M/s Varam Power Projects Pvt., Ltd., Srikakulam V. THE DCIT, CIRCLE - 4(1), Visakhapatnam

ITA 710/VIZ/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1138 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 09-11-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 11-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M NARAYANA RAO
• Keywords: Reopening of assessment; Cost of acquisition; Tangible material; Difference of opinion; Change of opinion
• Section: 143(3); 115JB; 148; 10

Judgement Text

ITA NO.710/VIZAG/2013 M/S. VARAM POWER PROJECT PVT. LTD., SRIKAKULAM 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.710/VIZAG/2013 ( / ASSESSMENT YEAR: 2007-08) M/S. VARAM POWER PROJECT PVT. LTD. SRIKAKULAM VS. DCIT, CIRCLE - 4(1), VISAKHAPATNAM [PAN: AABCV2160J ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI G.V.N. HARI, AR / RESPONDENT BY : SHRI M. NARAYANA RAO, DR / DATE OF HEARING : 13.04.2016 / DATE OF PRONOUNCEMENT : 27.05.2016 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT(A), VISAKHAPATNAM DATED 25.10.2013 FOR THE ASSE SSMENT YEAR 2007-08. ITA NO.710/VIZAG/2013 M/S. VARAM POWER PROJECT PVT. LTD., SRIKAKULAM 2 2. FACTS ARE IN BRIEF THAT THE ASSESSEE, IS A COMPA NY, ENGAGED IN POWER GENERATION, BY USING BIO-MASS. THE ASSESSEE HAS FILED A RETURN OF INCOME BY ADMITTING TOTAL INCOME OF ` NIL AFTER CLAIMING DEDUCTION OF ` 1,58,61,019/- U/S 80IA OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT'). THE ASSESSEE HAS DECLARED ` 2,10,44,256/- U/S 115JB OF THE ACT. IT HAS ALSO DEDUCTED AN AMOUNT OF 88,39,0 10/- TOWARDS PROFIT ON SALE OF AGRICULTURAL LAND EXEMPT U/S 10 OF THE A CT OUT OF THE BOOK PROFIT ADMITTED OF ` 2,98,83,266/- AND ARRIVED AT A NET BOOK PROFIT OF ` 2,10,44,256/-. THE ASSESSMENT WAS COMPLETED IN THE CASE OF THE ASSESSEE U/S 143(3) OF THE ACT ON 16.10.2009 WITHOU T MAKING ANY ADDITION. SUBSEQUENTLY, ASSESSING OFFICER HAS NOTI CED THAT THE ASSESSEE HAS NOT OFFERED ANY AGRICULTURAL INCOME FROM THE LA ND AND THE CLAIM OF EXEMPTION U/S 10 OF THE ACT WAS NOT CORRECT AND THE REFORE, NOTICE U/S 148 OF THE ACT WAS ISSUED. IN RESPONSE TO THE NOTI CE, THE ASSESSEE FILED A DETAILED REPLY AND AFTER CONSIDERING THE EXPLANAT ION OF THE ASSESSEE, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 143(3) R.W.S. 147 OF THE ACT ON 26.12.2011 BY REJECTING THE CLAIM OF THE ASSESSEE U/S 10 R.W.S. 2(A)(A) OF THE ACT AND ACCORDINGLY ADDITION WAS MADE OF ` 88,39,010/-. ITA NO.710/VIZAG/2013 M/S. VARAM POWER PROJECT PVT. LTD., SRIKAKULAM 3 3. THE ASSESSEE CARRIED MATTER IN APPEAL BEFORE THE CIT(A) AND SUBMITTED THAT THE ASSESSMENT IS COMPLETED U/S 143( 3) OF THE ACT AFTER EXAMINING ALL THE DETAILS, THE A.O. REOPENED THE AS SESSMENT ON THE BASIS OF SAME MATERIAL, WHICH IS AMOUNTING TO CHANGE OF O PINION AND THE ASSESSMENT IS NOT VALID AND THE SAME MAY BE QUASHED . THE LD. CIT(A) SIMPLY REJECTED THE VALIDITY OF THE REASSESSMENT QU ESTIONED BY THE ASSESSEE BY NOTING THAT THE ASSESSEE DID NOT POINT OUT ANY SPECIFIC DEFICIENCY IN THE INITIATION OR FINALIZATION OF THE REASSESSMENT ORDER. 4. ON BEING AGGRIEVED, THE ASSESSEE CARRIED MATTER IN APPEAL BEFORE THE TRIBUNAL. THE FIRST GROUND OF THE APPEAL RAISE D BY THE ASSESSEE IS IN RESPECT OF VALIDITY OF REOPENING, WHICH IS REPRODUC ED AS UNDER: THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED FACT T HAT THE REOPENING OF THE IMPUGNED ASSESSMENT ITSELF U/S 147 OF THE I.T. ACT WAS ILL FOUNDED AS THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) OF THE I.T. ACT BY THE THEN TH E LEARNED ASSESSING OFFICER AFTER THOROUGHLY EXAMINING ALL TH E ISSUES AND MATTERS OF THE APPELLANT COMPANYS CASE AND ALSO AF TER HAVING FULLY SATISFIED WITH THE EXPLANATIONS, CONTENTIONS AND EVIDENCES AND OTHER RELEVANT MATERIALS SUBMITTED BY THE APPEL LANT COMPANY. 5. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED T HAT THE ASSESSEE HAS PURCHASED AGRICULTURAL LANDS IN THE YEAR 2004. SUBSEQUENTLY, IN THE YEAR 2007, THE SAME WAS SOLD TO THIRD PARTIES AND T HE INCOME EARNED BY THE ASSESSEE IS AN AGRICULTURAL INCOME, WHICH IS EX EMPT FROM TAXATION. ITA NO.710/VIZAG/2013 M/S. VARAM POWER PROJECT PVT. LTD., SRIKAKULAM 4 HE FURTHER SUBMITTED THAT ALL THE DETAILS IN RESPEC T OF SALE OF AGRICULTURAL LANDS WERE FILED BEFORE THE A.O. FOR THAT EFFECT, HE HAS POINTED OUT FROM THE PAPER BOOK PAGE NO.3 ATTACHED TO RETURN OF INCO ME FOR 2007-08, WHEREIN STATEMENT OF INCOME IT WAS SPECIFICALLY MEN TIONED SALE OF AGRICULTURAL LAND LESS COST OF ACQUISITION LESS EXE MPTION U/S 10 OF THE ACT AMOUNTING TO ` 83,39,010/-. 6. HE ALSO POINTED OUT FROM THE PAPER BOOK PAGE NO. 4 IN RESPECT OF COMPUTATION OF BOOK PROFIT U/S 115JB OF THE ACT AND POINTED OUT THAT WHILE CALCULATING THE COMPUTATION OF BOOK PROFITS, THE PROFIT ON SALE OF LAND SHOWN AS EXEMPT FROM TAXATION U/S 10 OF THE AC T AFTER REDUCING THE AMOUNT OF ` 83,39,010/- BOOK PROFIT WAS CALCULATED. 7. HE HAS ALSO POINTED OUT FROM THE PAPER BOOK PAGE NO.9 ANNEXURE- A TO FORM NO.29B IN RESPECT OF 115JB OF THE ACT CAL CULATION OF PROFIT ON SALE ON AGRICULTURAL LAND EXEMPT U/S 10 OF THE ACT OF ` 83,39,010/-. 8. HE HAS ALSO POINTED OUT FROM THE PAPER BOOK PAGE NO.22 SCHEDULE FORMING PART OF PROFIT & LOSS ACCOUNT CLEARLY MENTI ONED PROFIT ON SALE OF AGRICULTURAL LAND AS ` 83,39,010/-. 9. HE FURTHER SUBMITTED THAT THE A.O. BY LETTER DAT ED 5.10.2009 HAS CALLED FOR ALL THE DETAILS IN RESPECT OF ASSESSEES BUSINESS ACTIVITIES AND ITA NO.710/VIZAG/2013 M/S. VARAM POWER PROJECT PVT. LTD., SRIKAKULAM 5 OTHER DETAILS AND HE HAS SPECIFICALLY POINTED OUT T HAT ARE YOU LIABLE TO MAT AND IN RESPONSE TO THAT (PAGE NO.38 OF THE PAP ER BOOK) ASSESSEE HAS CLEARLY SUBMITTED THAT REGARDING THE LIABILITY OF MAT, THE COMPANY IS LIABLE FOR MAT U/S 115JB OF THE ACT AND THE COMPANY HAS PAID THE MAT TAX ALSO AND COPY OF AUDIT REPORT ENCLOSED. 10. THE LD. COUNSEL FURTHER SUBMITTED THAT THE A.O. AFTER CONSIDERING ALL THE DETAILS AND IN RESPECT OF SALE OF AGRICULTU RAL LANDS AND ALSO COMPUTATION OF BOOK PROFITS U/S 115JB OF THE ACT AN D DETAILED EXPLANATION GIVEN BY THE ASSESSEE AND ALSO AUDIT RE PORT, THE A.O. HAS ACCEPTED THE RETURN FILED BY THE ASSESSEE U/S 143(3 ) OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE A.O . AFTER CONSIDERING THE ENTIRE DETAILS SUBMITTED BY THE ASSESSEE FORMED AN OPINION THAT THE SALE OF AGRICULTURAL LAND IS EXEMPT UNDER SECTION 1 0 OF THE ACT AND THERE AFTER ISSUED A SHOW CAUSE NOTICE U/S 148 OF THE ACT FOR REOPENING THE ASSESSMENT ON THE BASIS OF VERY SAME MATERIAL IS A CHANGE OF OPINION, WHICH IS NOT PERMISSIBLE UNDER LAW AND SUBMITTED TH AT THE REOPENING IS INVALID AND THE SAME MAY BE QUASHED. 11. ON THE OTHER HAND, THE LD. D.R. HAS SUBMITTED T HAT THE A.O. HAS REOPENED THE ASSESSMENT VALIDLY THOUGH THE ASSESSME NT WAS COMPLETED U/S 143(3) OF THE ACT. ITA NO.710/VIZAG/2013 M/S. VARAM POWER PROJECT PVT. LTD., SRIKAKULAM 6 12. THE LD. D.R. FURTHER POINTED OUT THAT THE A.O. HAS NOT EXAMINED THE ISSUE WHETHER THE INCOME RECEIVED FROM THE SALE OF LAND IS AGRICULTURAL INCOME OR NOT, THEREFORE, THE CHANGE O F OPINION DOES NOT ARISE. 13. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF POWE R GENERATION, BY USING BIO-MASS. THE ASSESSEE HAS FILED A RETURN OF INCOME BY ADMITTING TOTAL INCOME AT ` NIL AFTER CLAIMING DEDUCTION U/S 80IA OF THE ACT. THE ASSESSEE HAS DECLARED ` 2,10,44,256/- U/S 115JB OF THE ACT AND IT HAS DEDUCTED AN AMOUNT OF ` 88,39,010/- TOWARDS PROFIT ON SALE OF AGRICULTURAL LAND EXEMPT U/S 10 OF THE ACT OUT OF B OOK PROFIT ADMITTED OF ` 2,98,83,266/- AND ARRIVED AT NET BOOK PROFIT OF ` 2,10,44,256/-. BEFORE THE A.O., THE ASSESSEE HAS FILED A STATEMENT OF INCOME ALONG WITH RETURN OF INCOME, FILED THE DETAILS OF SALE OF AGRI CULTURAL LAND, LESS COST OF ACQUISITION, LESS EXEMPTION U/S 10 OF THE ACT (PAPE R BOOK PAGE NO.3). THE ASSESSEE ALSO FILED BEFORE THE A.O., THE COMPUT ATION OF BOOK PROFIT U/S 115JB OF THE ACT AND HE HAS SPECIFICALLY MENTIO NED THAT PROFIT ON SALE OF AGRICULTURAL LAND EXEMPT FROM TAX U/S 10 OF THE ACT OF ` 88,39,010/- (PAPER BOOK PAGE NO.4). THE ASSESSEE A LSO FILED ANNEXURE- ITA NO.710/VIZAG/2013 M/S. VARAM POWER PROJECT PVT. LTD., SRIKAKULAM 7 A TO FORM NO.29B MENTIONED PROFIT ON SALE OF AGRICU LTURAL LAND EXEMPT U/S 10 OF THE ACT AT ` 88,39,010/- (PAPER BOOK PAGE NO.9). THE ASSESSEE ALSO FILED AUDIT REPORT BEFORE THE A.O., W HEREIN IT IS CLEARLY MENTIONED PROFIT ON SALE OF LAND AT ` 88,39,010/- (PAGE NO.22 OF THE PAPER BOOK). THE ASSESSING OFFICER ALSO ISSUED A D ETAILED NOTICE TO THE ASSESSEE IN THE COURSE OF SCRUTINY ASSESSMENT PROCE EDINGS AND CALLED VARIOUS DETAILS, PARTICULARLY ASKED THE ASSESSEE TH AT ARE YOU LIABLE TO MAT AND ASSESSEE ALSO REPLIED THAT IT IS LIABLE FO R THE MAT U/S 115JB OF THE ACT. AFTER CONSIDERING ALL THE DETAILS, THE A. O. COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT. 14. THEREAFTER, THE A.O. WAS OF THE OPINION THAT TH ERE IS AN ESCAPEMENT OF INCOME AND NOTICE U/S 147 OF THE ACT WAS ISSUED TO THE ASSESSEE FOR THE FOLLOWING REASONS: AS PER THE COMPUTATION OF BOOK PROFIT U/S 115JB, TH E ASSESSEE HAS DEDUCTED AN AMOUNT OF ` 88,39,010/- TOWARDS PROFITS ON SALE OF AGRICULTURAL LAND EXEMPT U/S 10 OUT OF THE NET PROF IT OF ` 2,98,83,266/- TO ARRIVE AT TAXABLE INCOME OF ` 2,10,44,256/-. AS PER SEC.2(A)(A) OF THE I.T. ACT, IF THE FOLLOWING THREE CONDITIONS ARE TRANSFER RED INCOME DERIVED FROM LAND CAN BE TERMED AS AGRICULTURAL INCOME:- (A) RENT OR REVENUE SHOULD BE DERIVED FROM LAND (B) LAND SHOULD BE SITUATED IN INDIA (C) LAND SHOULD BE USED FOR AGRICULTURAL PURPOSES. IN THE INSTANT CASE, THE LAND WAS HELD UNDER FIXED A SSETS AND DELETIONS/SALES WERE SHOWN TO ARRIVE AT CLOSING WDB . THE ASSESSEE HAS ALSO NOT OFFERED ANY AGRICULTURAL INCOME FROM THE L AND AND THEREFORE THE CLAIM OF DEDUCTION U/S 10 IS NOT CORRECT. ITA NO.710/VIZAG/2013 M/S. VARAM POWER PROJECT PVT. LTD., SRIKAKULAM 8 15. FROM THE ABOVE, THE A.O. OF THE OPINION THAT TH E COMPUTATION OF BOOK PROFITS U/S 115JB OF THE ACT IS NOT CORRECT FOR THE REASON THAT THE LAND SOLD BY THE ASSESSEE IS NOT AN AGRICULTURA L LAND AND HE IS NOT ELIGIBLE FOR EXEMPTION U/S 10 OF THE ACT AND ACCORD INGLY HE HAS DENIED THE CLAIM MADE BY THE ASSESSEE U/S 10 OF THE ACT, THE AMOUNT OF ` 88,39,010/- IS TAXED AS AN INCOME OF THE ASSESSEE. 16. WE FIND THAT THE A.O. IN THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, HE MADE A DETAILED ENQUIRY IN RESPECT OF COMPUTATION OF INCOME U/S 115JB OF THE ACT AND HE HAS ASKED WHETHE R THE ASSESSEE IS LIABLE FOR THE MAT? THE ASSESSEE ALSO FILED THE DETAILS IN RESPECT OF PROFIT ON SALE OF LAND, DETAILS OF SALES OF AGRICUL TURAL LAND, LESS COST OF ACQUISITION, LESS EXEMPTION U/S 10 OF THE ACT. AFT ER CONSIDERING ALL THE DETAILS AND ALSO AFTER CONSIDERING COMPUTATION U/S 115JB OF THE ACT, THE ASSESSMENT ORDER IS COMPLETED U/S 143(3) O F THE ACT. NOW THE ASSESSING OFFICER REOPENED THE ASSESSMENT BASED ON VERY SAME MATERIAL AND ASSESSED THE INCOME OF THE ASSESSEE BY DISALLOWING THE CLAIM OF EXEMPTION U/S 10 OF THE ACT. IN OUR OPINI ON, THIS CLEARLY AMOUNTING TO A CHANGE OF OPINION, WHICH IS NOT PERM ISSIBLE UNDER THE LAW AND THE SAME IS NOT VALID. ITA NO.710/VIZAG/2013 M/S. VARAM POWER PROJECT PVT. LTD., SRIKAKULAM 9 17. IN THIS CONTEXT, THE HONBLE SUPREME COURT IN T HE CASE OF CIT VS. KELVINATOR INDIA LTD. 320 ITR 561 (SC) HAS OBSE RVED THAT AFTER 1 ST APRIL, 1989, POWER TO REOPEN IS MUCH WIDER, HOWEVER MERE CHANGE OF OPINION CANNOT PER SE BE REASON TO REOPEN. THE A.O . HAS POWER TO REASSESS BUT NO POWER TO REVIEW. IF THE CONCEPT OF CHANGE OF OPINION IS REMOVED AS CONTENDED ON BEHALF OF THE DEPARTMENT , REVIEW WOULD TAKE PLACE IN THE GARB OF REOPENING OF ASSESSMENT. THE CONCEPT OF CHANGE OF OPINION IS AN INCOMPLETE TEST TO CHECK AB USE OF POWER BY A.O. HENCE, AFTER 1 ST APRIL, 1989, A.O. HAS POWER TO REOPEN THE ASSESSMENT U/S 147 OF THE ACT, PROVIDED THERE IS A TANGIBLE MATERIAL CAME TO THE CONCLUSION THAT THERE IS AN ESCAPEMENT OF INCOME FROM THE ASSESSMENT REASONS MUST HAVE A LIVE LINK WITH T HE FORMATION OF BELIEF. 18. IN THE PRESENT CASE, THE A.O. BASED ON THE VERY SAME INFORMATION FURNISHED, IN THE COURSE OF SCRUTINY PR OCEEDINGS, CAME TO A CONCLUSION THAT THE ASSESSEE IS ELIGIBLE FOR EXEM PTION U/S 10 OF THE ACT. SUBSEQUENTLY, ON THE BASIS OF VERY SAME INFOR MATION, HE IS OF THE OPINION THAT ASSESSEE IS NOT ELIGIBLE FOR EXEMP TION U/S 10 OF THE ACT. IN OUR OPINION, IT IS A MERE CHANGE OF OPINIO N OF THE A.O. IT IS NOT THE CASE OF THE DEPARTMENT THAT SOME NEW TANGIB LE MATERIAL ITA NO.710/VIZAG/2013 M/S. VARAM POWER PROJECT PVT. LTD., SRIKAKULAM 10 CAME TO THE NOTICE OF THE A.O. IN VIEW OF THE ABOV E, WE HOLD THAT THE REOPENING IS NOT VALID. THEREFORE, THE NOTICE U/S 148 OF THE ACT IS QUASHED AND THE ASSESSMENT ORDER PASSED CONSEQUE NT TO THE NOTICE ISSUED U/S 147 R.W.S. 148 OF THE ACT DATED 2 6.12.2011 IS INVALID. THUS, THE GROUND RAISED BY THE ASSESSEE I S ALLOWED. 19. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 27 TH MAY16. SD/- SD/- ( . ) ( . ) (G. MANJUNATHA) (V. DURGA RAO) /ACCOUNTANT MEMBER /JUDICIAL MEMBER ! /VISAKHAPATNAM: % /DATED : 27.05.2016 VG/SPS '! (! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT M/S. VARAM POWER PROJECTS PVT. L TD., D.NO.8-4-120/3, RAJA COMPLEX, G.T. ROAD, SRIKAKULAM. 2. / THE RESPONDENT THE DCIT, CIRCLE-4(1), VISAKHAP ATNAM 3. ) / THE CIT, VISAKHAPATNAM 4. ) ( ) / THE CIT(A),VISAKHAPATNAM 5. ! , , , , ! / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // /0 , (SR.PRIVATE SECRETARY) , , ! / ITAT, VISAKHAPATNAM