ACIT 2(3), MUMBAI V. TATA CHEMICALS LTD, MUMBAI

ITA 6647/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1445 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2016
• Appeal Filed By: Department
• Bench Allotted: E
• Assessment Year: 2002-2003
• Appeal Filed On: 13-11-2013
• Court: TRIBUNAL
• Department Lawyers: H N SINGH
• Assessee Lawyers: DINESH VYAS
• Keywords: Reopening of assessment; Revision of order; Depreciation; Tangible material; Wrong claim; Bad and doubtful debts; Difference of opinion; Revised return; Reason to believe; Change of opinion
• Section: 143(3); 80HHC; 115JB; 148; 263; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER) I.T.A. NO.6647/MUM/2013 (ASSESSMENT YEAR: 2002-03) ACIT 2(3), MUMBAI VS M/S TATA CHEMICALS LTD BOMBAY HOUSE, 24, HOMI MODI STREET, FORT, MUMBAI-1 PAN : AAACT4059M (APPELLANT) (RESPONDENT) APPELLANT BY SHRI H.N. SINGH RESPONDENT BY SHRI DINESH VYAS, SR ADVOCATE DATE OF HEARING : 05-12-2016 DATE OF ORDER : 23-12-2016 O R D E R PER ASHWANI TANEJA, AM: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-6, MUMBAI [HER EINAFTER CALLED CIT(A)] DATED 26-08-2013 PASSED AGAINST THE ASSESSM ENT ORDER U/S 143(3) R.W.S. 147 OF THE INCOME-TAX ACT, 1961 DATED 30-12- 2009 FOR AY. 2002-03 ON THE FOLLOWING GROUNDS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN ALLOWING RELIEF TO THE ASSESSEE TO THE EXTENT IMPUGNED IN THE GROUNDS ENUMERATED BELOW : 2 I.T.A. NO.6647/MUM/2013 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN HOLDING THAT THE RE-ASSESSME NT PROCEEDINGS WERE INVALID AS THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE OR ANY NEW MATERIAL OR INFORMATION WAS IN THE POSSESSION OF AO ON THE BASIS OF WHICH THE AO HAS R EASON TO BELIEVE THAT PROCEEDINGS U/S 147 WERE HELD TO BE VA LID WITHOUT APPRECIATING THAT EXPLANATION 1 OF SECTION 147 MAKE S IT CLEAR THAT PRODUCTION BEFORE THE ASSESSING OFFICER OF BOO KS OF ACCOUNT OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COUL D WITH DUE DILIGENCE HAVE BEEN DISCOVERED BY THE AO WILL NOT N ECESSARILY AMOUNT TO DISCLOSURE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN HOLDING THAT THE RE-ASSESSME NT PROCEEDINGS WAS INVALID ON ACCOUNT OF CHANGE OF OPINION WITHOUT APPRECIATING THAT THE INCOME HAS ESCAPED ASSESSMENT ON ACCOUNT OF WRONG CLAIMS MADE BY THE ASSESSEE. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE DECISION OF THE CIT(A) MAY BE SET ASID E AND THAT OF THE AO BE RESTORED. 2. THE SOLITARY GROUND RAISED IN THIS APPEAL IS WHETHE R LD. CIT(A) IS JUSTIFIED IN HOLDING THAT REOPENING OF THE IMPUGNED ASSESSMENT U/S 147 WAS INVALID IN THE EYES OF LAW. 3. DURING THE COURSE OF HEARING BEFORE US, THE LD. DR RELIED UPON THE ORDER OF THE AO, WHEREAS THE LD. SENIOR COUNSEL REI TERATED HIS SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND DREW OUR ATTENTION UPON VARIOUS EVIDENCES ENCLOSED IN THE PAPER BOOK FILED BEFORE US AND ALSO RELIED UPON THE DETAILED FINDINGS OF LD.CIT(A) RECO RDED IN THE APPEAL ORDER FOR QUASHING THE IMPUGNED RE-ASSESSMENT ORDER AND R EQUESTED FOR UPHOLDING THE ORDER OF LD. CIT(A). 4. WE HAVE GONE THROUGH THE ORDERS PASSED BY THE LOWER AUTHORITIES AS WELL AS THE SUBMISSIONS MADE BY BOTH THE SIDES A ND ALSO EVIDENCES SHOWN TO US. 3 I.T.A. NO.6647/MUM/2013 5. THE BRIEF FACTS OF THIS CASE ARE THAT ORIGINALLY AS SESSMENT IN THIS CASE WAS COMPLETED U/S 143(3) VIDE ASSESSMENT ORDER DATE D 10-01-2005. SUBSEQUENTLY, THE AO RECORDED REASONS U/S 147 FOR R EOPENING THE CASE AND ISSUED NOTICE U/S 148 DATED 26-05-2008. IT IS NOTED THAT THE AO HAS RECORDED FOLLOWING REASONS:- IN THIS CASE, THE ASSESSMENT WAS COMPLETED U/S. 14 3(3) ON 1 0.1.2005 DETERMINING THE TOTAL INCOME AT RS. 104,94 ,92,278/-. IT IS SEEN FROM THE RECORDS THAT INCOME HAS ESCAPED AS SESSMENT FOR THE FOLLOWING REASONS:- 2. WHILE COMPUTING THE DEDUCTION U/S 80-IA, VI) THE PROFIT ON PRODUCTION OF STEAM IS WRONGLY DE TERMINED ON NOTIONAL BASIS (SINCE THE STEAM IS NOT A MARKETABLE PRODUCT) THEREBY ALLOWING EXCESS DEDUCTION OF 80-IA. VII) THE SALE VALUE OF POWER HAS BEEN ADOPTED AS PE R THE GEB RATE, BILL THE SAME HAS NOT BEEN ADOPTED FOR WORKIN G OUT THE COST OF PRODUCTION. THUS, THE ASSESSEE HAS SUPPRESSED TH E COST OF PRODUCTION AND INFLATED THE PROFITS RESULTING IN EX CESS DEDUCTION OF 80IA CLAIM. VIII) CERTAIN PASS THROUGH COMPONENTS LIKE FUEL ADJ USTMENT CHARGES, ELECTRICITY DUTY ETC HAS NOT BEEN CONSIDER ED FOR ARRIVING A; THE MARKET VALUE OF THE ELECTRICITY. IX) SEPARATE ACCOUNTS FOR THE POWER PLANT AND SET O FF LOSSES INCURRED BY THE ELIGIBLE BUSINESS HAS NOT BEEN WORK ED OUT (I.E POWER PLANTS IN THE INITIAL YEARS AGAINST ASSESSEE' S INCOME FROM OTHER PLANTS WITHOUT ADJUSTING THE SAME AGAINST PRO FITS OF POWER PLANT ELIGIBLE FOR 80IA DEDUCTION) X) THOUGH THE ASSESSEE IS BOOKING AVERAGE 9% OF BOO K DEPRECIATION TO 80-IA UNITS, THE IT DEPRECIATION CL AIMED IS ONLY 0.28% WHICH ENABLE THE ASSESSEE TO SHOW HIGHER PRO FIT FOR THE 80IA UNITS AND CLAIM EXCESS DEDUCTION. IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE THAT INCOME TO THE TUNE OF RS. 38.72 CRORES HAS ESCAPED ASSESSMENT FOR AY 2002-03 BY ALLOWING EXCESS DEDUCTION U/S 80-IA. ACCORDINGLY, NOTICE U/S 148 OF THE L.T. ACT IS ISSU ED AFTER OBTAINING APPROVAL FROM CIT-2, MUMBAI AS PER THE PR OVISIONS OF SECTION 151 OF THE INCOME TAX ACT, 1961. 6. THE ASSESSEE, IN RESPONSE TO THE AFORESAID NOTICE F ILED ITS OBJECTIONS 4 I.T.A. NO.6647/MUM/2013 VIDE ITS LETTER DATED 16-09-2009 FOR REOPENING OF T HE CASE, WHICH WAS DISPOSED OF BY THE LD. AO, VIDE HIS INTERIM ORDER D ATED 16-10-2009, WHEREIN HE REJECTED THE OBJECTIONS AND WENT AHEAD W ITH THE FRAMING OF THE RE-ASSESSMENT ORDER. THE ASSESSEE CONTESTED TH E RE-ASSESSMENT ORDER IN APPEAL BEFORE THE LD. CIT(A) WHEREIN CHALLENGE W AS MADE TO THE JURISDICTION OF THE AO IN REOPENING OF THE IMPUGNED ASSESSMENT AND ALSO ON THE MERITS OF THE ADDITIONS / DISALLOWANCES MADE BY THE AO IN THE RE- ASSESSMENT ORDER. LD. CIT(A) CONSIDERED BOTH THE A SPECTS BUT DECIDED THE APPEAL ON THE ISSUE ON THE JURISDICTION OF REOPENIN G. IT WAS NOTED BY HIM THAT REOPENING OF THE ASSESSMENT DONE BY THE AO WAS NOT IN ACCORDANCE WITH LAW ON AT LEAST TWO GROUNDS, VIZ. THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSING MATERIAL FACTS AND THE R EOPENING WAS BASED UPON THE CHANGE OF OPINION. THUS, TAKING INTO ACCO UNT BOTH THESE ASPECTS, THE REOPENING WAS HELD TO BE INVALID AND CONSEQUENT LY THE RE-ASSESSMENT ORDER WAS QUASHED. RELEVANT PART OF HIS OBSERVATIO NS IS REPRODUCED BELOW: 6.2 I HAVE CONSIDERED THE ABOVE SUBMISSIONS OF THE APPELLANT AS WELL AS THE FACTS OF THE CASE. I HAVE ALSO GONE THR OUGH THE CASE LAWS CITED BY THE APPELLANT IN THIS REGARD. THE ASS ESSMENT OF THE APPELLANT HAS BEEN REOPENED BEYOND THE INITIAL PERI OD OF FOUR YEARS FROM THE END OF THE CONCERNED ASSESSMENT YEAR . THE AO HAS REOPENED THE ASSESSMENT UNDER SECTION 147; ON A CCOUNT OF THE REASON THAT THE APPELLANT WAS WRONGLY GRANTED T HE DEDUCTION U/S 80 IA AMOUNTING TO RS.38.72 CRORES IN RESPECT OF ITS CAPTIVE POWER PLANT AT MITHAPUR, DURING THE COU RSE OF ORIGINAL ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE ACT. THE PROVISIONS OF SECTION 147 ARE ASUNDER: 'IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THA T ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF 5 I.T.A. NO.6647/MUM/2013 SECTIONS 148 TO 153, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS E SCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENT LY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, O R RECOMPUTED THE LOSS OR THE DEPRECIATION ALLOWANCE T O ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESS MENT YEAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SE CTIONS 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 R ELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THI S SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. UNLESS ANY INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REAS ON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A R ETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUBSECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HI S ASSESSMENT FOR THAT ASSESSMENT YEAR: ... . ' 6.3 IN THE CASE OF THE APPELLANT, THE DEDUCTION UND ER SECTION 80LA IN RESPECT OF THE SAID CAPTIVE POWER PLANT WAS FIRS T GRANTED IN ASSESSMENT YEAR 2001-02. IT IS SEEN THAT WHILE GRAN TING THE SAID DEDUCTION IN ASSESSMENT YEAR 2001-02, THE AO HAS CO NSIDERED THE CLAIM OF THE APPELLANT AS PER REVISED RETURN FI LED ON 28.03.2003, WHEREIN DEDUCTION OF RS.1,32,60,000/- ( BEING 30% OF THE PROFITS OF ELIGIBLE BUSINESS) WAS CLAIMED ON TH E NEW POWER PLANT AT MITHAPUR WHICH, STARTED GENERATING POWER W ITH EFFECT FROM 11TH MAY, 1995. DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, THE APPELLANT FURTHER REVISED ITS CLAI M TO 100% OF THE PROFITS OF ELIGIBLE BUSINESS. THE AO HAS OBSER VED IN THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2001-02 THAT T HE RELEVANT WORKING OF THE 80IA CLAIM ON THE NEW POWER PLANT WA S FILED ALONG WITH THE REVISED RETURN OF INCOME. IT IS ALS O OBSERVED BY THE AO IN THE ASSESSMENT ORDER THAT DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE VIDE LETTER DA TED MARCH 12, 2004, FURNISHED DETAILED SUBMISSIONS AND ALL FA CTUAL INFORMATION IN RELATION TO THE SAID CLAIM. THE AO G RANTED THE DEDUCTION OF RS 4,12,00,000/- (BEING 100% OF THE PR OFITS OF THE 6 I.T.A. NO.6647/MUM/2013 ELIGIBLE BUSINESS),AFTER MAKING CERTAIN ADJUSTMENTS . 6.4 SIMILARLY, DURING THE CURRENT YEAR ALSO, THE CL AIM OF DEDUCTION UNDER SECTION 80LA WAS MADE BY THE APPELL ANT THROUGH REVISED RETURN FILED ON 28.03.2003 AT RS.10 ,84,80,000/- (BEING 30% OF THE PROFITS OF ELIGIBLE BUSINESS). HE RE ALSO, IT IS OBSERVED BY THE AO IN THE ASSESSMENT ORDER THAT THE RELEVANT WORKING OF THE 80LA CLAIM ON THE NEW POWER PLANT WA S FILED ALONG-WITH THE REVISED RETURN OF INCOME. FURTHER, D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE APPELLANT REV ISED ITS CLAIM U/S 80LA ON THE POWER PLANT FROM 30% TO 100% I.E. T O RS.38,72,93,719/-. IN THE ASSESSMENT ORDER FOR THE CURRENT YEAR ALSO, THE AO HAS AGAIN OBSERVED THAT THE APPELLANT HAD VIDE LETTER DATED DECEMBER 23, 2004, FURNISHED DETAILED SUBMISSIONS ALONG-WITH THE AUDITED ACCOUNTS OF THE POWER PLANT DULY CERTIFIED BY THE CHARTERED ACCOUNTANT. AS PER AUDITED ACCOUNT S, THE 80LA CLAIM WORKED OUT TO RS.38,72,93,719/- (BEING 100% O F THE PROFITS & GAINS OF THE POWER PLANT), WHICH WAS GRANTED BY T HE AO. 6.5 IT IS SEEN FROM THE RECORDS THAT WHILE REOPENIN G THE ASSESSMENT, THE AO HAS NOT DISCOVERED ANY NEW FACTS NOR HAS HE FOUND ANY NEW MATERIAL. IN THE BACKGROUND OF ABOVE FACTS, IT IS EVIDENT THAT THE REOPENING IS BASED ON THE SAME FAC TS AND THE SAME MATERIAL/RECORDS WHICH WERE ALREADY CONSIDERED AND ON THE BASIS OF WHICH, THE DEDUCTION UNDER SECTION 80L A WAS GRANTED TO THE APPELLANT DURING THE COURSE OF ORIGINAL ASSE SSMENT PROCEEDINGS. DURING THE COURSE OF ORIGINAL ASSESSME NT PROCEEDINGS, THE WORKING OF THE DEDUCTION UNDER SEC TION 80LA AS WELL AS DETAILED SUBMISSIONS ALONG-WITH THE AUDITED ACCOUNTS OF THE POWER PLANT DULY CERTIFIED BY THE CHARTERED ACC OUNTANT WERE SUBMITTED BY THE APPELLANT AND ON THE BASIS OF THE SAME, THE AO HAD GRANTED THE SAID DEDUCTION. THE AO HAD THUS A LREADY APPLIED HIS MIND TO ALL THE FACTS PERTAINING TO THE CLAIM OF DEDUCTION UNDER SECTION 80IA. IN THE CIRCUMSTANCES, THEREFORE, IN MY OPINION, THE REOPENING OF THE ASSESSMENT IS BASE D ON MERE 'CHANGE OF OPINION'. HENCE, THE REOPENING CANNOT BE HELD TO BE LEGALLY VALID. 6.6 IN THE CASE OF KELVINATOR OF INDIA (SUPRA), CIT ED BY THE APPELLANT, HON'BLE SUPREME COURT HAS HELD THAT AN A SSESSMENT 7 I.T.A. NO.6647/MUM/2013 CAN BE RE-OPENED ONLY IF THERE IS 'TANGIBLE MATERIA L' TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME F ROM ASSESSMENT AND THE REASONS MUST HAVE A LIVE LINK WI TH THE FORMATION OF BELIEF. THERE IS NO POWER TO RE-OPEN T HE ASSESSMENT IN CASES OF 'CHANGE OF OPINION'. IN THE CASE OF NTP C LTD VS. DCIT (SUPRA), THE AO SOUGHT TO REOPEN THE ASSESSMENT ON TWO GROUNDS, FIRSTLY, NON-ELIGIBILITY OF DEDUCTION UNDE R SECTION 80-IA IN RESPECT OF STEAM TURBINE OF 'COMBINED CYCLE GAS POWER STATIONS' BELONGING TO THE ASSESSEE AND, SECONDLY, TAXABILITY OF INCOME-TAX RECOVERABLE BY ASSESSEE FROM STATE ELECT RICITY BOARDS. AS REGARDS FIRST REASON, IT WAS HELD THAT T HE ASSESSEE HAD ALREADY DISCLOSED FULLY AND TRULY THE ENTIRE PROCES S OF MANUFACTURE AND GENERATION OF ELECTRICITY BY GAS TU RBINE UNIT AS WELL AS BY STEAM TURBINE UNIT AND HENCE THE REOPENI NG ON THIS GROUND WAS INVALID. AS REGARDS SECOND GROUND, IT WA S APPARENT THAT TOTAL TAX PAYABLE BY THE ASSESSEE AS PER ITS M ETHOD OF GROSSING UP OF RATE OF TAX AS WELL AS DEPARTMENT'S PROPOSED METHOD OF GROSSING UP OF INCOME WAS SAME. HENCE, TH ERE WAS NO ESCAPEMENT OF INCOME. IT WAS THUS HELD THAT THERE W AS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND T RULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT AND THE IMPUGNED NOT ICE ISSUED UNDER SECTION 148 AFTER EXPIRY OF FOUR YEARS FROM E ND OF RELEVANT ASSESSMENT YEAR WAS NOT SUSTAINABLE. 6.7 IN THE CASE OF PURITY TECHTEXTILE PRIVATE LIMIT ED (SUPRA) CITED BY THE APPELLANT, THE AO REOPENED THE ASSESSMENT OF AY 2003- 04, WHICH WAS EARLIER COMPLETED UNDER SECTION 143(3 ), ON THE GROUND THAT THE PLAN OF BUILDING IN WHICH ASSESSEE OPERATES WAS SANCTIONED WAY BACK IN 1988 AND THE SAME PREMISES W ERE EARLIER USED BY SOME OTHER PARTY. IT WAS ALSO ALLEGED BY TH E AO THAT THE COPY OF PLAN WAS NOT FILED IN EARLIER ASSESSMENT. T HE ASSESSEE CONTENDED BEFORE THE HON'BLE HIGH COURT THAT THE IN FORMATION WHICH IS THE BASIS OF RE-ASSESSMENT WAS FILED BY TH E ASSESSEE IN 1988, DURING THE COURSE OF ASSESSMENT AND THERE IS NO NEW MATERIAL WITH THE AO. IT WAS HELD THAT THE ASSESSEE HAD DISCLOSED THE PRIMARY FACTS TRULY AND CORRECTLY AND THERE WAS NO NEW MATERIAL WITH AO. HENCE, THE REOPENING WAS HELD TO BE INVALID. 6.8 IN THE CASE OF CARLTON OVERSEAS (P) LTD (SUPRA), DEDUCTION UNDER SS. 80HHC AND 80-IB WAS ALLOWED AFTER ASSESSE E'S REPLY. 8 I.T.A. NO.6647/MUM/2013 LATER, THE ASSESSMENT WAS REOPENED ON THE GROUND TH AT AS PER REVENUE AUDIT, DEDUCTION UNDER S. 80HHC WAS ALLOWAB LE ONLY AFTER REDUCING DEDUCTION UNDER S. 80-IB. IT WAS HEL D BY THE HIGH COURT THAT REVENUE AUDIT MERELY GAVE AN OPINION AND THERE BEING NO NEW OR FRESH MATERIAL BEFORE THE AO, MERE CHANGE OF OPINION CANNOT FORM THE BASIS FOR REOPENING THE ASS ESSMENT. THE RATIO OF THE DECISION OF BOMBAY HIGH COURT IN THE C ASE OF PAUL BROTHERS (SUPRA) CITED BY THE APPELLANT IS ALSO ON SIMILAR LINES. 6.9 IN YET ANOTHER CASE OF CARTINI INDIA LIMITED, 3 14 ITR 275, HON'BLE BOMBAY HIGH COURT HELD THAT ASSESSMENT CANN OT BE RE- OPENED, IF IT IS BASED ON THE MATERIAL, WHICH WERE ALREADY ON RECORD. IN THAT CASE, THE ASSESSEE HAD CLAIMED ENTI RE EXPENDITURE PERTAINING TO 'PROJECT LAUNCH' AS REVENUE EXPENDITU RE EVEN THOUGH IN ITS BOOKS, THE SAME WAS SPREAD OVER A PER IOD OF THREE YEARS. SIMILARLY, THE ASSESSEE HAD TREATED THE TOOL S, DIES, JIGS AND MOULDS AS INVENTORY ITEMS AND CLAIMED DEDUCTION ON THE BASIS OF THEIR BALANCE USEFUL LIFE ON THE LAST DAY OF THE PR EVIOUS YEAR. DURING THE ORIGINAL ASSESSMENT PROCEEDINGS, THE ASS ESSING OFFICER HAD CALLED FOR THE PARTICULARS OF ASSESSEE' S CLAIMS INTER- ALIA RELATING TO ABOVE TWO CLAIMS AND AFTER CONSIDE RING THE ASSESSEE'S REPLY, THE ASSESSING OFFICER ALLOWED BOT H THE CLAIMS TO THE APPELLANT. THE HIGH COURT HELD THAT WHERE THE M ATERIAL ON RECORD HAS ALREADY BEEN CONSIDERED, IT IS NOT OPEN TO THE ASSESSING OFFICER TO DISAGREE WITH THE VIEW ALREADY TAKEN ON SUCH MATERIAL ON RECORD AND HENCE, RE-OPENING OF AS SESSMENT CANNOT BE SUSTAINED. IT WAS HELD THAT IN SUCH A CAS E, THE REOPENING IS BASED ON MERE 'CHANGE OF OPINION' AND HENCE, THE SAME IS INVALID. 6.10 IN THE CASE OF IPCA LABS LTD 251 ITR 416 (BOM) , WHERE THE ASSESSEE'S CLAIM OF DEDUCTION U/S. 80HHC ON EXPORT OF TRADING GOODS WAS EXAMINED IN ORIGINAL ASSESSMENT PROCEEDIN GS U/S. 143(3) FOR AY 1992-93, IT WAS HELD BY THE HON'BLE H IGH COURT THAT SUBSEQUENT RE-OPENING ON 30.03.1999 WHERE A.O SOUGH T TO RECONSIDER THE SAID CLAIM U/S. 80HHC ON EXPORT OF T RADING GOODS WAS INVALID AS IT WAS BASED ON 'CHANGE OF OPINION' AND THERE WAS NOTHING TO SHOW THAT THERE WAS FAILURE ON THE P ART OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS. IN THE CASE OF BHANJI LAVJI, 79 ITR 582 (SC), HON'BLE SUPREME COURT HELD THAT WHEN IN ORIGINAL 9 I.T.A. NO.6647/MUM/2013 ASSESSMENT, ALL PRIMARY FACTS WERE DISCLOSED, THE A SSESSING OFFICER COULD NOT SEEK TO REASSESS THE ASSESSEE ON THE GROUND OF FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FA CTS NECESSARY FOR ASSESSMENT. THE DECISIONS OF BOMBAY HIGH COURT IN T HE CASES OF ASTEROIDS TRADING AND INVESTMENTS P LTD, 308 ITR 19 0 (BOM), SIEMENS INFORMATION SYSTEMS LTD, 295 ITR 333 (BOM) AND ASIAN PAINTS LTD, 308 ITR 195 (BOM) ARE ALSO ON SIMILAR L INES WHERE PROCEEDINGS U/S 147 HAVE BEEN HELD TO BE INVALID BE CAUSE RE- OPENING WAS BASED ON MERE 'CHANGE OF OPINION'. IN T HESE DECISIONS, THE DECISION OF HON'BLE DELHI HIGH COURT (FULL BENCH), IN THE CASE OF KELVINATOR OF INDIA LTD. 256 ITR 1 ( DEL) (FB) HAS BEEN FOLLOWED. THE DECISION OF HON'BLE ANDHRA PRADE SH HIGH COURT IN THE CASE OF SIRPUR PAPER MILLS LTD, 114 IT R 404 (AP) ALSO SUPPORTS THE CASE OF THE APPELLANT. IN THE SAID CAS E, IT WAS HELD THAT, ONCE THE ASSESSING OFFICER EXAMINED THE CLAIM OF 'WORKMEN AND STAFF WELFARE EXPENSES' DURING ORIGINAL PROCEED INGS, HE COULD NOT RE-OPEN THE ASSESSMENT ON THE GROUND THAT VOUCHERS FOR SUCH EXPENSES WERE NOT PRODUCED THEN. 6.11 IN A LATER CASE OF RALLIS INDIA 323 ITR 54 ALS O, HON'BLE BOMBAY HIGH COURT HAVE FOLLOWED THE ABOVE JUDGMENT OF APEX COURT IN THE CASE OF KELVINATOR OF INDIA LTD. IT HA S BEEN HELD THAT SEC. 147 DOES NOT EMPOWER THE ASSESSING OFFICER TO RE-OPEN ASSESSMENT UNDER THE GARB OF 'REASON TO BELIEVE' TO REVIEW HIS OWN DECISION WHICH WAS A POSSIBLE VIEW TAKEN AFTER CONSIDERING THE MATERIAL ALREADY ON RECORD. IN THIS CASE, DURIN G THE COURSE OF ORIGINAL ASSESSMENT, THE ASSESSING OFFICER HAD EXAM INED THE CLAIM OF BAD AND DOUBTFUL DEBTS. SUBSEQUENTLY, HOWE VER, THE ASSESSMENT WAS RE-OPENED ON THE GROUND THAT (I) THE ASSESSEE HAD NOT DEBITED ANY AMOUNT ON ACCOUNT OF WRITE-OFF OF BAD DEBTS IN THE PROFIT & LOSS ACCOUNT AND ALSO FOR COMPUTING THE BOOK PROFIT U/S 115JB, THE ASSESSEE HAD NOT CONSIDERED C ERTAIN PROVISIONS (I.E. PROVISION FOR DIMINUTION IN THE VA LUE OF ANY ASSET) AND ADDED THEM BACK. THE 'HON'BLE HIGH COURT HELD T HAT RE- OPENING, SO FAR AS ALLOWABILITY OF THE CLAIM OF BAD AND DOUBTFUL DEBTS IS CONCERNED WAS BASED ON MERE CHANGE OF OPIN ION BECAUSE THE SAID CLAIM WAS ALREADY EXAMINED BY THE ASSESSING OFFICER DURING ORIGINAL ASSESSMENT AND THE SAME WAS FOUND 'IN ORDER'. SO FAR AS THE RE-OPENING, BASED ON THE COMP UTATION U/S 115JB IN RESPECT OF PROVISION FOR DIMINUTION IN THE VALUE OF ANY 10 I.T.A. NO.6647/MUM/2013 ASSET IS CONCERNED, IT WAS HELD THAT CLAUSE (I) TO EXPLANATION 1 OF SEC. 115JB DID NOT EXIST IN THE STATUTE ON THE DATE OF RE-OPENING AND HENCE, THE SAID REASON RECORDED BY THE ASSESSIN G OFFICER WAS INCORRECT. THUS, IN THE CIRCUMSTANCES, THERE WAS NO WARRANT FOR RE-OPENING THE ASSESSMENT IN EXERCISE OF THE POWER CONFERRED U/S 147. THERE ARE TWO MORE DECISIONS OF HON'BLE BOMBA Y HIGH COURT IN THE CASES OF KHANNA BUILDERS (P) LTD, 198 CTR 541 (BOM) AND HINDUSTAN LEVER (NOW UNILEVER) LTD, 268 ITR 332 (BOM) WHICH ARE VERY MUCH RELEVANT HERE, AS IN THESE CASE S, THE ISSUE INVOLVED WAS VALIDITY OF NOTICE U/S 148 OF THE ACT WHICH WAS ISSUED BEYOND 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. SINCE IN THE CASE OF THE APPELLANT ALSO, NOTI CE U/S 148 HAS BEEN ISSUED BEYOND 4 YEARS, THE ASSESSING OFFICER W AS ALSO LIABLE TO DEMONSTRATE THAT THE INCOME HAS ESCAPED ASSESSME NT BY REASON OF APPELLANT'S FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. BUT, HE HAS FAILED TO DO SO. IN FAC T, IT IS EVIDENT THAT THE APPELLANT HAD DISCLOSED ALL THE FACTS ON T HE SAID ISSUE DURING ORIGINAL ASSESSMENT PROCEEDINGS AND THE ASSE SSING OFFICER HAD ALSO CONSIDERED THE SAME BEFORE FINALIS ING THE ASSESSMENT U/S 143(3) OF THE ACT. 6.13 FROM THE ABOVE DECISIONS, IT IS AMPLY CLEAR TH AT IN THE CASES WHERE THE ISSUE HAS BEEN ALREADY CONSIDERED BY THE ASSESSING OFFICER DURING ORIGINAL ASSESSMENT PROCEEDINGS, THE ASSESSMENT CANNOT BE RE-OPENED U/S 147 ON THE BASIS OF THE REA SON THAT SOME ASPECT OF THE SAME ISSUE HAS REMAINED TO BE CO NSIDERED. SUCH CASES ARE NOTHING BUT CASES OF 'CHANGE OF OPIN ION'. THAT IS SO BECAUSE IF THE ISSUE HAS BEEN CONSIDERED DURING ORIGINAL ASSESSMENT PROCEEDINGS, IT HAS TO BE PRESUMED THAT ALL ASPECTS PERTAINING TO THE SAID ISSUE HAVE BEEN CONSIDERED. HENCE, THE DECISION ON THE SAID ISSUE CANNOT BE REVIEWED. IF S O, IT WILL AMOUNT TO GIVING THE ASSESSING OFFICER POWER TO REV IEW HIS OWN FAULTY DECISION WHICH CANNOT BE PERMITTED UNDER ANY LAW. IT IS ONLY THOSE CASES WHERE BY VIRTUE OF ANY FRESH INFOR MATION WHICH WAS NOT CONSIDERED IN THE ORIGINAL ASSESSMENT PROCE EDINGS, THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT THE IN COME HAS ESCAPED ASSESSMENT, THE ASSESSMENT CAN BE-RE-OPENED U/S 147 WITHIN 4 YEARS FROM THE END OF THE RELEVANT ASSESSM ENT YEAR. FRESH INFORMATION WOULD MEAN, INFORMATION FROM EXTE RNAL SOURCES AS WELL AS SUCH INFORMATION AVAILABLE IN TH E RECORDS, 11 I.T.A. NO.6647/MUM/2013 FROM WHICH THE FACT OF ESCAPEMENT OF INCOME COMES T O NOTICE DURING THE COURSE OF ANY SUBSEQUENT PROCEEDINGS. 6.14 IN THE CASE OF THE APPELLANT, NO SUCH FRESH IN FORMATION WAS AVAILABLE ON THE BASIS OF WHICH THE ASSESSMENT HAS BEEN RE- OPENED. IN FACT, DURING THE ORIGINAL PROCEEDINGS, S AME ISSUE OF DEDUCTION U/S 80LA WAS CONSIDERED BY THE ASSESSING OFFICER AND THE EXPLANATION OF THE APPELLANT WAS ACCEPTED. IN T HE ABOVE CITED CASES ALSO, IT HAS BEEN HELD THAT A REGULAR A SSESSMENT MADE U/S 143(3) CANNOT BE RE-OPENED U/S 147 MERELY ON THE BASIS OF 'CHANGE OF OPINION' AND ALSO THE ASSESSING OFFICER SHOULD HAVE REASON TO BELIEVE THAT INCOME HAS ESCAP ED ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR ASSESSMENT, IF HE SEEKS TO RE-OPEN THE ASSESSMENT A FTER 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. IN TH ESE CIRCUMSTANCES, THEREFORE IT CANNOT BE HELD THAT THE ASSESSING OFFICER HAD ANY FRESH MATERIAL OR INFORMATION IN HI S POSSESSION ON THE BASIS OF WHICH HE COULD HAVE HAD REASON TO B ELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. NEITHER THERE WAS AN Y FAILURE ON THE PART OF THE APPELLANT TO DISCLOSE ALL MATERI AL FACTS. THE ASSESSMENT HAS BEEN RE-OPENED ONLY ON ACCOUNT OF 'C HANGE OF OPINION'. HENCE, THE PROCEEDINGS INITIATED U/S 147 ARE INVALID. THEREFORE, THE ASSESSMENT MADE U/S 147/143(3) ALSO BECOMES INVALID. I ACCORDINGLY HOLD. THE ASSESSMENT ORDER P ASSED U/S 147 /143(3) IS HEREBY ANNULLED. 7. WE HAVE EXAMINED THE REASONS RECORDED BY THE AO, AO S ORDER DATED 16-10-2009 DISPOSING OF OBJECTIONS RAISED BY THE ASSESSEE WITH REGARD TO REOPENING OF THE IMPUGNED ASSESSMENT AND ALSO DETAILED FINDINGS OF THE LD. CIT(A) WHILE QUASHING THE IMPUG NED ASSESSMENT ORDER. IT IS NOTED BY US THAT RE-ASSESSMENT HAS BEEN HELD TO BE INVALID BY THE LD. CIT(A) ON TWO GROUNDS AS STATED ABOVE. THUS, WE SH ALL DEAL WITH BOTH THE GROUNDS, ONE BY ONE, AS UNDER:- I. REASONS HAVE BEEN RECORDED BY THE AO WITHOUT THERE BEING ANY FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSING ALL MATERIAL 12 I.T.A. NO.6647/MUM/2013 FACTS: 8. WE HAVE EXAMINED THE AFORESAID ASPECT OF THE MATTER . IT IS NOTED THAT PROVISIONS OF SECTION 147 HAVE BEEN BROUGHT ON THE STATUTE SO AS TO ENABLE THE AO TO BRING TO TAX ANY INCOME THAT MAY H AVE ESCAPED ASSESSMENT. BUT, THESE EXTRAORDINARY POWERS HAVE B EEN GIVEN TO THE AO WITH CERTAIN SAFEGUARDS. SINCE REOPENING OF AN ALR EADY CONCLUDED ASSESSMENT PIERCES THE VERY CONCEPT OF FINALITY OF LITIGATION WHICH IS BASIC THREAD OF OUR CONSTITUTION, THEREFORE THESE PROVISI ONS HAVE BEEN DRAFTED IN A VERY CAREFUL MANNER. THUS, THESE POWERS CAN B E EXERCISED BY AN AO STRICTLY IN ACCORDANCE WITH LAW ONLY AS CONTAINED I N SECTIONS 147 TO 151 OF THE ACT READ WITH OTHER APPLICABLE PROVISIONS OF TH E ACT. IF CASE OF AN ASSESSEE FALLS WITHIN THE SITUATIONS AS STIPULATED IN THESE SECTIONS, ONLY THEN, ITS CASE CAN BE REOPENED BY AN AO THAT TOO AF TER COMPLYING WITH THE CONDITIONS AS HAVE BEEN PRESCRIBED IN THESE SECTION S. THE CONDITIONS VARY ACCORDING TO THE TIME LAPSED IN REOPENING OF THE CA SE SINCE THE DATE OF EXPIRY OF THE IMPUGNED ASSESSMENT YEAR. 9. ONE OF THE SITUATIONS AS ENVISAGED IN SECTION 147 I S THAT IF ORIGINAL ASSESSMENT OF AN ASSESSEE WAS DONE U/S 143(3) AND 4 YEARS HAVE EXPIRED SINCE END OF IMPUGNED ASSESSMENT YEAR, THEN IT CANN OT BE REOPENED UNLESS CONDITIONS PRESCRIBED IN THE FIRST PROVISO T O SECTION 147 EXIST. IN THE CASE BEFORE US, ADMITTEDLY, THE ORIGINAL ASSESSMENT OF THE ASSESSEE WAS DONE U/S 143(3) AND REOPENING HAS BEEN DONE AFTER T HE EXPIRY OF 4 YEARS FROM THE END OF THE ASSESSMENT YEAR, AS WOULD BE EV IDENT FROM THE FACT THAT NOTICE U/S 148 WAS ISSUED ON 26-05-2008 WHICH IS AFTER THE EXPIRY OF 4 YEARS FROM THE END OF ASSESSMENT YEAR 2002-03. THU S, UNDISPUTEDLY, THE REOPENING COULD HAVE BEEN DONE ONLY SUBJECT TO FIRS T PROVISO TO SECTION 13 I.T.A. NO.6647/MUM/2013 147 WHICH READS AS UNDER:- PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE R ELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THI S SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REAS ON 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 FU LLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR TH AT ASSESSMENT YEAR 10. THE PERUSAL OF AFORESAID PROVISO MAKES IT CLEAR THA T NO ASSESSMENT CAN BE REOPENED UNLESS INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE IMPUGNED ASSESSMENT YEAR. THUS, WHILE RECORDING REASONS, IT IS INCUMBENT UPON THE AO TO FIRSTLY MAKE AN ALLEGATION IN THE REASON S RECORDED AND THEN ALSO TO MAKE OUT A CASE THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSING FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE IMPUGNED ASSESSMENT YEAR. PERUS AL OF THE REASONS RECORDED BY THE AO REVEALS THAT NO SUCH ALLEGATION HAS BEEN MADE IN THE REASONS. THUS, THE FOREMOST CONDITION TO ENABLE THE AO TO REOPEN THE ORIGINAL ASSESSMENT COMPLETED ORDER DATED 10-01-200 5 PASSED U/S 143(3), IS FOUND TO BE CLEARLY MISSING HERE. SO MUCH SO, E VEN IN THE RE-ASSESSMENT PROCEEDINGS, THE AO HAS NOWHERE BEEN ABLE TO SHOW A NYTHING FROM WHICH IT COULD BE INFERRED THAT THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSING FULLY AND TRULY ALL MATERIAL FACTS NE CESSARY FOR THE ASSESSMENT OF THE ASSESSEE. 14 I.T.A. NO.6647/MUM/2013 11. IT IS ALSO NOTED BY US THAT DURING THE COURSE OF R E-ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED ITS DETAILED OBJECT IONS VIDE ITS LETTER DATED 16-09-2009. THESE OBJECTIONS WERE DISPOSED OF BY T HE AO VIDE HIS INTERIM ORDER DATED 16-10-2009. IT IS NOTED BY US THAT IN THE OBJECTION DISPOSAL ORDER ALSO, THE AO NOWHERE COMMENTED OR CLARIFIED T HE OBJECTION RAISED BY THE ASSESSEE IN THIS REGARD. FOR THE SAKE OF RE ADY REFERENCE, CONCLUSIVE PART OF THE SAID INTERIM ORDER IS REPRODUCED BELOW: - 5.0 A PLAIN READING OF THE ASSESSEE'S SUBMISSION Q UOTED SHOWS THAT THE ASSESSEE HAS NOTHING TO OBJECT ON MERIT. T HE ASSESSEE HAS BEEN ONLY RAISING OBJECTIONS ON THE MANNER IN W HICH, AND THE FRAMING OF QUESTIONS IN NOTICE DATED 4.09.09. THE A SSESSEE HAS FURTHER CONTENDED THAT THE ISSUES RAISED IN THE NOT ICE REFERRED TO IN PARA 3.3 HAS BEEN DEALT WITH BY CIT IN EXERCISE OF HIS POWERS U/S 263 AND DROPPED THE PROCEEDINGS. THE ASSESSEE H AS ALSO COME TO THE CONCLUSION THAT THIS OFFICE HAS PROPOSE D TO REOPEN THE ASSESSMENT U/S 148 NOT ONLY FOR A.Y. 2003-04 BU T ALSO FOR A.Y. 2002-03 AGGRIEVED (EMPHASIS PLACED) BY THE ACT ION OF THE COMMISSIONER IN DROPPING THE PROCEEDINGS U/S 263. 5.1 ONE OF THE OBJECTIONS OF THE ASSESSEE THAT THE REASONS FOR REOPENING THE ASSESSMENT ARE BASICALLY THE OBJECTIO NS RAISED BY THE INTERNAL AUDIT AND THE ASSESSEE WAS NOT GIVEN A N OPPORTUNITY TO INTERACT WITH THE AUDITORS. EVEN FOR A MOMENT IT IS PRESUMED THAT THE GROUND FOR REOPENING THE ASSESSMENT WAS OB JECTIONS RAISED BY INTERNAL AUDIT, THE ASSESSEE'S OBJECTION HOLDS NO MERIT. 6.0 TO SUM UP, AS THERE IS NO MERIT IN ASSESSEES A RGUMENT, THE ASSESSEES OBJECTIONS ARE HEREBY REJECTED. 12. THUS, FROM THE ABOVE, IT IS CLEARLY NOTED THAT THE AO HAS NOT BROUGHT OUT ANYTHING TO SUPPORT HIS ACTION OF REOPENING THE ASSESSMENT. HE HAS NOT BEEN ABLE TO EVEN MENTION FOR THE SAKE OF MENTI ONING, ANYWHERE IN HIS INTERIM ORDER OR FINAL RE-ASSESSMENT ORDER THAT THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSING FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. 15 I.T.A. NO.6647/MUM/2013 13. HOWEVER, IN THE GROUNDS RAISED BEFORE US BY THE RE VENUE, IT IS MENTIONED THAT EXPLANATION 1 OF SECTION 147 SAYS TH AT PRODUCTION BEFORE THE AO OF BOOKS OF ACCOUNT OR OTHER EVIDENCES FROM WHICH MATERIAL EVIDENCE WITH DUE DILIGENCE COULD HAVE BEEN DISCOVE RED BY THE AO WILL NOT NECESSARILY AMOUNT TO DISCLOSURE. WE HAVE CONSIDER ED THIS EXPLANATION ALSO. IT IS NOTED BY US THAT REVENUE HAS MISREAD T HE MEANING AND INTENT OF THIS EXPLANATION. EXPLANATION 1 MAY COME TO THE RE SCUE OF THE REVENUE IN THOSE CASES WHERE THOUGH THE ASSESSEE HAS IN EFFECT SUPPRESSED MATERIAL FACTS, BUT HE IS TRYING TO TAKE SHELTER OF THE FACT THAT HE HAD PRODUCED BOOKS OF ACCOUNT AND OTHER RELATED EVIDENCES BEFORE THE AO FROM WHICH MATERIAL EVIDENCE COULD HAVE BEEN DISCOVERED BY AO WITH DUE DILIGENCE. BUT, FOR TAKING BENEFIT OF THE EXPLANATION 1, THE A O HAS TO FIRST SHOW THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE IN BRINGING ON RECORD CERTAIN FACTS WHICH IF THE ASSESSEE WOULD HAVE BROU GHT ON RECORDS, THEN IT COULD HAVE ALTERED THE CONCLUSIONS DRAWN BY THE AO WHILE DETERMINING THE TAXABLE INCOME AND COMPUTING TAX LIABILITY OF THE A SSESSEE IN THE ORIGINAL ASSESSMENT PROCEEDINGS. IT IS NOTED THAT THAT FAIL URE OF THE ASSESSEE OF DISCLOSURE OF MATERIAL FACTS IS A CONDITION PRECE DENT AS STIPULATED IN THE PROVISO TO SECTION 147 TO ENABLE THE AO TO EXERCISE HIS POWERS U/S 147. THE EXPLANATION WILL CERTAINLY NOT OBVIATE THIS JUR ISDICTIONAL CONDITION. THUS, IF THE MEANING AND SCOPE OF EXPLANATION 1 IS UNDERSTOOD AND APPLIED IN THE MANNER AS REVENUE IS ASKING US TO DO BY WAY OF THIS GROUND, THEN IT WILL OBVIOUSLY AMOUNT TO MAKING FIRST PROVISO TO SE CTION 147 AS OTIOSE AND REDUNDANT, WHICH IN OUR OPINION CANNOT BE THE INTEN TION OF THE LEGISLATURE. 14. THE POWERS U/S 147 GRANTED UPON THE AOS BY THE LEG ISLATURE ARE UNDOUBTEDLY WIDE, BUT THESE POWERS ARE CERTAINLY NO T PLENARY. THESE 16 I.T.A. NO.6647/MUM/2013 POWERS ARE SUBJECT TO CERTAIN FETTERS IN THE FORM O F JURISDICTIONAL CONDITIONS WHICH ARE MANDATORILY TO BE COMPLIED WIT H FOR ENSURING THE EXERCISING OF THESE POWERS IN JUSTIFIED AND FAIR MA NNER AND TO AVOID HARASSMENT TO THE TAXPAYERS AS MAY BE CAUSED BECAUS E OF REOPENING OF THE CASES IN UNDESERVING CASES IN A CALLOUS MANNER. 15. THEREFORE, IN OUR CONSIDERED OPINION, BEFORE TAKING SHELTER OF EXPLANATION 1 TO SECTION 147, IT IS MANDATORY ON TH E PART OF THE AO TO COMPLY WITH THE CONDITIONS STIPULATED IN FIRST PROV ISO TO SECTION 147, BY RECORDING A FINDING IN THE REASONS AND MAKING OUT A CASE OF FAILURE OF THE ASSESSEE OF DISCLOSING FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE IMPUGNED ASSESSMENT YEAR. IT IS NOTED BY US THAT THE LAW IN THIS REGARD IS NOT RES INTEGRA. IT IS NOTED THAT MANY COURTS IN OUR COUNTRY INCLUDING THE HONBLE BOMBAY HIGH COURT EXP LAINED THE CORRECT POSITION OF LAW IN THIS REGARD FROM TIME TO TIME, A ND SOME OF THEM ARE DISCUSSED HEREUNDER. 16. IN THE CASE OF ICICI BANK LTD VS DCIT 268 ITR 203 (BOM), IT HAS BEEN CLARIFIED BY THE HONBLE BOMBAY HIGH COURT THAT EXP LANATION 1 TO SECTION 147 OF THE ACT HAS TO BE READ WITH SECTION 148 OF T HE ACT IN ITS ENTIRETY AND IN CASE THERE IS NO FAILURE ON THE PART OF THE ASSE SSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS, THEN NO REOPENING CAN BE DONE BEYOND THE PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT ASSE SSMENT YEAR WHERE ORIGINAL ASSESSMENT WAS FRAMED U/S 143(3). RELEVAN T PART OF THE OBSERVATIONS THE HONBLE BOMBAY HIGH COURT IS REPRO DUCED BELOW:- UNDER S. 147 OF THE IT ACT, CONCLUDED ASSESSMENTS CAN BE REOPENED BEYOND A PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEARS ONLY IF THERE IS FAILURE ON THE PART OF THE 17 I.T.A. NO.6647/MUM/2013 ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR THE PURPOSE OF ASSESSMENT . HAVING FURNISHED ALL MATERIAL FACTS EVEN IF AN ASSESSEE ERRONEOUSLY CLAIMS HIGHER DEPRE CIATION, IT WILL NOT BE A CASE OF FAILURE TO DISCLOSE FULLY AND TRUL Y ALL MATERIAL FACTS. AT WHAT RATE THE DEPRECIATION IS TO BE CLAIMED IS A MATTER OF LEGAL INFERENCE TO BE DRAWN FROM THE MATERIAL FACTS. IF THE LEGAL INFERENCE DRAWN FROM THE MATERIAL FACTS IS ERRONEOU S IT CANNOT BE SAID THAT THERE IS FAILURE ON THE PART OF THE AS SESSEE TO DISCLOSE MATERIAL FACTS. IN THE PRESENT CASE, ON THE MATERIAL FACTS DISCLOSED, THE ASSESSEE HAD CLAIMED DEPRECIATION AT 40 PER CENT AND THE SAME WAS ALLOWED BY THE AO. IT IS NOT THE C ASE OF THE REVENUE THAT THE FACTS DISCLOSED BY THE ASSESSEE WE RE INCORRECT OR THAT THERE WERE ANY OTHER FACTS WHICH WERE MATERIAL FOR THE ASSESSMENT WHICH HAVE NOT BEEN DISCLOSED BY THE ASS ESSEE. UNDER THE CIRCUMSTANCES, IF THERE IS NO FAILURE TO DISCLO SE MATERIAL FACTS, THEN, EVEN IF THERE IS EXCESS RELIEF GRANTED, THE A SSESSMENTS CANNOT BE REOPENED BEYOND THE PERIOD OF 4 YEARS FROM THE E ND OF THE RELEVANT ASSESSMENT YEARS. THIS COURT IN THE CASE O F IPCA LABORATORIES LTD. (SUPRA) AND IN THE CASE OF BHOR I NDUSTRIES (SUPRA) HAS HELD THAT NOTICE FOR REOPENING OF THE ASSESSMEN T CANNOT BE ISSUED AFTER A PERIOD OF 4 YEARS UNLESS THE ESCAPEM ENT OF INCOME IS ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE T O DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. IT HAS BEEN FURTHER HELD THAT THE EXPLANATION TO S. 147 OF THE IT ACT HAS TO BE R/W S . 148 OF THE IT ACT IN ITS ENTIRETY. IN THE LIGHT OF THE AFORESAID DECISIONS, IN THE PRESENT CASE, THERE BEING NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS, THE IM PUGNED NOTICES ISSUED BEYOND THE PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEARS, ARE LIABLE TO BE HELD TO HAVE BEE N ISSUED IN CONTRAVENTION OF THE PROVISION OF THE IT ACT. 17. SIMILARLY, IN THE CASE OF HINDUSTAN LEVER LTD VS R.B. WADEKAR 268 ITR 332 (BOM) IT HAS BEEN EMPHASIZED BY THE HONBLE BOMBAY HIGH C OURT THAT REASONS RECORDED BY THE AO MUST CONTAIN THE FINDING WITH REGARD TO THE 18 I.T.A. NO.6647/MUM/2013 ALLEGED FAILURE ON THE PART OF THE ASSESSEE TO DISC LOSE FULLY AND TRULY ALL MATERIAL FACTS. IT HAS ALSO BEEN OBSERVED BY THE H ONBLE HIGH COURT THAT THE REASONS RECORDED BY THE AO HAVE TO BE READ AS IT IS. THE AO HAS TO SPEAK THROUGH HIS REASONS AND SHOULD DISCLOSE AN OPEN MIND THROUGH REASONS RECORDED BY HIM. THUS, IT IS FOR THE AO TO REACH TO THE CONCLUSION IN HIS REASONS AS TO WHETHER THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERI AL FACTS NECESSARY FOR THE ASSESSMENT FOR THE CONCERNED ASSESSMENT YEAR. RELE VANT PART OF THE JUDGMENT IS REPRODUCED BELOW:- 20. THE REASONS RECORDED BY THE AO NOWHERE STATE THAT T HERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSME NT OF THAT ASSESSMENT YEAR. IT IS NEEDLESS TO MENTION THAT THE REASONS ARE REQUIRED TO BE READ AS THEY WERE RECORDED BY THE AO . NO SUBSTITUTION OR DELETION IS PERMISSIBLE. NO ADDITIO NS CAN BE MADE TO THOSE REASONS. NO INFERENCE CAN BE ALLOWED TO BE DRAWN BASED ON REASONS NOT RECORDED. IT IS FOR THE AO TO DISCLOSE AND OPEN HIS MIND THROUGH REASONS RECORDED BY HIM. HE H AS TO SPEAK THROUGH HIS REASONS. IT IS FOR THE AO TO REACH TO THE CONCLUSION AS TO WHETHER THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR HIS ASSESSMENT FOR THE CONCERNED ASSESSMENT YEAR. IT IS FOR THE AO TO FORM HIS OPINION. IT IS FOR HIM TO PUT HIS OPINI ON ON RECORD IN BLACK AND WHITE. THE REASONS RECORDED SHOULD BE CLEAR AND UNAMBIGUOUS AND SHOULD NOT SUFFER FROM ANY VAGUENES S. THE REASONS RECORDED MUST DISCLOSE HIS MIND. REASONS AR E THE MANIFESTATION OF MIND OF THE AO. THE REASONS RECORD ED SHOULD BE SELF-EXPLANATORY AND SHOULD NOT KEEP THE ASSESSEE G UESSING FOR THE REASONS. REASONS PROVIDE LINK BETWEEN CONCLUSIO N AND EVIDENCE. THE REASONS RECORDED MUST BE BASED ON EVI DENCE. THE AO, IN THE EVENT OF CHALLENGE TO THE REASONS, MUST BE ABLE TO JUSTIFY THE SAME BASED ON MATERIAL AVAILABLE ON REC ORD. HE MUST DISCLOSE IN THE REASONS AS TO WHICH FACT OR MATERIA L WAS NOT DISCLOSED BY THE ASSESSEE FULLY AND TRULY NECESSARY FOR ASSESSMENT OF THAT ASSESSMENT YEAR, SO AS TO ESTABL ISH VITAL LINK 19 I.T.A. NO.6647/MUM/2013 BETWEEN THE REASONS AND EVIDENCE. THAT VITAL LINK I S THE SAFEGUARD AGAINST ARBITRARY REOPENING OF THE CONCLU DED ASSESSMENT. THE REASONS RECORDED BY THE AO CANNOT B E SUPPLEMENTED BY FILING AFFIDAVIT OR MAKING ORAL SUB MISSION, OTHERWISE, THE REASONS WHICH WERE LACKING IN MATERI AL PARTICULARS WOULD GET SUPPLEMENTED, BY THE TIME THE MATTER REAC HES TO THE COURT, ON THE STRENGTH OF AFFIDAVIT OR ORAL SUBMISS IONS ADVANCED. 21. HAVING RECORDED OUR FINDING THAT THE IMPUGNED N OTICE ITSELF IS BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE ASST. YR. 1996-97 AND DOES NOT COMPLY WITH THE REQUIREMENTS O F PROVISO TO S. 147 OF THE ACT, THE AO HAD NO JURISDICTION TO REOPEN THE ASSESSMENT PROCEEDINGS WHICH WERE CONCLUDED ON THE BASIS OF ASSESSMENT UNDER S. 143(3) OF THE ACT. ON THIS SHOR T COUNT ALONE THE IMPUGNED NOTICE IS LIABLE TO BE QUASHED AND SET ASIDE. 18. SIMILARLY , IN THE CASE OF LOK HOUSING & CONSTRUCTION LTD VS DCIT 348 ITR 338 (BOM) IT WAS HELD BY THE HONBLE JURISDICTIONAL HIGH COU RT THAT A JURISDICTIONAL CONDITION PRECEDENT FOR REOPENING OF THE CASES WHERE FIRST PROVISO TO SECTION 147 IS APPLICABLE, IS THAT THERE MUST BE FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE AL L MATERIAL FACTS NECESSARY FOR THE ASSESSMENT FOR THE IMPUGNED ASSESSMENT YEAR . RELEVANT PART OF THE OBSERVATIONS OF THE SAID JUDGMENT IS REPRODUCED BELOW:- THE REOPENING OF THE ASSESSMENT IN THE PRESENT CASE IS BEYOND THE PERIOD OF FOUR YEARS OF THE END OF THE RELEVANT ASSESSMENT YEAR. IN SUCH A CASE, THE POWER OF THE AO IS STRUCTURED BY THE REQUIREMENT, A JURISDICTIONAL CONDITION PRECEDENT, THAT THERE MUST BE A FAILURE ON THE PART OF THE ASSESSEE TO FU LLY AND TRULY DISCLOSE ALL THE MATERIAL FACTS NECESSARY FOR THE A SSESSMENT FOR THAT ASSESSMENT YEAR. EX FACIE, THE REASONS WHICH H AVE BEEN DISCLOSED BY THE AO DO NOT REFER TO ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS, NOR IS THE RE ANY ALLEGATION OF SUPPRESSION ON THE PART OF THE ASSESS EE. ON THE CONTRARY, THE AO HAS RELIED UPON NOTE 3(E) OF SCH. P TO THE NOTES FORMING PART OF THE ACCOUNTS. THE ASSESSEE HAD CLEA RLY DISCLOSED 20 I.T.A. NO.6647/MUM/2013 THEREIN THAT AS A RESULT OF THE RESTRUCTURING BY TH E LENDERS, FINANCE COST TO THE TUNE OF RS. 20.58 CRORES WAS WA IVED/FOREGONE AND THAT THE PAYMENT OF THE BALANCE WAS TO BE MADE IN ACCORDANCE WITH THE SETTLEMENT TERMS. THE POWER OF THE AO TO REOPEN BEYOND A PERIOD OF FOUR YEARS IS EVEN MORE R ESTRICTED THAN WHEN THE REOPENING TAKES PLACE WITHIN A PERIOD OF FOUR YEARS OF THE END OF THE RELEVANT ASSESSMENT YEAR. I N THE PRESENT CASE, THE CONDITION PRECEDENT TO THE INVOCATION OF THE JURISDICTION IS CLEARLY ABSENT SINCE THERE IS NOT E VEN AN AVERMENT TO THE EFFECT THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MA TERIAL FACTS NECESSARY FOR THE ASSESSMENT . 19. TURNING BACK TO THE FACTS OF THE CASE BEFORE US IN THE LIGHT OF LAW AS EXPLAINED IN AFORESAID JUDGMENTS, IT IS NOTED THAT NOTHING HAS BEEN RECORDED BY THE AO IN THE REASONS ABOUT ANY FAILU RE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR THE IMPUGNED ASSESSMENT. IT HAS NOWHERE BEEN MENTIONED BY HIM THAT WHICH FACT OR MATERIAL WAS NOT DISCLOSED BY THE ASSESSEE. THUS, VITAL LINK BETWEEN REASONS AND HIS FINDINGS HAS NOT BEEN EST ABLISHED BY HIM. THIS VITAL LINK IS THE SAFEGUARD AGAINST ARBITRARY REOPE NING OF THE CONCLUDED ASSESSMENT. THE REASONS RECORDED CANNOT BE SUPPL EMENTED BY WAY OF FURTHER OBSERVATIONS IN THE ASSESSMENT ORDER OR IN ANY OTHER MANNER. THE VALIDITY OF THE REOPENING CAN BE EXAMINED ON THE BA SIS OF REASONS ALONE AND NOT IN SUPPLEMENTARY MATERIAL. THUS, TAKING IN TO ACCOUNT ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE REO PENING HAS BEEN DONE WITHOUT COMPLYING WITH THE MANDATORY JURISDICTIONAL CONDITION PRECEDENT AS STIPULATED IN FIRST PROVISO TO SECTION 147. THU S, REOPENING IS INVALID ON THIS GROUND. II. REOPENING IS BASED UPON CHANGE OF OPINIO N OF THE AO. 21 I.T.A. NO.6647/MUM/2013 20. IT HAS ALSO BEEN HELD BY LD. CIT(A) THAT REASONS RECORDED ARE INVALID IN THE EYES OF LAW BECAUSE THESE HAVE BEEN RECORDED ON THE BASIS OF CHANGE OF OPINION OF THE AO. 21. WE HAVE EXAMINED THIS ASPECT ALSO IN DETAIL ON LAW AS WELL AS ON FACTS. THE LEGAL REQUIREMENT IS THAT THE REOPENING IS NOT PERMISSIBLE TO REAPPRAISE OR REVIEW THE SAME MATERIAL WHICH HAS BE EN TAKEN INTO CONSIDERATION WHILE FRAMING THE ORIGINAL ASSESSMENT ORDER. THE SCOPE OF REOPENING AS PRESCRIBED U/S 147 IS CONFINED TO BRIN G TO TAX THE INCOME ESCAPED. THE LAW IN THIS REGARD HAS BEEN EXPLAINED IN DETAIL BY HON'BLE SUPREME COURT ALSO, TIME AND AGAIN. IN THE CASE OF CIT VS KELVINATOR INDIA LTD 320 ITR 561 (SC), IT HAS BEEN HELD BY HON'BLE SUPREME COURT THAT UNDOUBTEDLY, AFTER 1 ST APRIL, 1989, POWER TO REOPEN THE ASSESSMENT AS PRESCRIBED U/S 147 IS MUCH WIDER. HOWEVER, MERE CH ANGE OF OPINION CANNOT PER SE OPERATE REASONS TO REOPEN AN ALREADY CONCLUDED ASSESSMENT. IN OTHER WORDS, THE AO HAS POWER TO RE -ASSESS BUT NO POWER TO REVIEW. THUS, IF THE CONCEPT OF CHANGE OF OPIN ION IS REMOVED, AS IN SOMETIMES DONE BY THE DEPARTMENT, REVIEW WOULD TAKE PLACE IN THE GARB OF REOPENING OF THE ASSESSMENT. THEREFORE, CONCEPT OF CHANGE OF OPINION IS AN ENABLED TEST TO CHECK ABUSE OF POWER BY THE A O. HENCE, THE AO HAS POWER TO REOPEN THE ASSESSMENT U/S 147 PROVIDED THE RE IS A TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS ES CAPEMENT OF INCOME FROM ASSESSMENT. THUS, FOR VALID REOPENING OF THE CASE, THE REASONS RECORDED BY THE AO MUST SHOW A LIVE LINK OF THE MAT ERIAL CONSIDERED BY THE AO FOR REOPENING WITH THE FORMATION OF BELIEF B Y THE AO OF ESCAPEMENT OF INCOME. 22 I.T.A. NO.6647/MUM/2013 22. IN THE LIGHT OF THE LEGAL POSITION AS HAS BEEN DISC USSED ABOVE BY US, WE HAVE EXAMINED THE FACTS OF THIS CASE. PERUSAL O F REASONS RECORDED BY THE AO REVEALS THAT AS PER BELIEF OF THE AO, DEDUCT ION U/S 80IA AVAILABLE TO THE MITHAPUR POWER PLANT OF THE ASSESSEE WAS WRONGL Y DETERMINED IN THE ORIGINAL ASSESSMENT PROCEEDINGS COMPLETED U/S 143(3 ) ON 10-01-2005 FOR IMPUGNED ASSESSMENT YEAR I.E. AY 2002-03. 23. IN THIS REGARD IT WAS NOTED BY US ON THE BASIS OF I NFORMATION PROVIDED BY BOTH THE PARTIES TO US THAT THE YEAR BE FORE US, I.E. A.Y 2002-03 IS THE SECOND YEAR OF CLAIMING THE BENEFIT OF DEDUC TION U/S 80-IA ON THE INCOME OF NEW POWER PLANT LOCATED AT MITHAPUR. THE DEDUCTION WAS CLAIMED FOR THE FIRST TIME IN THE YEAR AY 2001-02. THE ASSESSMENT ORDER WAS FRAMED U/S 143(3) FOR AY 2001-02 VIDE ORDER DAT ED 29-03-2004 WHEREIN THE CLAIM OF THE ASSESSEE WAS EXAMINED IN D ETAIL AND THEREAFTER ONLY THE BENEFIT OF DEDUCTION WAS ALLOWED AFTER RE- COMPUTING THE SAME AS WAS ALLOWABLE TO THE ASSESSEE. RELEVANT PART OF TH E ASSESSMENT ORDER FOR A.Y. 2001-02 IS REPRODUCED BELOW:- CLAIM FOR DEDUCTION U/S 80LA ON NEW POWER PLANT OF MITHAPUR IN THE REVISED RETURN OF INCOME FILED ON 28-3-2003, THE ASSESSEE HAS CLAIMED DEDUCTION OF RS.1,32,60,000/- (BEING 30 % OF THE PROFITS OF ELIGIBLE BUSINESS) ON ITS NEW POWER PLAN T AT MITHAPUR WHICH STARTED GENERATING POWER WITH EFFECT FROM 11 TH MAY 1995. THE RELEVANT WORKING OF THE 80LA CLAIM ON THE NEW P OWER PLANT WAS FILED ALONG WITH THE REVISED RETURN OF INCOME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE VIDE LETTER DATED MARCH 12, 2004 FURNISHED DETAILED SUBM ISSIONS AND ALL FACTUAL INFORMATION IN RELATION TO THE SAID CLA IM. THE ASSESSEE ALSO SUBMITTED THAT IT HAD FILED ALL THE NECESSARY INFORMATION IN RELATION TO THE SAID CLAIM DURING THE COURSE OF ASS ESSMENT PROCEEDINGS OF AY 2000-01 ALSO. HOWEVER, IT DID NOT PURSUE THE CLAIM IN AY. 2000-01 AND IS NOW CLAIMING THE SAME I N AY 2001- 23 I.T.A. NO.6647/MUM/2013 02. HENCE, THIS CLAIM IS BEING MADE BY THE ASSESSEE FOR THE FIRST TIME IN THE ASSESSMENT YEAR UNDER REFERENCE I.E. IN AY 2001-02. IN ITS LETTER, THE ASSESSEE FURTHER SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 80IA AS APPLICABLE TO THE YEA R UNDER REFERENCE, IT IS ENTITLED TO A DEDUCTION @ 100% OF THE PROFITS OF THE POWER PLANT AS AGAINST 30% OF THE PROFITS AS CL AIMED IN THE RETURN OF INCOME - A. Y. 2001-02 BEING THE FIRST AS SESSMENT YEAR DURING WHICH THE 80LA CLAIM IS MADE. ON PERUSAL OF THE SAID CLAIM, I AM IN AGREEMENT THA T THE CONDITIONS STIPULATED FOR ENTITLEMENT OF DEDUCTION UNDER SECTION 80IA HAVE BEEN FULLY COMPLIED WITH AND HENCE THE AS SESSEE IS ENTITLED FOR DEDUCTION U/S 80-IA ON THE NEW POWER P LANT AT MITHAPUR @ 100% OF THE PROFITS OF THE NEW POWER PLA NT. AS PER THE REQUIREMENTS OF SECTION 80IA, THE ASSESSEE WILL NOW BE REQUIRED TO CONTINUE TO CLAIM 80IA DEDUCTION ON THI S PLANT FOR THE NEXT 9 CONSECUTIVE ASSESSMENT YEARS. HOWEVER, IT IS NOTICED THAT WHILE COMPUTING THE DED UCTION U/S 80IA ON THE NEW POWER PLANT AT MITHAPUR , THE ASSES SEE HAS CONSIDERED MISCELLANEOUS INCOME OF RS.30,00,000/- ( BEING INCOME ON SALE OF FLY ASH GENERATED) AS PART OF THE PROFITS AND GAINS DERIVED FROM THE BUSINESS AND CONSIDERED THE SAME FOR COMPUTING DEDUCTION U/S 80IA. IN MY VIEW, THE SAID INCOME CANNOT BE SAID TO HAVE BEEN DERIVED FROM BUSINESS O F THE POWER PLANT AND HENCE THE SAME REQUIRES TO BE EXCLUDED WH ILE COMPUTING 80LA DEDUCTION, ACCORDINGLY, THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80LA ON NEW POWER PLANT AT MITHAPUR WORKS OUT TO RS.12,00,000/- (BEING 100% OF THE PROF ITS) AND THE SAME IS GRANTED. 24. SIMILARLY, WHEN THE ORIGINAL ASSESSMENT PROCEEDINGS FOR THE IMPUGNED ASSESSMENT YEAR, I.E. A.Y. 2002-03 WERE CA RRIED ON, A QUERY WAS ASKED BY THE AO WITH REGARD TO THE CLAIM OF DEDUCTI ON U/S 80-IA ON THE MITHAPUR POWER PLANT. THE SAME WAS REPLIED BY ASSE SSEE, VIDE LETTER DATED 23-12-2004 AS UNDER:- WITH FURTHER REFERENCE TO OUR EARLIER LETTER DATED DECEMBER 22, 2004 AND THE DISCUSSIONS THE UNDERSIGNED HAD WITH YOU, WE SU BMIT HEREWITH THE FOLLOWING ADDITIONAL SUBMISSIONS: 24 I.T.A. NO.6647/MUM/2013 1. CLAIM FOR DEDUCTION U/S 80LA ON POWER PLANT (HPB-3 & 1T-9) AT MITHAPUR IN THE RETURN OF INCOME, WE HAD CLAIMED RELIEF U/S 80LA ON OUR POWER PLANT AT MITHAPUR @ 30% OF THE PROFITS AND GA INS. HOWEVER, AS PER SECTION 80IA(4) (IV) R.W.S. 80IA(2) , WE CLAIMED THE BENEFIT OF SECTION 80LA COMMENCING FROM ASSESSM ENT YEAR 2001-2002. THIS YEAR (ASSESSMENT YEAR 2002-2003) BE ING THE SECOND YEAR OF CLAIM, WE ARE ENTITLED TO CLAIM 100% OF THE PROFITS AND GAINS OF THE POWER PLANT. HENCE, WE REQUEST YOU TO KINDLY GRANT US DEDUCTION U/S 80LA @ 100% OF THE PROFITS. FOR YOUR READY REFERENCE, WE ENCLOSE HEREWITH COMPU TATION OF INCOME FOR DEDUCTION U/S 80LA ALONGWITH AUDITED ACC OUNTS OF THIS NEW INDUSTRIAL UNDERTAKING DULY CERTIFIED BY C HARTERED ACCOUNTANT. AS PER THE AUDITED ACCOUNTS, OUR CLAIM U/S 80LA @ 100% IS RS.38,72,93,719/- AS AGAINST RS.36,16,00,00 0/- CLAIMED IN THE RETURN OF INCOME WHICH MAY PLEASE BE ACCEPTE D. WE WOULD ALSO LIKE TO INFORM YOU THAT ON SIMILAR LI NES, YOU HAVE ALREADY CONSIDERED AND ALLOWED OUR 80LA CLAIM ON MI THAPUR POWER PLANT FOR THE PREVIOUS ASSESSMENT YEAR I.E. A SSESSMENT YEAR 2001-2002. 25. T HEREAFTER, THE AO FRAMED ORIGINAL ASSESSMENT U/S 14 3(3) DATED 10- 01-2005 WHEREIN BENEFIT OF DEDUCTION ON THE NEW POW ER PLANT OF MITHAPUR WAS ALLOWED BY OBSERVING AS UNDER:- 12. CLAIM FOR DEDUCTION U/S 80IA ON NEW POWER PLANT OF MITHAPUR:- 12. IN THE REVISED RETURN OF INCOME FILED ON 28-3-2 003, THE ASSESSEE HAD CLAIMED DEDUCTION OF RS. 10,84,80,000/ - (BEING 30% OF THE PROFITS OF' ELIGIBLE BUSINESS) ON ITS NE W POWER PLANT AT MITHAPUR WHICH STARTED GENERATING POWER WITH EFFECT FROM 11 TH MAY' 1995 . THE RELEVANT WORKING OF THE 80LA CLAIM ON THE NEW POWER PLANT WAS FILED ALONGWITH THE REVISED RETURN OF INCOME. 12.2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE ASSESSEE REVISED ITS CLAIM U/S 80LA ON THE POWER PLANT FROM 30% TO 100%. VIDE LETTER DATED DECEMBER 23, 2004 THE ASSESSEE FU RNISHED DETAILED SUBMISSIONS ALONGWITH THE AUDITED ACCOUNTS OF THE POWER PLANT DULY CERTIFIED BY THE CHARTERED ACCOUNT ANT. AS PER AUDITED ACCOUNTS, THE 80LA CLAIM WORKED OUT TO RS.3 8,72,93, 719/- (BEING 100% OF THE PROFITS & GAINS OF THE POW ER PLANT). 25 I.T.A. NO.6647/MUM/2013 12.3 IN ITS LETTER, THE ASSESSEE FURTHER SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 80IA AS APPLICABLE TO THE YEA R UNDER REFERENCE, IT IS ENTITLED TO A DEDUCTION @ 100% OF THE PROFITS OF THE POWER PLANT AS AGAINST 30% OF THE PROFITS AS CL AIMED IN THE REVISED RETURN OF INCOME. 12.4 THE 80LA CLAIM ON THE NEW POWER PLANT WAS MADE FOR THE FIRST TIME IN A.Y.2001-2002 AND WAS ALLOWED. THIS Y EAR I.E. A.Y. 2002-2003 BEING THE SECOND YEAR OF CLAIM, THE DEDUC TION U/S 80LA @ 100% OF RS.38,72,93,719/- IS ALLOWED. 26. THUS, FROM THE PERUSAL OF THE ABOVE EXPLANATIONS AN D DISCUSSIONS MADE IN THE ASSESSMENT ORDERS IT IS CLEAR THAT REQU ISITE MATERIAL WAS OBTAINED BY THE AO WHICH WAS DULY CONSIDERED AND ON LY THEREAFTER, THE BENEFIT OF DEDUCTION WAS ALLOWED TO THE ASSESSEE A S WAS AVAILABLE IN THE ASSESSMENT ORDER PASSED U/S 143(3). UNDER THESE CI RCUMSTANCES, IT IS NOT LEGALLY PERMISSIBLE TO REOPEN THE CASE MERELY REAPP RAISING SAME MATERIAL AND REVIEWING THE DECISION ALREADY TAKEN BY THE AO. IT IS WELL SETTLED LAW THAT REOPENING BASED UPON CHANGE OF OPINION OF THE AO IS NOT PERMISSIBLE IN THE EYES OF LAW. THUS, ON THIS GROUND AS WELL, THE REOPENING HAS BEEN RIGHTLY HELD AS INVALID BY LD. CIT(A). 27. BEFORE PARTING WITH, WE WOULD LIKE TO MAKE REFERENC E TO A RECENT JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF PRINCIPAL CIT VS SAMCOR GLASS LTD ITA NO.768/2015, JUDGEMENT DATED 1 2.10.15 WHEREIN IT WAS HELD BY THE HONBLE HIGH COURT THAT WHERE THE R EOPENING IS DONE BEYOND 4 YEARS AND ORIGINAL ASSESSMENT WAS DONE U/S 143(3) AND YET, THE REASONS FOR REOPENING DID NOT CATEGORICALLY STATE THAT THERE WAS FAILURE BY THE ASSESSEE TO DISCLOSE ANY MATERIAL PARTICULAR S ON THE BASIS OF WHICH THERE WERE REASONS TO BELIEVE THAT INCOME HAD ESCAP ED ASSESSMENT, THEN, THE REOPENING WOULD BE WITHOUT AUTHORITY OF LAW. I T WAS ALSO HELD BY THE HONBLE HIGH COURT THAT IN CASE REOPENING IS DONE M ECHANICALLY AND 26 I.T.A. NO.6647/MUM/2013 CASUALLY, THEN IT RESULTS IN UNNECESSARY HARASSMENT OF THE ASSESSEE. RELEVANT PART OF OBSERVATIONS OF HONBLE HIGH COURT IS REPRODUCED HEREUNDER FOR THE SAKE OF READY REFERENCE:- 7. THE COURT IS OF THE VIEW THAT NOTWITHSTANDING SE VERAL DECISIONS OF THE SUPREME COURT AS WELL AS THIS COURT CLEARLY ENUNCIATING THE LEGAL POSITION UNDER SECTION 147/148 OF THE ACT, TH E REOPENING OF ASSESSMENT IN CASES LIKE THE ONE ON HA ND GIVE THE IMPRESSION THAT REOPENING OF ASSESSMENT IS BEING DONE MECHANICALLY AND CASUALL Y RESULTING IN UNNECESSARY HARASSMENT OF THE ASSESSEE. 8. THE COURT WOULD HAVE BEEN INCLINED TO IMPOSE HEAVY COSTS ON THE REVENUE FOR FILING SUCH FRIVOLOU S APPEALS BUT DECLINES TO DO SO SINCE THE APPEALS ARE BEING DISMISSED EX PARTE. HOWEVER, THE COURT DIRECTS THE REVENUE THROUGH THE PRINCIPAL CHIEF COMMISSIONE R OF INCOME TAX (PR CIT) TO ISSUE INSTRUCTIONS TO THE AO S TO STRICTLY ADHERE TO THE LAW EXPLAINED IN VARIOUS DECISIONS OF THE SUPREME COURT AND THE HIGH COURT I N REGARD TO SECTIONS 147/148 OF THE ACT AND MAKE IT MANDATORY FOR THEM TO ENSURE THAT AN ORDER FOR REOPENING OF AN ASSESSMENT CLEARLY RECORDS THE COMPLIANCE WITH EACH OF THE LEGAL REQUIREMENTS. SECONDLY, THE AOS MUST BE DIRECTED TO STRICTLY COMP LY WITH THE LAW EXPLAINED BY THE SUPREME COURT IN GKN DRIVESHAFTS (INDIA) LID V. INCOME TAX OFFICER (2003 ) 259 ITR 19 (SC) AS REGARDS THE DISPOSAL OF THE OBJECTIONS RAISED B Y THE ASSESSEE TO THE REOPENING OF THE ASSESSMENT. 28. WE BELIEVE THAT CONCERNED CHIEF COMMISSIONERS HAVE ALREADY TAKEN REQUISITE STEPS UNDER GUIDANCE FROM THE CBDT TO FOR MULATE AND ISSUE THE REQUISITE SET OF INSTRUCTIONS TO THE AO SO AS TO EN ABLE THE AOS TO REOPEN THE CASES ONLY IN DESIRED AND DESERVING CASES SO AS TO BUILD UP THE FAITH OF 27 I.T.A. NO.6647/MUM/2013 THE TAXPAYERS ON THE WORKING OF INCOME-TAX DEPARTME NT WHICH WILL, IN TURN, INCREASE VOLUNTARY COMPLIANCE BY THE TAXPAYER S. 29. WITH THE AFORESAID DIRECTIONS, THE APPEAL FILED BY THE REVENUE IS HEREBY DISMISSED. ORDER PRONOUNCED IN THE COURT ON THIS 23 RD DAY OF DECEMBER, 2016. SD/- SD/- (MAHAVIR SINGH) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT: 23 RD DECEMBER, 2016 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , E-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES