EXPLANATI ON.FOR THE PURPOSES OF THIS SUB-SECTION, MARKET VALUE, IN RE LATION TO ANY GOODS OR SERVICES, MEANS THE PRICE THAT SUCH GOODS OR SERVICES WOULD ORDINARILY FETCH IN THE OPEN MARKET. 10.1.3 IN VIEW OF THE CLEAR PROVISIONS OF SECTION 8 0IA(8) APPLICABLE TO THE ASSESSEES BUSINESS, WHERE THERE ARE TRANSACTIONS B ETWEEN ELIGIBLE BUSINESS AND ANY OTHER BUSINESS CARRIED ON BY THE A SSESSEE (GENERALLY CALLED NON-ELIGIBLE BUSINESS), THE ASSESSING OFFICE R HAS TO DETERMINE THE MARKET VALUE OF GOODS AND SERVICES IN ARRIVING AT T HE PROFITS. THIS ASPECT WAS TAKEN CARE BY THE ASSESSING OFFICER AT THE TIME OF ORIGINAL ASSESSMENT FROM AY 2000-01 AND ONWARDS AND SO THE A SSESSING OFFICERS OPINION IN INVOKING THE PROVISIONS OF 80I A(10) IS NOT ACCORDING TO ITA NOS.6295,6296 & 5537 OF 10 7 THE LAW AND FACTS. 10.2 TARIFF DETERMINED IN THE M ERC ORDER ANOTHER REASON FOR REOPENING IS THE ORDER FOR DETERMINATION OF TARIFF FOR SALE OF POWER ISSUED BY THE MAHARASHTRA REGULATORY COMMISSI ON FOR FINANCIAL 2004-05 IN ASSESSEE CASE OF 18 OF 2003, DATED 1.7.2 004. AS ADMITTED BY THE ASSESSING OFFICER HIMSELF IN THE REASONS RECORD ED, THIS ORDER WAS NOT AVAILABLE AT THE TIME OF COMPLETION OF ORIGINAL ASS ESSMENT, THEREFORE, THE ASSESSEE CANNOT BE CONSIDERED TO HAVE NOT DISCLOSED FULL FACTS WHEN THE SAID ORDER ITSELF WAS NOT AVAILABLE AND EVEN THE PR OCEEDINGS HAVE NOT BEEN INITIATED FOR ANY OF THE ASSESSMENT YEARS UNDE R CONSIDERATION. AS CAN BE SEEN FROM THE ORDER OF THE MERC, THE ORDER I TSELF INDICATES THAT IT IS IN A MATTER OF APPROVAL OF M/S BSES LTD) (NOW A RELIANCE ENERGY LTD)S ANNUAL REVENUE REQUIREMENTS FOR FINANCIAL YE AR 2003-04 AND 2004- 05 AND DETERMINATION OF TARIFF FOR FY 2004-05. THE ISSUE BEFORE THE MERC UNDER THE ELECTRICITY ACT, 2003 VIDE POWERS VE STED IN SECTION 61 & 62 IN THE MERC WAS FOR DETERMINATION OF THE TARIFF FOR SUPPLY OF ELECTRICITY TO VARIOUS CATEGORIES OF CONSUMERS. IN ITS DETAILED ORDER, THE MERC HAS TAKEN INTO CONSIDERATION VARIOUS FACTORS, OBJECTION S AND ALSO THE DETAILS, PARTICULARLY, THE STATEMENTS SUBMITTED BY THE BSES, OBJECTIONS FROM THE GENERAL PUBLIC AND ULTIMATELY MADE VARIOUS ADJUSTME NTS TOWARDS CAPITAL COST, FUEL ADJUSTMENT, REVENUE PROJECTIONS, REQUIRE MENT OF FUNDS IN NEXT FEW YEARS, PAST PROFITS OF THE COMPANY IN THE DETAI LED ORDER. THE FIRST PART OF THE ORDER CONSISTS OF BRIEF HISTORY OF TARIFF DE TERMINATION, SECOND PART CONTAINS VARIOUS OBJECTIONS RAISED AND THE ISSUES A ND THE FINDINGS ON THE ISSUES AND THIRD PART COMPRISES COMMISSIONS ANALYSI S AND ITS DECISIONS ON BSES SUBMISSIONS, ARR AND TARIFF OBJECTIONS FOR FY 2003-04 AND 2004-05 AND COMMISSIONS REASONING IN ARRIVING AT ACCEPTABLE FIGURES WITH REFERENCE TO THE FIGURES FURNISHED BY BSES. TH E LAST PART CONTAINS THE DETERMINATION OF TARIFF FOR VARIOUS CATEGORIES IN FINANCIAL YEAR 2004-05. THIS INDICATES THAT ENTIRE EXERCISE OF THE REGULATO RY COMMISSION WAS WITH REFERENCE TO DETERMINING ANNUAL REVENUE REQUIREMENT AND FIXING THE TARIFF FOR SUPPLY OF ELECTRICITY TO VARIOUS CONSUMERS GROU PS. AS PER THE PROVISIONS OF THE ELECTRICITY ACT, AS MODIFIED BY T HE VARIOUS PROVISIONS OF STATE ACT, THE MERC HAS, FOR THE FIRST TIME ISSUED A TARIFF ORDER ON 1 ST JULY 2004 WHICH IS APPLICABLE FOR FINANCIAL YEAR 2004-05 . IN DETERMINING THE TARIFF, THERE ARE VARIOUS PARAMETERS TO BE CONSIDER ED AND IN THAT ONE SUCH PARAMETER IS THE REASONABLE RATE OF RETURN AT 16% O F THE CAPITAL COST. HOWEVER, THERE ARE VARIOUS METHODOLOGIES IN ARRIVIN G AT VARIOUS WORKINGS FOR DETERMINING THE TARIFF AND THIS IS BASED ON THE PROVISIONS OF THE ACT, VARIOUS INSTRUCTIONS AND FINDINGS OF THE COMMISSION . AS PER THE MOP NOTIFICATIONS INVESTMENTS MADE AFTER 31.3.1999 ARE ELIGIBLE FOR REASONABLE RETURN OF 16%. LICENCEES WERE ALSO ENTITLED FOR 0.5 % RETURN ON LOANS FROM APPROVED INSTITUTIONS AND ON THE INVESTMENT ALLOWAN CES RESERVE. FURTHER IT INDICATES THAT ON ACCOUNT OF COMMISSIONS PHILOSOPH Y IN REDUCING THE RESERVES TO MATCH THE SHORTFALL IN CLEAR PROFIT ON YEARLY BASIS STATED CAPITAL BASE WAS HIGHER THAN THE CAPITAL BASE PROJECTED BY THE BSES. ACCORDINGLY, THE RESTATED LEVEL OF REASONABLE RETUR NS FOR THE PERIOD FY 2002-03 TO FINANCIAL YEAR 2004-05 HAS BEEN GIVEN IN DETAIL IN PAGE 117 OF THE ORDER. AS SEEN FROM THE ORDER AND THE TABLE, TH ERE ARE VARIOUS RATES OF RETURN FOR INVESTMENTS MADE BY THE ASSESSEE COMPANY FROM CAPITAL BASE ON 31 ST MARCH 1965 TO 1 ST APRIL 1999 AND AT VARIOUS PERCENTAGES OF REASONABLE RETURN. THE PROBABLE REASONABLE RETURNS WERE ESTIMATED BY THE MERC. THE PROJECTIONS ALSO INDICATE THAT THE AS SESSEE SUBMITTED THAT THE REASONABLE RETURN AT RS 337.37 CRORES WHEREAS M ERC ARRIVED AT 256.66 CRORES. LIKEWISE, CLEAR PROFITS WERE DISCUSS ED IN PARA 21 AND AT THE END OF THE DISCUSSION, THE COMMISSION HAS LEFT THIS NOTE THUS, THE REVISED NET SURPLUS BETWEEN CLEAR PROFIT AND THE RE ASONABLE RETURN IN ITA NOS.6295,6296 & 5537 OF 10 8 FINANCIAL YEAR 2004-05 BASED ON THE EXISTING TARIFF AND THE COMMISSIONS PROJECTIONS OF EXPENSES WORKS OUT TO 309.4 CRORES, WHICH WAS ADJUSTED BY THE REVISING TARIFF TO DIFFERENT CATEGORIES BASED O N THE COMMISSIONS TARIFF PHILOSOPHY DISCUSSED IN THE NEXT SECTION. 10.2.2. ALL THIS INDICATES THAT UNDER THE ELECTRICI TY ACT, MERC IS EMPOWERED TO DETERMINE THE TARIFF AT WHICH THE ASSE SSEE CAN SUPPLY THE ELECTRICITY TO THE CONSUMERS AND IN DOING SO, THE M ERC WAS GIVEN VARIOUS GUIDELINES INCLUDING CONSIDERING THE RATE OF RETURN AT 16%. THE ENTIRE EXERCISE, AS CAN BE SEEN IS ONLY TO DETERMINE THE T ARIFF, AT WHICH THE ELECTRICITY CAN BE SUPPLIED, BUT THAT DOES NOT MEAN THAT ASSESSEE CANNOT EARN MORE PROFIT THAN THAT. IN FACT, THE COMMISSION ALSO ACKNOWLEDGES THAT THE ACTUAL PROFITS ARE MORE THAN CLEAR PROFITS DETE RMINED AND THE SURPLUS WAS ADJUSTED TO THE RESERVES FOR FUTURE ADJUSTMENTS IN TARIFFS. THE ENTIRE ORDER IS FOR FIXING THE TARIFF ONLY AND NOWHERE THE RE IS ANY RESTRICTION THAT THE ASSESSEE CANNOT EARN MORE THAN THE REASONABLE R ATE OF RETURN THAT WAS PROJECTED, BY EFFICIENT PLANT LOAD FACTOR, DEC REASE IN TRANSMISSION LOSSES, BENEFITS IN INTEREST SAVINGS AND FUEL COSTS ETC, WHICH HAVE BEEN PROJECTED AT A FIXED RATE IN THE ELECTRICITY ACT UN DER VARIOUS GUIDELINES AND NOTIFICATIONS AND SCHEDULES. SINCE EXERCISE OF MERC IS ONLY FOR FIXING THE TARIFF, THAT TOO APPLICABLE FROM FINANCIAL YEAR 200 4-05, WE ARE NOT IN A POSITION TO UNDERSTAND HOW THE ORDER OF MERC ISSUED FOR FIXATION OF TARIFF FROM FINANCIAL YEAR 2004-05 HAS ANY RELEVANCE IN AR RIVING AT THE PROFITS OF THE GENERATION UNIT DETERMINED ALREADY BY THE ASSES SING OFFICER UNDER THE PROVISIONS OF THE ACT. THERE IS NO CO-RELATION WITH THE REASONABLE RATE OF RETURN CONSIDERED FOR TARIFF FIXATION UNDER THE ELE CTRICITY SUPPLY ACT AND THE ACTUAL PROFITS EARNED BY THE ASSESSEE COMPANY AND T HE PROFITS AS DETERMINED BY THE ASSESSING OFFICER UNDER THE PROVI SIONS OF SECTION 80IA(10). IN FACT, IN THE ORIGINAL ASSESSMENT ORDER , THE ASSESSEES CLAIM OF PROFIT IS ON THE ACTUAL AVERAGE SALE PRICE TO TH E CUSTOMERS, WHICH WAS HIGHER THAN WHAT WAS AS DETERMINED WHILE BASING THE SALE PRICE ON THE POWER PURCHASED FROM TATA POWER COMPANIES. SINCE TH E ASSESSING OFFICER HAS ORIGINALLY EXERCISED THE CORRECT PROVIS IONS OF THE ACT IN DETERMINING THE PROFIT OF THE ELIGIBLE UNIT, THE PR ESENT ASSESSING OFFICERS EXERCISE IN RE-DETERMINING THE PROFIT ON THE BASIS OF THE TARIFF FIXATION ORDER R. W. ELECTRICITY SUPPLY ACT HAS NO BASIS AT ALL. ACCORDINGLY, WE ARE OF THE VIEW THAT REFERENCE BY THE ASSESSING OFFICER TO MERCS ORDER AND INVOKING PROVISIONS OF SECTION 147 FOR REASSESSMENT IS NOT CORRECT AND HAS NO BASIS AT ALL. 10.3 FAILURE TO FURNISH FULLY AND TRULY ALL MATERIA L FACTS FOR THE ASSESSMENT YEAR 2001-02, THE ASSESSMENT WAS REOPENED AFTER 4 Y EARS FROM THE END OF THE ASSESSMENT YEAR. AS PER THE FIRST PROVISO TO SECTION 147, THE ASSESSING OFFICER CANNOT REOPEN THE ASSESSMENT UNLE SS THERE IS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND T RULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. AS RIGHTLY SUBMITTED BY THE LEARNED COUNSEL, THE ELECTRICITY ACT 1948 AND ITS NOTIFICAT ION ISSUED WAY BACK IN 1992 ARE IN THE PUBLIC DOMAIN AND THERE IS NO NEED TO SPECIFICALLY FURNISH THEM TO THE ASSESSING OFFICER. MOREOVER, THE ASSESS EE IS ALSO ASSESSED FROM SO MANY YEARS AND IS IN THE BUSINESS OF SUPPLY OF TRANSMISSION OF ELECTRICITY INITIALLY AND POWER GENERATION AND TRAN SMISSION IN THE RECENT PAST AND IT CANNOT BE STATED THAT THE ACT, NOTIFICA TIONS, WHICH ARE IN PUBLIC DOMAIN CANNOT BE CONSIDERED AS NON-DISCLOSURE OF MA TERIAL FACTS NECESSARY FOR HIS ASSESSMENT. EVEN THE MERC ORDER R ELIED UPON BY THE ASSESSING OFFICER WAS NOT EVEN IN THE KNOWLEDGE OF THE ASSESSEE AS THEY HAVE FOR THE FIRST TIME APPROACHED THE MERC IN YEAR 2003 ONLY AND THE ORDER WAS PASSED, AFTER OBTAINING PUBLIC OBJECTIONS AND AFTER EXAMINATION OF FACTS ON 1.7.2004. RELYING ON VARIOUS PRINCIPLE ESTABLISHED IN THE CASE ITA NOS.6295,6296 & 5537 OF 10 9 LAWS STATED IN THE ARGUMENTS ABOVE ON THIS PROPOSIT ION, WE ARE OF THE OPINION THAT THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSE SSMENT AND CONSEQUENTLY THE REOPENING AFTER THE END OF 4 YEARS FROM THE ASSESSMENT YEAR IS BAD IN LAW. 10.3.2 FURTHER THE ORDER OF MERC CAN NOT BE A BASIS FOR REOPENING. IN THE CASE OF COCA-COLA EXPORT CORPORATION VS ITO & ANOTH ER 231 ITR 200 THE HONBLE SUPREME COURT HAS CONSIDERED SIMILAR FACTS WHERE THE LETTERS WERE ISSUED BY THE GOVERNMENT OF INDIA RELATING TO REMITTANCE OF FOREIGN EXCHANGE UNDER THE PROVISIONS OF FOREIGN EXCHANGE R EGULATION ACT AND ON THE BASIS OF THOSE LETTERS THE ASSESSMENTS IN TH E ABOVE SAID WHOLLY OWNED SUBSIDIARY OF COCA-COLA CORPORATION WAS REOPE NED FOR DISALLOWING THE FOREIGN EXCHANGE LOSS AROSE TO THE SAID ASSESSE E. ON THESE FACTS, IT IS HELD AS UNDER: ..ALLOWING THE APPEALS, THAT THE TWO LETTERS IN QU ESTION WERE ISSUED UNDER THE PROVISIONS OF THE FOREIGN EXCHANGE REGULATION ACT AND DEALT WITH REMITTANCE OF FOREIGN EXCHANGE O UTSIDE INDIA. ANY CONTRAVENTION OF THESE LETTERS WOULD ENTAIL PRO SECUTION UNDER SECTION 56 OF THE FOREIGN EXCHANGE REGULATION ACT, 1973, AND UNDER SECTION 23 OF THE FOREIGN EXCHANGE REGULATION ACT, 1947. THE EMBARGO SO PLACED BY THESE TWO LETTERS ON THE F OREIGN REMITTANCE TO BE MADE ABROAD BY THE APPELLANT HAD N OTHING TO DO WITH THE AMOUNT OF DISALLOWANCES UNDER THE INCOME-T AX ACT. IF ANY REMITTANCE OF FOREIGN EXCHANGE HAD BEEN MADE IN EXC ESS OF THE PRESCRIBED LIMIT FROM JANUARY 1,1969, IT WAS FOR TH E RESERVE BANK OR THE CENTRAL GOVERNMENT TO TAKE ACTION OR TO GRAN T PERMISSION AS MAY BE PROVIDED UNDER THE FOREIGN EXCHANGE REGUL ATION ACT, 1973. THAT, HOWEVER, COULD NOT BE A GROUND FOR THE INCOME TAX OFFICER TO ASSUME JURISDICTION TO START REASSESSMEN T PROCEEDINGS EITHER UNDER SECTION 147(A) OR SECTION 147(B) OF TH E ACT ON THE GROUND THAT THAT IT WOULD BE IN CONSEQUENCE OF INF ORMATION IN HIS POSSESSION IN THE SHAPE OF THESE TWO LETTERS. BOTH THE ACTS-THE INCOME-TAX ACT AND THE FOREIGN EXCHANGE REGULATION ACT-OPERATE IN DIFFERENT FIELDS. THE TWO LETTERS WERE WHOLLY IR RELEVANT AND COULD NOT BE TREATED AS INFORMATION TO THE INCOME-TAX OFF ICER TO INITIATE REASSESSMENT PROCEEDINGS. THEREFORE, THERE WAS INHE RENT LACK OF JURISDICTION IN THE INCOME-TAX OFFICER TO ISSUE NOT ICES UNDER SECTION 148 OF THE ACT ON THE BASIS OF ANY INCOME O F THE APPELLANT ESCAPING ASSESSMENT EITHER UNDER CLAUSE (A) OR CLAU SE (B) OF SECTION 147 OF THE ACT. ALL THE NOTICES UNDER SECTI ON 148 OF THE ACT WERE LIABLE TO BE QUASHED. IN THIS CASE ALSO WE ARE OF THE OPINION THAT THE ME RC ORDER GIVEN SUBSEQUENTLY FOR FIXATION OF TARIFF ON THE BASIS OF ELECTRICITY SUPPLY ACT AND ITS NOTIFICATIONS OPERATE IN DIFFERENT FIELD AND HA S NO BEARING FOR DETERMINATION OF PROFITS UNDER THE IT ACT. 10.4 MERGER OF THE ORDER IT WAS ALSO ONE OF THE CONTENTION THAT THE ISSUE OF QUANTIFICATION OF DEDUCTION UNDER SECTION 80IA IN RESPECT OF THE DAHA NU PLANT BY THE ASSESSING OFFICER, IN THE ORIGINAL ASSESSMENT ORDER HAS MERGED WITH THE ORDERS OF THE CIT (A) AND ITAT AND, THEREFORE, THE RE-COMPUTATION THEREOF BY ADOPTING A DIFFERENT METHOD OF WORKING OF PROFIT ELIGIBLE FOR DEDUCTION U/S 80IA WAS BEYOND THE POWERS OF THE ASSESSING OFF ICER. THE LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY ARGUED THAT THE ISSUE IN ORIGINAL ASSESSMENT WAS ENTIRELY DIFFERENT. WE ARE NOT IN A POSITION TO ACCEPT THE CONTENTION. THE ISSUE IN ORIGINAL ASSESSMENT WAS DE TERMINATION OF PROFIT FOR THE PURPOSE OF DEDUCTION U/S 80IA ON THE DAHANU GENERATION PLANT. ITA NOS.6295,6296 & 5537 OF 10 10 THE CLAIM OF PROFIT, AS DETERMINED BY THE ASSESSEE ON THE BASIS OF AVERAGE SALE PRICE TO THE CUSTOMERS WAS NOT ACCEPTE D AND THE ASSESSING OFFICER RE-DETERMINED THAT PROFIT BY INVOKING THE P ROVISIONS OF SECTION 80IA(8) AND DETERMINED ON THE BASIS OF AVERAGE PURC HASE PRICE FROM TATA POWER COMPANIES. THE ITAT ORDER IN THE AY 2000-01 I NDICATES THAT THE ISSUE IN APPEAL WAS A QUANTUM OF PROFIT GENERATED B Y THE DAHANU UNIT. SINCE THIS QUANTUM OF PROFIT IS BEING RE-DETERMINED AT 16% ON THE BASIS OF REASONABLE RETURN CONSIDERED WHILE FIXATION OF TARI FF BY THE MERC, WE ARE OF THE OPINION THAT, THE ISSUE BEING SIMILAR, THE O RDERS OF THE AO MERGED WITH THAT OF ITAT AND ACCORDINGLY THE ASSESSING OFF ICER LOOSES HIS JURISDICTION TO REOPEN THE ASSESSMENT AS SECOND PRO VISO TO SECTION 147 IS CLEARLY APPLICABLE. SINCE THE ISSUE OF PROFIT FOR D EDUCTION UNDER SECTION 80IA, HAVING BEEN MADE SUBJECT MATTER OF APPEAL BEF ORE THE CIT (A) AND THE ITAT, THE SAID ISSUE OF DETERMINATION OF PROFIT FOR THE PURPOSE OF 80IA(10) HAS MERGED WITH THE ORDER OF THE APPELLATE AUTHORITIES AS A WHOLE AND HENCE, IT WAS NO LONGER AMENABLE TO THE R EASSESSMENT PROCEEDINGS U/S 147 BY VIRTUE OF SECOND PROVISO TO SECTION 147. ON THIS PRINCIPLES ALSO, SINCE IN BOTH THE ASSESSMENT YEARS , THE ISSUE WAS ORIGINALLY CONSIDERED AND AGITATED AT THE LEVEL OF THE ITAT, THE REOPENING ON THE SAME ISSUE IS TO BE CONSIDERED AS BAD IN LAW . WE NEED NOT EXAMINE THE VARIOUS CASE LAW RELIED ON THIS ISSUE. SUFFICE TO SAY THAT ON FACTS AND IN LAW THE ISSUE HAVING MERGED WITH THE O RDERS OF ITAT WAS NOT AMENABLE FOR REASSESSMENT. 10.5 CHANGE OF OPINION IT IS ONE OF THE CONTENTIONS OF THE ASSESSEE THAT A SSESSING OFFICER HAS CHANGED HIS OPINION IN RE-DETERMINING THE PROFITS. AS DISCUSSED EARLIER, THE ASSESSING OFFICER ORIGINALLY INVOKED SECTION 80 IA(8) IN ASSESSMENT YEAR 2000-01 IN RE-DETERMINING PROFITS AND THE SAME WAS FOLLOWED IN LATER YEARS INCLUDING THE IMPUGNED YEARS. NOW, AGAIN RE-D ETERMINING THE PROFITS UNDER 80IA(10) WHICH IS NOT APPLICABLE TO THE ASSES SEE AT ALL, CAN ONLY BE CONSIDERED AS CHANGE OF OPINION. ACCORDINGLY, IT WA S ARGUED THAT CHANGE OF OPINION CANNOT BE A BASIS FOR REOPENING OF THE A SSESSMENTS. IN THIS REGARD RELIANCE WAS PLACED ON THE JUDGMENT OF THE H ONBLE SUPREME COURT IN THE CASE OF KELVINATOR INDIA LTD 320 ITR 5 61(SC). IN THE PRESENT CASE WE FIND THAT THERE WAS AN AUDIT OBJECTION BASE D ON WHICH THE ASSESSMENT PROCEEDINGS WERE REOPENED. THOUGH THE AS SESSING OFFICER DID NOT ACCEPT THE AUDIT OBJECTION LATER AFTER INIT IATION OF REASSESSMENT PROCEEDINGS, YET THE FACT REMAINS THAT THERE WAS SO ME MATERIAL BASED ON WHICH HE ISSUED NOTICE U/S.148 OF THE ACT. IN THE D ECISION OF THE HONBLE SUPREME COURT IN THE CASE OF KELVINATOR INDIA LTD. (SUPRA) IT HAS BEEN CLARIFIED THAT EVEN AFTER 1ST APRIL, 1989, ASSESSIN G OFFICER HAS POWER TO RE- OPEN, PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. THE FOLLOWING OBSERVATIONS OF THE HONBLE SUPREME COURT HIGHLIGHT THIS ASPECT. WE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFFERENC E BETWEEN POWER TO REVIEW AND POWER TO RE-ASSESS. THE ASSESSI NG OFFICER HAS NO POWER TO REVIEW; HE HAS THE POWER TO RE-ASSE SS. BUT RE- ASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CERTAI N PRE-CONDITION AND IF THE CONCEPT OF 'CHANGE OF OPINION' IS REMOVE D, AS CONTENDED ON BEHALF OF THE DEPARTMENT, THEN, IN THE GARB OF REOPENING THE ASSESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF 'CHANGE OF OPINION' AS AN IN-B UILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER. HENC E, AFTER 1ST APRIL, 1989, ASSESSING OFFICER HAS POWER TO RE-OPEN , PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO THE CONCLUS ION THAT THERE IS ITA NOS.6295,6296 & 5537 OF 10 11 ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. WE ARE THEREFORE UNABLE TO ACCEPT THE ARGUMENT OF T HE LEARNED COUNSEL FOR THE ASSESSEE. SINCE THE VALIDITY OF INITIATION OF REASSESSMENT HAS BEEN HELD TO BE NOT VALID ON OTHER GROUNDS, WE ARE OF TH E VIEW THAT THIS ASPECT WILL NOT MAKE ANY DIFFERENCE TO THE ULTIMATE CONCLU SION IN THE CASE. 10.6 BASIS OF AUDIT OBJECTION NOT ACCEPTED THE ASSESSEE ALSO CONTENDED THAT REOPENING ON THE B ASIS OF AUDIT OBJECTION, WHICH WAS NOT ACCEPTED BY THE REVENUE AU THORITIES, WAS ALSO BAD IN LAW. RELIANCE WAS PLACED ON THE DECISION IN THE CASE OF IL & FS INVESTMENT MANAGERS LTD VS ITO 298 ITR 32 (BOM) WHE REIN IT WAS CONSIDERED THAT THE STAND TAKEN BY THE ASSESSEE WAS ACCEPTED BY THE REVENUE ON MERITS AND HELD THAT AFTER DISAGREEING W ITH THE AUDIT OBJECTION, REOPENING THE ASSESSMENT HAS NO BASIS AND SO, WAS N OT VALID. IN THIS CASE HOWEVER, THE ASSESSING OFFICER ISSUED NOTICE U /S.147 ON RECEIPT OF THE AUDIT OBJECTION AND LATER ON THE ASSESSING OFFI CER AS WELL AS THE CIT DID NOT ACCEPT THE AUDIT OBJECTION. THEY HOWEVER PR OCEEDED TO COMPLETE THE REASSESSMENT. IN SUCH CIRCUMSTANCES, WE ARE DOU BTFUL AS TO WHETHER IT CAN BE SAID THAT THE AUDIT OBJECTION WAS NOT ACC EPTED WHEN THE NOTICE U/S.148 WAS ISSUED. WE THEREFORE DO NOT AGREE WITH THIS SUBMISSION MADE ON BEHALF OF THE ASSESSEE. 10.7. BEFORE CONCLUDING, WE HAVE TO DISCUSS ANOTHER CONTENTION RAISED BY THE LEARNED COUNSEL IN THE ARGUMENTS THAT THE ASSES SING OFFICER SHOULD HAVE REASON TO BELIEF NOT ONLY AT THE TIME OF ASSES SMENT BUT ALSO AT THE TIME OF COMPLETION OF ASSESSMENT. THIS ARGUMENT CAN T BE ACCEPTED AS THE PARAMETERS FOR REOPENING ON THE BASIS OF REASO N TO BELIEVE HAS TO EXAMINED ONLY AT THE TIME OF ISSUE OF NOTICE U/S 14 7 R W S 148. IN FACT, THE SUFFICIENCY OF THE MATERIAL AVAILABLE WITH THE ASSE SSING OFFICER WAS CALLED IN QUESTION MANY A TIME, BUT THERE IS CONSISTENT JU DICIAL OPINION ON THIS ISSUE THAT SUFFICIENCY OF MATERIAL FOR REASON TO B ELIEVE THAT INCOME HAS ESCAPED ASSESSMENT HAS TO BE EXAMINED AT THE TIME O F INITIATION OF THE PROCEEDINGS. EVEN THOUGH THE ASSESSING OFFICER WAS EMPOWERED TO DROP PROCEEDINGS, INITIATED U/S 147 BY VIRTUE OF PROVISI ONS OF SECTION 152(2), THERE IS NO RESTRICTION IN CONCLUDING THE PROCEEDIN GS, HAVING BEEN INITIATED VALIDLY. HOWEVER, THIS ISSUE BECOMES ACADEMICS PROC EEDINGS U/S 147 ARE HELD TO BE BAD IN LAW BY VIRTUE OF FIRST PROVISO TO SECTION 147 FOR ASSESSMENT YEAR 2001-02 AND IN BOTH THE YEARS IT IN VOLVED MERGER OF THE ORDERS OF THE HIGHER AUTHORITIES AND SECOND PROVISO TO SECTION 147 LIMITS THE JURISDICTION OF AO AND ALSO ON THE BASIS OF CHA NGE OPINION, AND OTHER REASONS AS DISCUSSED IN DETAIL ABOVE. ACCORDINGLY, WE ARE OF THE OPINION THAT CIT (A)S ORDERS IN CANCELLING THE PROCEEDINGS U/S 147 ARE TO BE UPHELD. THE REVENUES GROUNDS ARE ACCORDINGLY DISMI SSED. 11. THE CROSS APPEALS BY THE ASSESSEE ARE WITH REFE RENCE TO THE MERITS OF REDETERMINATION OF PROFITS OF THE ELIGIBLE BUSINESS . SINCE WE DISCUSSED THE MERITS OF THE VARIOUS ISSUES WHILE CONSIDERING THE REVENUE APPEALS, WE ARE OF THE OPINION THAT THE ASSESSING OFFICER WAS N OT CORRECT IN INVOKING THE PROVISIONS OF SECTION 80IA(10) AS WELL AS RE-DE TERMINING THE PROFITS ON THE BASIS OF TARIFF ORDER OF MERC WHICH WAS FOR THE DIFFERENT PURPOSE. EVEN OTHERWISE, QUANTUM OF DETERMINATION OF PROFITS HAVING BEEN CONTESTED IN APPEAL AND GOT CONCLUDED IN THE ORIGIN AL ASSESSMENT PROCEEDINGS, THE RE-DETERMINATION BY THE ASSESSING OFFICER IN REASSESSMENT PROCEEDINGS IS NOT CORRECT. THERE IS N O NEED TO CONSIDER THE ISSUE ON MERITS AGAIN, SINCE THE REASSESSMENT P ROCEEDINGS ARE HELD TO BE BAD IN LAW, AND SO THE ISSUES RAISED IN ALTOG ETHER ASSESSEES APPEAL BECOMES THE ACADEMIC IN NATURE AND ACCORDINGLY THES E APPEALS ARE ALSO CONSIDERED DISMISSED FOR STATISTICAL PURPOSES. ITA NOS.6295,6296 & 5537 OF 10 12 FOLLOWING THE ABOVE ORDER, WE ARE OF THE OPINION, T HAT REOPENING OF ASSESSMENT HAS BEEN CORRECTLY CANCELLED BY THE LD. CIT(A). 7. IN THE RESULT, REVENUES APPEALS ARE DISMISSED. 8. I.T.A.NOS. 5537 & 5538/M/10 [ASSESSEES APPEAL S] : IN BOTH THESE APPEALS VARIOUS GROUNDS HAVE BEEN RAISED, BUT AT THE OUT SET LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT SINCE LD. CI T(A) HAS NOT ADJUDICATED THE ISSUES ON MERITS AND IF THE TRIBUNA L APPROVES HIS DECISION IN CANCELLING THE RE-ASSESSMENT PROCEEDING S, THEN EITHER ASSESSEES APPEALS MAY BE DISMISSED OR RESTORED TO THE FILE OF THE CIT(A). 9. LD. DR, ON THE OTHER HAND, STRONGLY SUPPORTED TH E ORDER OF THE AO. 10. AFTER CONSIDERING THE SUBMISSIONS, SINCE WE HAV E ALREADY UPHELD ACTION OF THE LD. CIT(A) IN CANCELLING THE RE-ASSES SMENT PROCEEDINGS, THEREFORE, THESE ISSUES BECOME ACADEMIC AND INFRUCT UOUS. SINCE THESE ISSUES HAVE NOT BEEN ADJUDICATED BY THE LD. CIT(A), WE ARE OF THE VIEW, THAT THEY HAVE BECOME INFRUCTUOUS. 11. IN THE RESULT, ASSESSEES APPEALS ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 3 0/9/2011. SD/- SD/- (N.V.VASUDEVAN) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 30/9/2011. P/-* ITA NOS.6295,6296 & 5537 OF 10 13