Puri Oil Mills Ltd, New Delhi V. ACIT, Circle-20(1), New Delhi

ITA 7726/DEL/2019

AI Insights

Puri Oil Mills Ltd. filed appeals against the orders of the Commissioner of Income Tax (Appeals) for the assessment years 2012-13 and 2013-14, which upheld the reassessment proceedings initiated by the Assessing Officer. The reassessment was based on the receipt of a capital subsidy from the government, which the company treated as a capital receipt and did not reduce from the cost of the depreciable assets. The Tribunal found that the reassessment was initiated on a mere change of opinion and not on new tangible material, thus quashing the reassessment orders. The Tribunal also addressed the applicability of the amended Section 2(24)(xviii), ruling that it applies prospectively and not retrospectively to the assessment years in question.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 112844 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: F
• Next Hearing Date: 02-04-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 19-09-2019
• Other Referred Cases: CIT vs P.l. Chemical Limited, PVR Limited vs ACIT, Sasisri Extractions Limited vs ACIT, GKN Drive Shaft (India) Ltd. Vs ITO, Kelvinator of India Ltd. vs. CIT, Usha International Ltd. vs. CIT, Ankit Metal & Power Ltd. vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Search and seizure; Tangible material; Difference of opinion; Assessment record; Capital receipt; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 147; 148; 143(3); 115JB; 143(1); 143(2); 44AB; 13; 22

Judgement Text

1 ITA. 6971/Del/2018 AND ITA. 7726/Del/2019 Puri Oil Mills Ltd., New Delhi. IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH : “F” NEW DELHI ] BEFORE DR. B. R. R. KUMAR, ACCOUNTANT MEMBER AND SH. YOGESH KUMAR U.S., JUDICIAL MEMBER I.T.A. No. 6971/DEL/2018 (A.Y 2012-13) Puri Oil Mills Limited, 302 – Jyoti Shikhar, Janakpuri, New Delhi – 110 058. PAN No. AAACP3653M Vs. ACIT, Circle : 20 (1) New Delhi. AND I.T.A. No. 7726/DEL/2019 (A.Y 2013-14) Puri Oil Mills Limited, 302 – Jyoti Shikhar, Janakpuri, New Delhi – 110 058. PAN No. AAACP3653M (APPELLANT) Vs. ACIT, Circle : 20 (1) New Delhi. (RESPONDENT) Appellant by Shri S. K. Vatta, C. A.; Respondent by Shri Sanjay Nargas, Sr. D. R.; Date of Hearing 03.04.2023 Date of Pronouncement 30.06.2023 2 ITA. 6971/Del/2018 AND ITA. 7726/Del/2019 Puri Oil Mills Ltd., New Delhi. ORDER PER YOGESH KUMAR U.S., JM These two appeals are filed by the assessee for assessment years 2012- 13 and 2013-14 against two separate orders of the ld. Commissioner of Income Tax (Appeals)-7, New Delhi, dated 05.09.2018 and 23.07.2019 respectively. I.T.A. No. 6971/DEL/2018 (A.Y 2012-13) : 2. The assessee has raised the following substantive grounds of appeal :- “1. That the worthy CIT(Appeals) was absolutely wrong, unjustified and have erred both on facts and in Law to have uphold the orders of the Assessing Officer initiating the reassessment proceedings on mere change of opinion and on review subsequently of a completed assessment u/s 143(3) of the Act on the same primary and material facts as stood categorically disclosed in the Audited Financial Statements and tax Audit Report u/s 44AB of the Act and also the fact in view of the specific reply as was also placed on record, on due query raised and replies submitted and placed on record during the course of original Assessment proceedings for asstt. made u/s 143(3) of the Act in respect of. the Central subsidy amount, accounted and treated as capital subsidy and also in respect of calculation of depreciation on such Assets without adjusting the amount of the said Capital subsidy from the cost of the Assets. 3 ITA. 6971/Del/2018 AND ITA. 7726/Del/2019 Puri Oil Mills Ltd., New Delhi. 2. That the worthy CIT(Appeals) has erred both on facts and in Law to have upheld the addition in account arbitrary calculation of depreciation of Rs.72.90 Lacs in respect of receipt/accrual of Central Capital Subsidy amount on the said Power Projects on misperceived and misconstrued provisions of Law contrary to the settled law and decisions of the Hon'able Supreme Court in the case of CIT vs P.l. Chemical Limited reported at Appeal (Civil) 2474 of 1991 followed by the Hon'able ITAT 'F' Bench, Delhi in case of PVR Limited vs ACIT s reported in ITA No. lS97/Del/2010 and ITAT Vishkhapatnam Bench in the case of Sasisri Extractions Limited vs ACIT (200S) 307 ITR (AT) 127, and the said being part of the records and proceedings in original assessment framed u/s 143(3) of the Act on mere change of opinion and review of the completed assessment, which is impermissible in law. 3. That the worthy CIT(A) was also wrong, unjustified and have erred both on facts and in law while passing appellate orders in completely disregarding the facts and submission in respect of matter of calculation of depreciation on such Power Project as per para' 4' at Page 12 - 13 of his orders. 4. That the worthy CIT(A) have erred both on facts and in law and was thus wrong, unjustified and failed to take cognizance of the facts and submissions of para 4,5,6,7,8,9 & 10 as also contained at page 4 & 5 of his appellate orders, and pass a speaking orders on the issue of disposing of legal objections by the Assessing Officer in complete disregard of the decision of the Hon'able Supreme Court in the case of GKN Drive Shaft (India) Ltd. Vs ITO (2004) 259 ITR 19 - 20 (SC) and other judgements as relied upon. 4 ITA. 6971/Del/2018 AND ITA. 7726/Del/2019 Puri Oil Mills Ltd., New Delhi. 5. That the worthy CIT(A) have erred both on facts and in Law while upholding the application of the provisions of section 2(24) sub-section (xviii), which amendments have prospective application w.eJ. 1.4.2016 for the Asstt. Year 2016-17.” I.T.A. No. 7726/DEL/2019 (A.Y 2013-14) : 3. The assessee has raised the following substantive grounds of appeal :- “1. That the worthy CIT(Appeals) was absolutely wrong, unjustified and have erred both on facts and in Law to have uphold the orders of the Assessing Officer initiating the reassessment proceedings on mere change of opinion and on review, subsequently of a completed assessment u/s 143(3) of the Act on the same primary and material facts as stood categorically disclosed in the Audited Financial Statements and tax Audit Report u/s 44AB of the Act and in view of the specific replv/les on record, on due query raised and replies submitted in original Assessment proceedings for asstt. made u/s 143(3) of the Act in respect of the Central subsidy amount, accounted and treated as capital subsidy and also in respect of calculation of depreciation on such Assets without adjusting the amount of the said Capital subsidy from the cost of the said Assets. 2. That the worthy CIT(Appeals) has erred both on facts and in Law to have upheld the addition in account arbitrary calculation of depreciation of Rs.72.90 Lacs in respect of receipt/accrual of Central Capital Subsidy amount on the said Power Projects on misperceived and misconstrued provisions of Law contrary to the settled law and decisions of the Hon'ble Supreme Court in the case of CIT vsP.l . 5 ITA. 6971/Del/2018 AND ITA. 7726/Del/2019 Puri Oil Mills Ltd., New Delhi. Chemical Limited reported at Appeal (Civil) 2474 of 1991 and ITAT Vishkhapatnam Bench in the case of Sasisri Extractions Limited vs ACIT (2008) 307 ITR (AT) 127, and the said being part of the records, duly disclosed in original assessment proceedings framed u/s 143(3) of the Act, therefore such reopening was on mere change of opinion and review of the completed assessment, which is impermissible in law. 3. That the worthy CIT (Appeals) while upholding the reassessment proceedings and the quantum thereof was absolutely wrong, unjustified & erred both on facts and in law since in para 7 of the Reasons recorded, such disallowance was observed at Rs.72.90 lacs, the additions as made in Asstt. Order was Rs.61,96,000/- whereas due differential depreciation as per applicable rates on the said Hydro projects as per working documents on record vide submissions 28 th Sept., 2018, even hypothecally presuming, that such capital subsidy required due reduction proportionately from respective cost of such assets worked out to be Rs.46,00,723/-, as per applicable rates, and as such the said Reasons recorded itself were merely on conjectures/surmises and without any basis or application of mind. 4. That the worthy CIT(Appeals) while upholding the validity of Reassessment proceedings and Ld. ACIT while passing the assessment order u/s 143/147 of the Act was unjustified, wrong and erred both on facts and in law and have failed to consider the legal objections and submissions in right perspective and pass a speaking order on our submissions in para 7, 8, 9 and 10 of our submissions, as contained at page 6,7,8,9,& 10 of the appellate orders read with our submissions of 27 th " Sept., & 28 th Sept before 6 ITA. 6971/Del/2018 AND ITA. 7726/Del/2019 Puri Oil Mills Ltd., New Delhi. the Ld. ACIT, 20(1), ignoring the substance of the decision of the Hon'able Supreme Court in the case of GKN Drive Shaft (India) Ltd vs. ITO (2004) 259 ITR 19 20 (SC) and other judgements as per our submissions. 5. That the worthy CIT(Appeals) while upholding the said disallowance of depreciation by adjusting the capital subsidy amount from the cost of the assets was wrong and unjustified, both on facts and in law by invoking the provisions of section 2(24)(xviii) as amended by the Finance Act, 2015, which have prospective application w.e.f. 01.04.2016.” I.T.A. No. 6971/DEL/2018 (A.Y 2012-13) 4. Since the issue involved in the above appeals are similar, the brief facts of the case for the Assessment Year 2012-13 are considered for the sake of convenience which are that, the assessee filed return of income at an income of ‘NIL’ but paid taxes on income of Rs. 4,16,26,187/- u/s 115JB of the Act. Assessment order u/s 143(3) of the Income Tax Act, 1961 (‘Act’ for short) was passed on 26/12/2017 at an income of Rs.72,90,000/- at normal provision and Rs. 4,16,26,187/- u/s 115JB of the Act. Subsequently, it is found by the A.O. that the assessee received subsidy of Rs. 4,86,00,000/- as financial support for encouraging setting up of SHP Project from Government of Himachal Pradesh and Haryana, accordingly the case was reopened u/s 147 of the Act and notice u/s 148 of the Act was issued thereafter the assessment order came to be passed u/s 147/143(3) of the Act, wherein the depreciation of 7 ITA. 6971/Del/2018 AND ITA. 7726/Del/2019 Puri Oil Mills Ltd., New Delhi. Rs. 72,90,000/- claimed on assets purchased from the amount of subsidy received from Central Government has been disallowed and added back to the income of the assessee. Aggrieved by the assessment order dated 26/12/2017, the assessee preferred an appeal before the CIT(A). The Ld.CIT(A) vide order dated 05/09/2018 dismissed the appeal filed by the assessee on 05/09/2018. 5. As against the order of the CIT(A) dated 05/09/2018, the assessee is on Appeal before us on the grounds mentioned above. 6. In the Ground No. 1, the assessee challenged initiation of reassessment proceedings u/s 147/148 of the Act. The Ld. counsel for the assessee submitted that the CIT(A) has committed error in upholding the order of the Assessing Officer in initiating the reassessment proceedings on mere change of opinion and on review subsequently of a completed assessment u/s 143(3) of the Act, on the same material facts as stood categorically disclosed in the Audited Financial Statements and tax Audit Report u/s 44AB of the Act. Further the specific reply was also placed on record on due query raised by the A.O. during the course of original Assessment proceedings made 143(3) of the Act in respect of the Central subsidy amount, accounted and treated as capital subsidy and also in respect of calculation of depreciation on such Assets without adjusting the amount of the said Capital subsidy from the cost of the Assets. The Ld. Counsel for the assessee has drawn our attention to the original assessment records, original assessment order and the reasons 8 ITA. 6971/Del/2018 AND ITA. 7726/Del/2019 Puri Oil Mills Ltd., New Delhi. recorded in the reassessment proceedings and submitted that the initiation of reassessment proceedings is contrary to law. Further addressing on argument on Ground No. 5 submitted that the CIT(A) erred in law while upholding the application of provision of Section 2(24) sub-section (xviii), which amendment have prospective application w.e.f 1.4.2016 for the Ay 2016-17. The Ld. Counsel relied on the judgment of Hon’ble Calcutta high Court in the case of Pr. Commissioner of Income Tax Vs. Ankit Metal & Power Ltd. reported in (2019) 182 DTR (Cal) 333. 7. On the other hand, the Ld. DR submitted that the reopening is in accordance with the provisions of the Act which cannot be found fault with. There was sufficient reason to believe that income had escapement assessment and proceedings were initiated after recording reasons and submitted that the reassessment is valid if there is a prima facie reason to believe that income had escaped assessment. It is the case of the Department that after the amendment of Section 147 w.e.f. 01/04/1989 the scope of Section 147 of the Act has been considerably widened the only requirement under the amended Section is that A.O. must have reason to believe that any income chargeable to tax has escaped assessment for any assessment year. Therefore submitted that, the initiation of proceedings u/s 147/143(3) of the Act is in accordance with law. 9 ITA. 6971/Del/2018 AND ITA. 7726/Del/2019 Puri Oil Mills Ltd., New Delhi. 8. We have heard the parties and perused the material available on record. 9. It is emerges from the record that, originally the assessment order u/s 143(3) of the Act was passed on 30/03/2015 assessing the income of the Assessee at Rs. 53,59,780/- at normal provision and Rs. 4,16,26,187/- u/s 115JB of the Act. Subsequent to passing of the assessment order, the Ld. A.O. noticed that the Assessee received subsidy of Rs. 4,86,00,000/- as financial support for encouraging setting up SHP Project from Government of Himachal Pradesh and Haryana. Accordingly, the case was reopened u/s 147 and notice u/s 148 of the Act was issued to the Assessee 10. As per the reasons recorded the Assessing Officer, the A.O. had reason to belief that the income has been escaped for the Assessment Year 2012-13 for following reasons:- 1. In this cases, it was noticed that the assessee filed its return of income on 29/09/2012 at an income of Rs. NIL but paid taxes on income of Rs. 4,16,26,187/- u/s 115JB. The assessment order u/s 143(3) was passed on 30/03/2015 at an income of Rs. 53,59,780/- at normal income and Rs. 4,16,26,187/- at income u/s 115JB. 2. Subsequently", it was noticed that the assesses received subsidy of Rs. 4,55,00.000/ - as financial support for encouraging setting up of (1.40KW) SHP Project from Government of Himachal Pradesh and Haryana. The assesses has neither treated the subsidy received as revenue income nor reduced the value of depreciable assets from ‘actual cast. Thereafter, the assessee had failed to disclose fully arid truly dl material facts necessary' for its assessment for A Y 2012-13. 3. Section 5 of the Income Tax Act, 196!, provides that the total income of the person for previous year includes at income from whatever sources derived which is received or deemed to be 10 ITA. 6971/Del/2018 AND ITA. 7726/Del/2019 Puri Oil Mills Ltd., New Delhi. received or which accrues or arises during such previous year unless specifically exempted from tax under the provisions of Act. 4. Prior to the amendments made in Finance Act 2015, Court had settled the law on the ' distinction between subsidy of a capital nature and that of a revenue nature. The Hon'ble Supreme Court in the case of Sohnay Steel A Presswork’s Limited and Ponni Sugars A Chemicals Limited hove principally applied the ‘motive’ or ‘purpose; test to determine the nature of subsidy. If the object of the subsidy scheme is to enable the tax payer To run the business mare profitably or reimburse the costs incurred in running the business, then the subsidy would qualify as taxable revenue receipt. On the other hand, if the object of the assistance under the subsidy scheme is to enable the tax payer to set up a new unit or to expand the existing unit then the subsidy would qualify as capital receipt. Capital subsidies were held as not taxable - subject, to reduction from actual cost of asset in case of depreciable assets. Finance Act, 2015 w.e.f. 01.04.2016 with due insertion of Sub Clouse (xviii) in section 2(24} of the. Income Tax Act, 1961 providing an inclusive definition of the expression 'Income' under the taxing law. 5. In view of the above, it is dear that the assesses has claimed excess depreciation amounting to Rs 72,90 000/-on Plant A Machinery as the assesses has received subsidy on new set up of plant A machinery in, the-month of August, 2011 and the assesses had not reduced the cost of Plant A machinery. As per Explanation 2(c) to section 147, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment; "(c) where, an assessment has hem made, but --- (i) income chargeable to tax has been under assessed: or: (ii) such income has been assessed at too low a rate: or (iii) such income has been made the subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowanceunder this Act has been computed.” 11. It is the specific case of the assessee is that the Assessing Officer initiated the reassessment proceedings on mere change of opinion and the assessee had disclosed in the audited financial statement and tax audit report 11 ITA. 6971/Del/2018 AND ITA. 7726/Del/2019 Puri Oil Mills Ltd., New Delhi. on due query has been raised in the original assessment proceedings. Further, it is the case of the assessee that the assessee Company had disclosed all primary facts, in respect of the receipt/accrual of Central Capital subsidy in respect of the Power Projects set up in the State of Himachal Pradesh/Haryana etc, the terms of the declared policy of the Ministry of New & Renewal Energy, Govt. of India and the Accounting treatment of the said Central Capital Subsidy has been disclosed in the Audited Financial statements, vide the relevant Statutory Auditor's Note No. 42-read with-note No. 13 (e) and 14(f) of Tax Audit Report of Form 3CD. 12. We have gone through the audited financial statement wherein Note. No. 42 forming part of audited financial statement for the year ended 31/03/2012, the auditor stated as under:- “The company in accordance with AS-12 issued by Institute of Chartered Accountant of India has accounted for Capital Subsidy in respect of Hydro Power Project at Khukhani, Mussapur and Chakshi. Total capital subsidy of Rs.486 lacs received /receivable from MNRE (Ministry of New and Renewal Energy) have been credited to Capital Reserve.” 13. The copy of the statement of particulars in form 3CD being an integral part of the tax audit report u/s 44AB of the Act for the Financial year ended on 31/03/2012 produced before the A.O. during the original assessment proceeding and Para Serial No. 13(e) & 14(f) reads as under:- 12 ITA. 6971/Del/2018 AND ITA. 7726/Del/2019 Puri Oil Mills Ltd., New Delhi. “Capital Receipt: Capital subsidy of Rs.4,86,00,000/- received /receivable in respect of Hydro Power Projects credited to the Capital Reserve Account (Refer Note 42 of the Financial statement) Para 14(f): The assessee is of the view that capital subsidy received for setting up of Hydro Power Units have not been reduced from cost of fixed assets relying on decision of Honorable Supreme Court judgement in case of CIT vs P.J. Chemical Ltd and ITAT Vishakhapatnam Bench judgement in case of Sasisri Extractions Ltd vs ACIT(2008) 307 ITR(AT) 127.” 14. Further, during the original assessment proceedings a specific query has been raised by the A.O. u/s 143(3) of the Act for which a submission has been filed by the Assessee on 11/02/2015, wherein in Para 5 & 6 the subject matter of treatment of capacity subsidy received/accrued of Rs. 4.80 crore along with the copy of the Notification No. 14(1) 2001/SAP dated 11/12/2009 issued by Ministry of New and Renewal Energy (MNRE) explaining the status of receipt/accrual of the said capacity subsidy was duly filed along with citation in support of the treating the said amount of the subsidy as capital receipt which is reproduced as under:- “ During the year, the company has capitalized interest amounting to Rs. 17,363,114/- on borrowings in respect of Hydro Power Projects in accordance with AS 16 issued by the institute of Chartered Accountants of India and has not been claimed expenditure. Please refer Annexure 3 above. 13 ITA. 6971/Del/2018 AND ITA. 7726/Del/2019 Puri Oil Mills Ltd., New Delhi. Regarding capital subsidy amounting to Rs. 4.86 Croros credited to reserve account it is submitted that during the year the assessee has received part amount of such subsidy - Rs, 2.43 Crore and balance amount of Rs. 2.43 Crore is shown as capital subsidy receivable. Such capital subsidy relates to the hydro projects of the assessee. The Hydro projects are eligible for capital subsidy as per the Notification No. 14 (1)/2008-SHP dated 11.12.2009 issued by Ministry bf New & Renewable Energy (‘MNRE’). Copy of this notification along with its Annexure B is attached as Annexure 4. Also, copy of >n letters for such capital subsidy from MNRE are enclosed as jure 5. The subsidy is given as a financial support for [aging setting up of new Small Hydro Power Projects (‘SHPs’) by the MNRE. The quantum of subsidy if linked with the capacity of the project (See annexure B of the Notification). Your good self’s attention is invited to the heading of annexure B to the notification of MNRE which reads as under:- “Scheme for Financial support to set up new SHP Projects.......” Also subject of sanction letters from MNRE reads as under: “Proposal for sanction and release of capital subsidy for setting up of ......SHP Projects.” Since the subsidy is granted for promotion of setting up of the SHPS, is in the nature of capital receipt. Also, such treatment is in accordance with the Accounting Standard 12 "Accounting for Government Grants" issue by ICAI The assessee's case is squarely covered by the decision of the Apex Court reported in 306 ITR 392 (SC) in the case of CIT V Ponni Sugars and Chemicals Ltd. It was held that: 14 ITA. 6971/Del/2018 AND ITA. 7726/Del/2019 Puri Oil Mills Ltd., New Delhi. The character of the receipt of subsidy in the hands of the assessee under scheme has to be determined with respect to the purpose for which subsidy is granted. In other words, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is immaterial. If the object of the subsidy is to enable he assessee to run the business more profitably then the receipt on revenue account. On the other hand, if the object of the assistance under the subsidy scheme is to enable the assessee to set up a new unit or to expand and existing unit then the receipt of the subsidy would be on capital account." The assessee also relies upon the following judicial precedents in its favor 1) Dy. CT v. Reliance Industries Ltd. (Mum)-SB 88 ITD 273 2) CIT v Reliance Industries Ltd. (Bom)-339 ITR 632 3. Balaji Alloys & Ors. Vs. CIT(A) (J & K) 333 ITR 335 15. The documents produced by the assessee and the contentions raised by the assessee had been adjudicated by the A.O. during the original assessment wherein the A.O. has specifically examined the issue of capital subsidy received/accrued of Rs.4.80 Crore and the Ld. A.O. has not made the addition on the said count, accordingly passed the assessment order on 30/03/2015 u/s 143(3) of the Act for the Assessment Year 2012-13. 16. The case of the Assessee was reopened u/s 147 and notice u/s 148 dated 01/03/2017 had been issued and made the addition by the A.O. in following manner:- 15 ITA. 6971/Del/2018 AND ITA. 7726/Del/2019 Puri Oil Mills Ltd., New Delhi. “4.13. Assesses was asked to identify the assets which were purchased and put to use with the amount received as subsidy from MNRE vide questionnaire dated 28.11.2017. However, in response to the questionnaire no specific information w.r.t. the fixed assets were provided by the assessee. Further, from the documents produced with respect to the capital subsidy received, it was found that the subsidy was given for the purpose of commissioning the small hydro power projects only. Therefore, in view of this it can be deduced that the sum of Rs. 4.86 crore was not 'reduced from the actual cost of the asset. Further, due to this fact, assessee while accounting for depreciation has claimed excess depreciation of Rs. 72,90,000/-. In view of the above, the excess depreciation of Rs. 72,90,000/- claimed on assets purchased from the amount of subsidy received 'from Central Government is being disallowed and added back to the income of the assessee. Further the onus to file true and correct particulars of income always lies on the assessee which in the current case is not the situation and therefore I am satisfied that the assessee has furnished inaccurate particular of income. Hence, penalty proceedings u/s 271 (l)(c) is being initiated separately for furnishing inaccurate particular of income.” The said addition made by the A.O. has been confirmed by the CIT(A) in the order impugned. 17. From the above, it is found that the assessee had disclosed details, nature and accounting of central subsidy sanctioned and released for setting up the small hydro project under Renewal Energy Scheme of the Ministry of 16 ITA. 6971/Del/2018 AND ITA. 7726/Del/2019 Puri Oil Mills Ltd., New Delhi. New Renewal Energy, Government of India, but no addition was made by the A.O. after making detail examination of the documents. Thus, in our opinion, the reassessment proceedings are merely on the change of opinion of the Assessing Officer which the original assessment u/s 143(3) of the Act was completed after due consideration of the facts. 18. It is well settled law that the Assessing Officer cannot invoke the provisions of Section 147 & 148 of the Act merely on the change of opinion wherein the original assessment u/s 143(3) of the Act was completed after due consideration of the facts. The Co-ordinate Bench of the Tribunal in ITA No. 473/Del/2017 in the case of Anant Raj Ltd. Vs. DCIT reported in (2021) 226 DTR 33 held as under:- “Reassessment -Full and true disclosure-Absence of new tangible material- Assessee had declared long-term capital gain on sale of the property - It placed on record all evidences to show that the information submitted by it were correct, property was held for a period of more than three years, rent was received from the said property and no depreciation at all was claimed on the property - All documents were part of the returns of income at tax audit report filed before the Revenue - These evidences clearly show that the assessee made a true and full disclosure of facts regarding the sale of the assets and depreciation thereon which were very much part of the assessment records and the same had been examined by the AO in the original assessment proceedings- Neither the AO nor the Departmental Representative pointed out any discrepancy in the above mentioned information submitted by the assessee to the 17 ITA. 6971/Del/2018 AND ITA. 7726/Del/2019 Puri Oil Mills Ltd., New Delhi. Revenue authorities nor they brought any evidence on record to show that the said information in the assessment order Assessment cannot be reopened on the basis of mere change of opinion on the same set of facts on record - In this case, there was true and full disclosure of facts and no new information came to the knowledge of the A.O. Therefore, the reopening of - assessment was invalid." 19. Further, the Hon'ble Supreme Court in the case of CIT Vs. Kelvinator of India Ltd. (2010) 320 ITR 561 S.C, while deciding the question whether the concept of “change of opinion” stands obliterated with effect from 1 st April, 1989, i.e., after substitution of Section 147 of the Income Tax Act, 1961 by Direct Tax Laws (Amendment) Act, 1987 held as under:- “On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1st April, 1989], they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re-open the assessment. Therefore, post-1st April, 1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere change of opinion", which cannot be per se reason to re- open. We must also keep in mind the conceptual difference between 18 ITA. 6971/Del/2018 AND ITA. 7726/Del/2019 Puri Oil Mills Ltd., New Delhi. power to review and power to reassess. The Assessing Officer has no power to review; he has the power to re-assess. But reassessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to Section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in Section 147 of the Act. However, on receipt of representations from the Companies against omission of the words "reason to believe", Parliament re-introduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the Assessing Officer. We quote here in below the relevant portion of Circular No.549 dated 31st October, 1989, which reads as follows: "7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression `reason to believe' in Section 147. --A number of representations were received against the omission of the words `reason to believe' from Section 147 and their substitution by the `opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, `reason to believe' had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay 19 ITA. 6971/Del/2018 AND ITA. 7726/Del/2019 Puri Oil Mills Ltd., New Delhi. these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression `has reason to believe' in place of the words `for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new section 147, however, remain the same." For the afore-stated reasons, we see no merit in these civil appeals filed by the Department, hence, dismissed with no order as to costs.” 20. The Hon’ble High Court of Delhi at New Delhi in the case of D.T & T.D. C. Ltd. Vs. ACIT 232 CTR 260 (Del) held as under:- “9. We may also point out that insofar as the assessment year 1997- 98 and 1998-99 are concerned, the same would require application of the proviso to Section 147 of the said Act, inasmuch as the notices under Section 148 of the said Act in respect of these two years have been issued beyond the period of four years prescribed in the said provision. That being the case, before the Assessing Officer could acquire jurisdiction for reopening the assessments in respect of these two years, it would have to be shown that the assessee did not file a return or that he did not make a full and true disclosure. It is an admitted position that the assessee had filed a return, therefore, the only question which remains to be open is whether the assessee made a full and true disclosure or not. In the present case there is no allegation in the reasons recorded by the Assessing Officer that the assessee had failed to make a full and true disclosure of the relevant facts. In fact, there could be no such allegation because the assessee had clearly indicated the nature and contents of the TIUF and the treatment given by the assessee in its books of accounts. The same had also been examined by the Assessing Officer as aforesaid. Thus, in respect of the assessment 20 ITA. 6971/Del/2018 AND ITA. 7726/Del/2019 Puri Oil Mills Ltd., New Delhi. years 1997-98 and 1998-99 this additional ground is also available in favour of the assessee/petitioner. 10. The position that a mere change of opinion would not entitle an Assessing Officer to reopen a completed assessment is well settled. The latest decision being of the Supreme Court in Civil Appeal No.2009-2011 of 2003 and Civil Appeal No. 2520 of 2008 decided on 18th January, 2010 which approves this Court‟s Full Bench decision in the case of Commissioner of Income Tax vs. Kelvinator of India Limited:256 ITR 1 (Del.) (HC). The power of re-assessment is different from the power of review. The Assessing Officer has been given the power to re-asses under Section 147 upon certain conditions being satisfied. The Assessing Officer does not have the power of review. If a change of opinion were to be permitted as a ground for re-assessment then it would amount to granting a licence to the Assessing Officer to „review‟ his decisions, which power he does not have. 11. Consequently, holding that initiation of the proceedings in question was based entirely on change of opinion, we find that the re-assessment proceedings are without jurisdiction. The notices under Section 147 /148 of the said Act and the proceedings pursuant thereto stand quashed. We make it clear that in this writ petition we have considered the case only from the stand point of jurisdiction and not on the merits of the issues with regard to taxability of the amount transferred to TIUF.” 21 ITA. 6971/Del/2018 AND ITA. 7726/Del/2019 Puri Oil Mills Ltd., New Delhi. 21. The Jurisdictional High Court in the case of CIT-VI, New Delhi Vs. Usha International Ltd. (2012) 348 ITR 485 (Delhi High Court) “Now we examine the claim of the assessee regarding this contention that reopening is on mere change of opinion. Reliance has been placed on a judgment of Hon'ble Delhi High Court rendered in the case of Usha International Ltd. (supra). Para 13 to 17 of this judgment are relevant for the dispute in present case and the same are reproduced below for the sake of ready reference:- "13. It is, therefore, clear from the aforesaid position that : (1) Reassessment proceedings can be validly initiated in case return of income is processed under section 143(1) and no scrutiny assessment is undertaken. In such cases there is no change of opinion. (2) Reassessment proceedings will be invalid in case the assessment order itself records that the issue was raised and is decided in favour of the assessee. Reassessment proceedings in the said cases will be hit by the principle of "change of opinion". (3) Reassessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer does not make any addition in the assessment order. In such situations it should be accepted that the issue was examined but the Assessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. 22 ITA. 6971/Del/2018 AND ITA. 7726/Del/2019 Puri Oil Mills Ltd., New Delhi. 6.1 As per above paras from this judgment of Full Bench of Hon'ble Delhi High Court, it is seen that it was held in this case that reassessment proceedings will be invalid in case the assessment order itself records that the issue was raised and is decided in favour of the assessee because in that situation the reassessment proceedings will be hit by the principle of change of opinion. Similarly, in that situation where query is raised and answered by the assessee in original assessment proceedings, and thereafter, the Assessing Officer does not make any addition in the assessment order, the reassessment proceedings will be invalid in that scenario also, it has to be accepted that the Assessing Officer had formed an opinion in the original assessment although he had not recorded his reasons for forming opinion but still this is a change of opinion if the Assessing Officer starts the reassessment proceedings for the same issue. In the light of this, now we examine the facts of the present case. As per the original assessment order passed by Assessing Officer u/s 143(3) dated 11/12/2008, it is seen that it is noted by Assessing Officer on page No. 2 of this assessment order that queries were raised vide letter dated 12/11/2008. The queries are reproduced by the Assessing Officer on pages 2 of the assessment order and one of the queries was that the assessee was asked to explain as to why the prior years expenses should not be disallowed. The reply of the assessee before the Assessing Officer are also reproduced by the Assessing Officer on pages 2 & 3 of that assessment year and in the reply para 4, it was submitted by the assessee before the Assessing Officer that prior year expenses should be allowed as deduction because the same are in the nature of business expenses for which liability arose during the present year under question. Even after making this query and receiving 23 ITA. 6971/Del/2018 AND ITA. 7726/Del/2019 Puri Oil Mills Ltd., New Delhi. reply from the assessee, no addition was made by the Assessing Officer in the assessment order u/s 143(3) dated 11/12/2008 on account of prior period expenses. But still it has to be accepted that opinion was formed by the Assessing Officer although the reasons for forming an opinion is not available in the assessment order u/s 143(3) of the Act. Hence, this judgment of full Bench of Hon'ble Delhi High Court rendered in the case of Usha International Ltd. (supra) is squarely applicable in the present case and hence, respectfully following this judgment of Hon'ble Delhi High Court, we hold that in the present case, reopening is on mere change of opinion and therefore, not valid. These grounds of the assessee are allowed.” 22. In view of the above facts and circumstances, we are of the opinion that the reassessment proceedings initiated by the A.O. u/s 147/148 of the Act on mere change of opinion and review. Thus, we find merit in Ground No. 1 of the assessee, accordingly, we allow Ground No. 1 of the assessee quash the assessment order and the order of the CIT(A). 23. In so far as Ground No. 5 of the Assessee is regarding the applicability of amended provision of Section 2(24) sub-section (xviii). The Hon’ble Calcutta High Court in the case of Pr. Commissioner of Income Tax Vs. Ankit Metal & Power Ltd. reported in (2019) 182 DTR (Cal) 333, held that the amendment to Section 2(24) w.e.f. 01.04.2016 is having prospective effect in following manners:- “31. Accordingly we hold the aforesaid incentive subsidies are 'capital receipts' and is not an 'income' liable to be taxed in relevant 24 ITA. 6971/Del/2018 AND ITA. 7726/Del/2019 Puri Oil Mills Ltd., New Delhi. assessment year 2010-11 on the basis of discussion made above and further taking into consideration the definition of Income under Section 2(24) of the Income Tax Act, 1961, where sub- clause (xviii) has been inserted including 'subsidy' for the first time by Finance Act, 2015 w.e.f. April, 2016 i.e assessment year 2016- 17. The amendment has prospective effect and had no effect on the law on the subject discussed above applicable to the subject assessment years.” By respectfully following the ratio laid down in the case of Ankit Metal (supra), we allow the Ground No. 5 of the Assessee. Since, we have allowed the Ground No. 1 & 5 by quashing the addition, other grounds of the Assessee requires no adjudication. In the result, the appeal of the assessee is partly allowed. ITA No. 7726/Del/2019 (A.Y 2013-14) 24. Brief facts of the case as per the assessment order are as under:- The assessee filed its return of income at an income of Rs. 6,96,13,880/- under normal provisions and Rs. 9,90,59,286/- u/s 115JB. The assessment order u/s 143(3) of the Act was passed on 01/03/2016 at an income of Rs. 6,96,13,880/- under normal provisions of the Act. Subsequently, it was noticed that the assessee received subsidy of Rs. 4,86,00,000/- as financial support for encouraging setting up of (1.40MV) SHP Project from Government of Himachal Pradesh and Haryana during FY 2011-12. The assessee had neither treated the subsidy received as revenue income nor reduced the value 25 ITA. 6971/Del/2018 AND ITA. 7726/Del/2019 Puri Oil Mills Ltd., New Delhi. of depreciable assets from 'actual cost’. The case of the assessee was reopened u/s 147 for the AY 2012-13 and reassessment proceedings-were completed by the AO. As the assessee treated the subsidy received as revenue receipt nor reduced the value of the depreciable assets from the ‘Actual cost’, therefore excess depreciation of Rs. 72,90,000/- claimed by the assessed was disallowed by the AO during the reassessment proceedings for- the AY 2012-13. Subsequently on perusal of ITR of the assessee for the AY 2013-14 as well, it found that the same treatment of the subsidy received from the Govt. has been done by the assessee during the Financial Year 2012-13, i.e. the assessee has claimed depreciation on the plant & machinery during the F 2012-13 while no treatment of the subsidy received from the Government has been shown by the assessee in its ITR. Therefore, notice u/s 148 dated 28.04.2017 was issued. The said notice u/s 148 was served upon the Assessee. The assessee vide his letter dated 01.05.2017 received in the office on 11.05.2017 submitted that the return filed originally for the AY 2013-14 shall considered return filed against notice u/s 148 of the IT Act, 1961. Thereafter notice u/s 143(2) was issued to the assessee and the representative of the assessee attended the proceedings and filed the basic details as called. 25. The assessment order came to be passed by making disallowance of depreciation of Rs.72.90 lacs in respect of receipt/actual of central capacity subsidy amount on the power project. The said addition has been confirmed 26 ITA. 6971/Del/2018 AND ITA. 7726/Del/2019 Puri Oil Mills Ltd., New Delhi. by the CIT(A). The primary basis for reopening in the year under consideration is that the same set of facts the record has been found for the Assessment Year 2012-13. The said issue has already been decided in favour of the assessee in ITA No. 6971/Del/2019. 26. Even in the present assessment year under consideration, considering the fact that the assessee had disclosed details, nature and accounting of central subsidy sanction for setting up of the hydro power project but no addition has been made by the A.O. in the original assessment proceedings. The reassessment proceedings in the Assessment Year 2012-13 has been elaborately consideration in Ground No. 1 & 5 of the Assessee’s Appeal in ITA No. 6971/Del/2018 and considering the fact that the issue involved in the Ground No. 1 & 5 of the Assessee’s Appeal in Assessment Year 2012-13 and 2013-14 being identical, in view of quashing reopening and the assessment order passed u/s 147/143(3) of the Act in the Assessment Year 2012-13, by applying the same ratio, the decisions mutatis mutandis applies to AY 2013-14. Accordingly, the Ground No. 1 & 5 of the Assessee challenging the initiation of reassessment proceedings is hereby allowed and the addition made by the A.O. which was sustained by the CIT(A) is hereby quashed. Since, we have allowed the Ground No. 1 & 5 and quashed the addition, other grounds of the Assessee requires no adjudication. 27 ITA. 6971/Del/2018 AND ITA. 7726/Del/2019 Puri Oil Mills Ltd., New Delhi. 27. In the result, the appeal of the assessee is partly allowed. Order pronounced in the Open Court on : 30.06.2023. Sd/- Sd/- (Dr. B. R. R. KUMAR) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 30/06/2023 *MEHTA/R.N, Sr. PS Copy forwarded to : 1. Appellant 2. Respondent 3. CIT 4. CIT (Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI