SYLVAN GREENS PRIVATE LIMITED,JAIPUR V. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 6, JAIPUR

ITA 414/JPR/2025

AI Insights

The case involves Sylvan Greens Private Ltd., which appealed against the order of the CIT(A) confirming the addition of Rs. 71,86,388 as income, representing a subsidy received from the Himachal Pradesh State Government. The subsidy was initially treated as a capital receipt but was later added to the income by the AO, who reopened the assessment under Section 147 of the Income Tax Act, 1961. The Tribunal found that the reopening was based on a change of opinion without new tangible material, and the procedural requirements under the amended provisions of the Act were not met, leading to the quashing of the assessment order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 711875 (ITAT-JAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2015-2016
• Other Referred Cases: Sahney Steel & Press Works vs CIT, Commissioner of Income-tax, Delhi V. Kelvinator of India Ltd, Deputy Commissioner of Income Tax V Pandesara Infrastructure Ltd, Commissioner of Income-tax, Chennai V India Cements Ltd, Kedarnath Jute Mfg. Co. Ltd. V Commissioner of Income-tax, Crystal Crop Protection (P.) Ltd V Principal Commissioner of Income-tax, Principal Commissioner of Income-tax V. Budge Budge Refineries Ltd., Shiv Shakti Flour Mills (P.) Ltd V Commissioner of Income-tax, Assam, Shree Balaji Alloys V Commissioner of Income-tax, Principal Commissioner of Income-tax, Ajmer v Nitin Spinners Ltd, ITAT Jaipur Bench in the case of Shree Cement Ltd. V. Additional Commissioner of Income-tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GORAV AVASTHI
• Assessee Lawyers: NEELAM BHALA
• Keywords: Business income; Difference of opinion; Change of opinion; Capital asset; Opportunity of being heard; Reassessment proceedings; Question of law; Depreciation; Capital receipt; Period of limitation; Reopening of assessment; Principle of natural justice; Rectification of order; Assessment record; Competent authority; Reason to believe; Tangible material
• Section: 147; 148; 143(3); 142(1); 154; 271(1)(c); 139

Judgement Text

"vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,’’B” JAIPUR Mk0 ,l- lhrky{eh]U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;djvihyla-@ITA No.414/JPR/2025 fu/kZkj.ko\"kZ@AssessmentYear : 2015-16 Sylvan Greens Private Ltd. 4-A, Kamla Nehru Market East Ajmeri Gate, Jaipur – 302 004 cuke Vs. The DCIT Circle-6 Jaipur LFkk;hys[kk la-@thvkbZvkjla-@PAN/GIR No.: AAFCS5914 H vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksjls@Assesseeby :Smt. Neelam Bhala, Advocate jktLo dh vksjls@Revenue by: Shri Gorav Avasthi, JCIT-DR lquokbZ dh rkjh[k@Date of Hearing : 03/07/2025 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement : 25 /07 /2025 vkns'k@ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal filed by the assessee is directed against the order of the ld. CIT(A) dated 21-01-2025, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2015-16 raising therein following grounds of appeal. ‘’1. That in absence of signature of the person who has recorded the reason on the annexure appended along with approval where reason for reopening the assessment mentioned the reopening of assessment by the Ld. AO is void ab- initio and is unsustainable in law and on facts and liable to be quashed. Printed from counselvise.com 2 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR 2. That the Ld. AO seriously erred in reopening the assessment only on the basis of change of opinion while all the material on the basis of the Ld AO reopen the assessment had already been provided during the course of scrutiny assessment u/s 143(3) of the Act and the order passed by the Ld AO deserves to be quashed. 3. That the Ld. AO has not find any additional / tangible material which were not provided by the assessee neither during the course of scrutiny assessment proceedings under section 143(3) of the Act, nor during any enquiry by the assessee. Hence the assessment proceedings initiated under section 147/148 of the Act are not according to the law and facts of the case. 4. That The Ld AO has reason to believe recorded only on surmises is contrary to the provisions of law and facts of the case and the same kindly be quashed. 5. That the Notice issued under section 148 beyond time limit are not according to the law and facts of the case and the same kindly be quashed. 6. That the Ld AO has seriously erred in law and facts of the case, being proceedings initiated u/s 147/148 not complied the provisions of the Act amended by the Finance Act 2021, though the notice is served on or after 01 April 2021 7. The Ld AO had seriously erred in adding Subsidy received Rs. 7186388 as business income only on the basis of surmises, without passing the speaking order regarding to all objections raised by the assessee, without considering the object for which subsidy was given, without following the proper procedure with respect with respect to reassessment and without giving the deduction under section 801C, are not according to the law and facts of the case. 8. That the order passed under section 250 of Income Tax Act by the Ld Commissioner of Income Tax (Appeals) without providing the proper opportunity of being heard, is contrary to the principles of natural justice and equity and liable to be quashed. 2.1 Brief facts of the case are that the assessee company is engaged in the business of manufacturing Kraft Paper in the State of Himachal Pradesh. The assessee had filed its original Income Tax Return on 28-09- 2015 for the assessment year 2015-16 thereby declaring total income at Rs.64,21,420/- under the head of Income from Business and Interest Printed from counselvise.com 3 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR Income. The case of the assessee was selected for scrutiny assessment through CASS and the assessment proceedings u/s 143(3) of the Act were completed on 21-11-2017 accepting returned income/loss. The AO, thereafter on perusal of the records available with him, noted that during assessment the assessee had received a subsidy of capital nature of Rs.71,86,388/- and the same is directly added under the head ‘Reseve and Surplus’ of the balance sheet for the year ending on 31-03-2015. The assessee had not reduced the subsidy amount from WDV of assets and claimed depreciation leading to the excess claim of depreciation of Rs.10,77,958/-. The assessee was required to subtract the subsidy amount from the assets to ascertain the WDV assets. Accordingly, the assessment was reopened u/s 147 of the Act after recording the reasons for reopening and obtaining approval from the competent authority. 2.2 The notice u/s 148 of the Act was issued and duly served on the assessee on 31-03-2021. In response, the assessee was required to furnish its return of income within 30 days from the date of service of notice but the assessee did not file for which the assessee was again notice u/s 142(1) was issued on 13-07-2021 requiring the assessee to file its return of income. In response to the same, the assessee firm had filed its return of Printed from counselvise.com 4 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR income for the assessment year 2015-16 on 28-07-2021 declaring total income at Rs. 64,21,420/-. Further, the case had been transferred to National Faceless Assessment Unit on 11-11-2021 to complete assessment proceedings in a faceless manner. Subsequently, notice u/s 143(2) of the Act dated 9-12-2021 along with the reasons for reopening the case had been issued and served on the assessee. The assessee did not respond to the notices. Thus on perusal of the balance sheet, ld. AO noticed that the assessee had shown subsidy received from the Himachal State Government in the form of VAT exemption of Rs.71,86,388/- as Capital Receipt under the head ‘’Reserve and Surplus’’. It is noted that the AO vide notice u/s 142(1) dated 9-12-2021 and 30-12-2021 required the assessee to furnish the requisite details. In response to the same, the assessee vide letter dated 24-01-2022 stated that the subsidy received by the assessee in the form of VAT exemption given by the Himachal Pradesh State Govt. to promote establishment of new Unit/ expansion of existing unit in the State of Himachal Pradesh in such area (Baddi). The assessee has to pay 65% of its Gross VAT Liability and balance 35% is exempted by the Govt. which is credited to subsidy account by the assessee. The assesse had also furnished copies of letter issued by the concerned Department and copies of all months VAT returns along with details of Printed from counselvise.com 5 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR subsidy received. In this case it is noted the AO in view of the entirety of the facts and circumstances of the case made addition of Rs.71,86,388/- by observing as under:- ‘’8. Considering the above facts and circumstances, the assessee was afforded final opportunity vide show cause notice dated 19.03.2022 for compliance 23.03.2022 as to why the assessment should not be completed as per Draft Assessment Order. In response to the same vide letter dated 23.03.2022 the assessee has raised preliminary objection on validity of notice under section 143 of the IT. Act The objections raised by the assessee at the fag-end of the time barring date and after receipt of showcase robics are dealt hereunder Objection of assessee (1) As the assessee had already been demanded alongwith his reply submitted on 24th Jan 2022 the reason to believe along with requisite permission of competent authority. Today now the assessce going to file its reply to the show cause notice issued on 19th March 2022 find that on E proceeding tab reason recorded along with your letter having DIN ITBA/AST/F/17/2021-22/1039509763(1) dated 18.02.2022 available but the same was not sent served to assesseet data through email/ message Hence the assessee would like to request that the date on which you have provided the reason recorded kindly be considered on 23rd march 2022 approval u/s 151 appended to the notice Designation of the person mentioned in Proposal Detail ACIT/DCIT Cir-6 Jaipur, hence Designation not clear the annexure appended along with approval where reason for reopening the assessment mentioned, signature of the person who has recorded the reason are not available Reply: In this regard, it is to mention here that the reasons recorded for opening has been provided to the assessee vide notice is 143(2) 09.12.2021. Further, on request of the assessee, the reasons along approval u/s. 151 of the IT Act was again provided to the assessee vide letter bearing DIN ITBA AST/F/17/2021- 22/1039909763(1) dated 18.02.2022 which has been delivered to the assessee on the same day through is registered mail-id. Screenshot of delivery status is hereunder:- Printed from counselvise.com 6 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR Printed from counselvise.com 7 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR The assessee has further stated that the designation in the u/s 151 appended to the notice the designation i.e. ACIT/DCIT Cir 6 Jaipur is not clear The ACIT/DCIT is only the rank based designation in the department. Further it is to mention that the approval u/s. 151 is a system generated bearing all the name of the approving authorities. Objection No.(2) The assessee has stated that the Ld AO has only analyzed the ITR, balance sheet and P&L Account and formed the opinion that subsidy directly added to the Reserve & Surplus related to fixed assets and capital nature. Though ITR, balance sheet and P&L account has already bear provided by the assessee during the course of scrutiny assessment proceedings u/s.143(3) of the Act. More change of opinion cannot be the basis to reopen the assessment under section 148 of the Act. Reply: Under explanation 1 to the provisions of Section 147 says, mere production material evidence could have been discovered by the Ld AO not necessarily amount to disclosure of true & full facts of a particlar case. The question whether disclosure was made fully and truly depends upon the facts and circumstances of each case Where primary facts lie hidden or Immersed in the record including the books of accounts, which are filed o produced before an assessing authonty either along with the return o subsequently it may require detailed exercise and deep study to discem, perceive and detect or uncover the same. Therefore, such type of disclosure cannot sald to be a true and full disclosure of primary facts or material evidences within the meaning of explanation 1 to section 147 of the Act, to enable the assessing officer to assess the income Objection No.(3) The assessee has challenged the date of service of notice u/s,148 dated 31.03 2021, which was served on the assessee on 01.04.201 by stating that the provisions of the Act amended by the Finance Act. 2021 applicable on the assessee. Reply: As intimated earlier, the notice u/s 148 dated 31.03.2021 has been issued to the assessee as per the old provisions of the IT Act. The Finance Act. 2021 speaks about the date of issue of notice after 01.04 2021 and ro about the service of notice served after 01.04.2021 The objections raised by the assessee are hereby disposed off Though the reasons were served to the assessee within a reasonable time the assessce was having enough time to raise the objections but the assess has raised objection only at the fag-end of the time barring date, hence t same is dealt herewith in the said assessment order. 9. With regard to the proposed addition, the relevant portion of the assessas submission is reproduced hereunder Printed from counselvise.com 8 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR \"The assessee's plant is situated al Khasra No 4.5 & 58 Mauza Kulham PO:Berotiwalia Tehsil, Baddi District Scan (HP) 174103 which is backward area and the assessee is a eligible to claim deduction under section 80 IC(ii)(b) of the Income Tax Act. The assessee also claimed deduction under section 80IC(ii)(b) since A Y 2010-11 and also claimed for this year also. Copy of Audit Report under section 80 IC in form No 10CCB filed by the assesse for the year under consideration is enclosed here with. The Ld AO during the course of scrutiny assessment proceedings under section 143(3) of the Act also verify the claim of deduction under section 80 IC(ii)(b) of the Act. b) The assessee would like to enclose here sanction letter dated 01.12.2011 related to subsidy The same was also enclosed with reply submitted on 24th Jan 2021. In such sanction at page no 4 that the peiod of sanction is 01.12.2011 to 30.03.2015 and also stated at pats 6 page 2 of the sanction that this being a new industrial unit located in Barotiwala which comes in the category of industrially developing area and do not come in the description of unit specified in negative list. Hence it is clear that subsidy received by the assessen due to establishment of new industrial Unit in Himachal Pradesh 9.1. The reply of the assessee has been perused but not found to be acceptable The assessee has received subsidy from the public funds to assist the assesses company in carrying on its business. The VAT amount forms part of the public funds of the State. If any subsidy is given by way of assistance to enable the assessee acquire new plants and machinery for further expansion of business of s manufacturing capacity in a backward area or subsidy granted to the newly set up industries, the entire subsidy must be held to be of a capital receipts. In assess.201 case, it is noticed that they have not set any new unit during the financial year under consideration. The assessee has received subsidy to assist them in carrying on business, in the form of VAT, which forms part of the public fund. Further, reliance also placed on the deasion of Apes Court in the case of M/s. Sahney Steel & Press Works Vs. CIT wherein it is mentioned that if the payment in the nature of the subsidy from Public Funds if made available to the assessee to assist him to carry on his trade or business, the same are considered as revenue receipts. Hence, the entre receipts, being receipts from the public fund is nothing but a revenue receipt and the same is taxable in the hands of the assesses 10. In view of the above discussed facts and submissions made by the asses00 the subsidy received by the assessee of Rs 71,86,388/- is treated as assessee’s income and the same is added to the total income of the assessee. Also penalty proceedings u/s 271(1)(c) of the IT. Act is hereby initiated for furnishing inaccurate particulars of income.’’ Printed from counselvise.com 9 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR 2.3 In first appeal, it is noticed that the ld.CIT(A) has passed an ex-parte order by confirming the action of the AO as to the addition made by him amounting to Rs.71,86,388/- for the reason that the assessee did not respond to various notices issued and the assessee could not controvert the findings given by the AO. The narration as made by the ld. CIT(A) in his order at para 5.6 to 5.7 is reproduced as under:- ‘’5.6 By its own act, the appellant has failed to remain vigilant and did not avail the opportunity to submit necessary evidence in support of its point of view/contention as it did not respond to various notices issued. The fact that the appellant d receive the order and filed the present appeal, but chose not to respond to any notices issued by this office clearly establish total disregard to the due process of law. Therefore, the conclusion that the appellant could not controvert the findings given by the AO on merits of the issue either is inescapable. 5.7 In view of the above. I am of the considered view that the Assessing Officer was justified in addition of Rs.71,86,388/-in his order passed u/s 147 read vi section 144B of the Income-tax Act, 1961. As such, the addition of Rs. 71,86,388- made by the AO is confirmed.’’ 2.4 During the course of hearing, the ld.AR of the assessee has filed following detailed written submission to quash the assessment order on the legal as well as on merits of the issues; ‘’With reference to above your honor is hereby given the statement of facts as under:- The assessee company is engaged in the business of manufacturing kraft Paper at Baddi in the state of Himachal Pradesh. The assesee had filed its original ITR on 28/09/2015 for A.Y. 2015-16 thereby declaring total income at Rs.64,21,420/- under the head of income from business and interest income. The case of the assessee was selected for scrutiny assessment through CASS and assessment proceedings under section 143(3) of the I.T. Act, 1961 was completed on 21.11.2017 accepting returned income/loss. Printed from counselvise.com 10 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR Further the Hon'ble CIT Appeals issued the last notice of hearing on 17.09.2024 mentioning the date of compliance is 23.09.2024 i.e time is given for less than 7 days which are also not according to the law and facts of the case. Though no written submission could be filed before the learned CIT(A) due to unavoidable and bonafide circumstances beyond the control of the appellant, it is submitted that all relevant facts and documentary evidence were already filed during the assessment proceedings and form part of the assessment record. The appellant craves indulgence of this Hon'ble Tribunal to consider the merits of the case afresh by permitting submission of necessary documents and arguments in the interest of justice, equity and fair play. - It is settled law that substantive justice must prevail over technicalities, and an opportunity may kindly be granted to the appellant to place its case on record. Hon'ble Supreme Court said in the case of Kedarnath Jute Mfg. Co. Ltd. V Commissioner of Income-tax [1971] 82 ITR 363 (SC) held: We are wholly unable to appreciate the suggestion that if an assessee under some misapprehension or mistake fails to make an entry in the books of account and although, under the law, a deduction must be allowed by the Income-tax Officer, the assessee will lose the right of claiming or will be debarred from being allowed that deduction. Whether the assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights nor can the existence or absence of entries in the books of account be decisive or conclusive in the matter. 2.The Hon'ble Commissioner of Income tax appeals has not justified to appellant by confirm the additions made by the Ld AO in absence of signature of the person who has recorded the reason on the annexure appended along with approval where reason for reopening the assessment mentioned the reopening of assessment by the Ld. AO is void ab-initio and is unsustainable in law and on facts and liable to be quashed. The assessee company would like to give here under the brief of objection no 1 raised by the company and reply submitted by the Ld AO as also mentioned on Page no 3 of the Assessment Order under section 147 of Income Tax Act 1961. Objection Category Assessee's Objection (Brief) Assessing Officer's Reply (Brief) Validity of Notice under Section 148 and Procedural Issues 1. Unclear designation of approving authority (\"ACIT/DCIT Cir 6 Jaipur\") on Section 151 approval 1.\"ACIT/DCIT\" is a rank-based designation; 2. Section 151 approval is system- Printed from counselvise.com 11 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR 2. lack of signature of PCIT on approval under section 151 3. lack of signature of person who has recorded the reason generated 3. No reply From the above reply of Ld AO it is clear that approval under section 151 is system -generated hence the PCIT has not given his satisfaction personally. According to section 151. (1) No notice shall be issued under section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer, that it is a fit case for the issue of such notice. Hon'ble SC in the case of Income-tax Officer V Tia Enterprises (P.) Ltd, SLP dismissed against order of High Court that where Assessing Officer did not obtain prior approval of specified authority, impugned notice issued under section 148 was liable to be quashed. 3. The Hon'ble Commissioner of Income tax appeals has further not justified to appellant by confirm the additions made by the Ld AO being reopening the assessment only on the basis of change of opinion while all the material on the basis of the Ld AO reopen the assessment had already been provided during the course of scrutiny assessment u/s 143(3) of the Act and the order passed by the Ld AO deserves to be quashed. The assessee company would like to give here under the brief of objection no 2 raised by the company and reply submitted by the Ld AO as also mentioned on Page no 4 of the Assessment Order under section 147 of Income Tax Act 1961 Objection Category Assessee's Objection (Brief) Assessing Officer's Reply (Brief) Change of Opinion as Basis for Reopening AO had already analyzed ITR, balance sheet, and P&L during Section 143(3) scrutiny, forming an opinion Cited Explanation 1 to Section 147, arguing that mere production of material does not amount to full disclosure if primary Printed from counselvise.com 12 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR that subsidy was capital. Reopening based on mere change of opinion is impermissible. facts are \"hidden or immersed\" and require \"detailed exercise and deep study.\" The assessee company would like to submit that as per the reason to record provided by the Ld AO, Brief details of Information collected is Balance Sheet, Analysis of information collected is ITR, Profit and Loss account and Balance Sheet. The Department's reliance on Explanation 1 to Section 147, asserting that the assessee failed to disclose \"true and full facts\", is unfounded and legally untenable. The assessee had provided its Income Tax Return, balance sheet, and Profit & Loss account during the original scrutiny assessment under Section 143(3). These documents clearly disclosed the subsidy and its accounting treatment. There was no failure on the part of the assessee to disclose primary facts; rather, the Assessing Officer's interpretation of these facts, or a re- evaluation of them, was erroneous and led to an incorrect conclusion regarding the nature of the receipt. Mere Change of opinion cannot be the basis to reopen the assessment under section 148 of the Act. The Hon'ble Supreme Court also decided in the, case of Commissioner of Income- tax, Delhi V. Kelvinator of India Ltd ([2010] 187 Taxman 312 (SC), concept of 'change of opinion' must be treated as an in-built test to check abuse of power by Assessing Officer therefore, after 1-4-1989, Assessing Officer has power to reopen, provided there is 'tangible material' to come to conclusion that there is escapement of income from assessment and reasons must have a live link with the formation of the belief. The Hon'ble Supreme Court in the case of Deputy Commissioner of Income Tax V Pandesara Infrastructure Ltd. [2019] 105 taxmann.com 182 (SC) said Where Assessing Officer initiated reassessment proceedings on ground that subsidy received by assessee from Government was directly credited to capital reserve account which resulted into non-consideration of such amount for computation of assessee's book profit, however, said proceedings were quashed by High Court by holding that there was sufficient disclosure in return filed by assessee with respect to entry in question, SLP filed against decision of High Court was to be dismissed. Printed from counselvise.com 13 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR 4. The Hon'ble Commissioner of Income tax appeals has further not justified to appellant by confirm the additions made by the Ld AO being the Ld. AO has not find any additional / tangible material which were not provided by the assessee neither during the course of scrutiny assessment proceedings under section 143(3) of the Act, nor during any enquiry by the assessee. Hence the assessment proceedings initiated under section 147/148 of the Act are not according to the law and facts of the case. As per the para 2 & 3 of the reason recorded related to the Information collected and analysis of information collected absence of name of record available. The Ld AO has only analyze the ITR, Balance Sheet & Profit & Loss Account and formed the opinion that subsidy directly added to the Reserve & Surplus related to fixed assets and capital in nature. Though ITR, Balance Sheet & Profit & Loss Account has already been provided by the assessee during the course of Scrutiny Assessment proceedings under section 143(3) of the Act. The Hon'ble Supreme Court also decided in the case of Commissioner of Income- tax, Delhi V. Kelvinator of India Ltd ([2010] 187 Taxman 312 (SC) concept of 'change of opinion' must be treated as an in-built test to check abuse of power by Assessing Officer therefore, after 1-4-1989, Assessing Officer has power to reopen, provided there is 'tangible material' to come to conclusion that there is escapement of income from assessment and reasons must have a live link with the formation of the belief. The Assessing Officer must specifically identify what material was not truly and fully disclosed, or what new information came to light that could not have been discovered during the original assessment. Simply stating that the subsidy was \"hidden or immersed\" when it was clearly reflected in the balance sheet as part of \"Reserve & Surplus\" and linked to fixed assets 1 is an insufficient argument. The burden rests squarely on the Assessing Officer to demonstrate a failure of disclosure or the discovery of new tangible material, not merely to assert it. Without such demonstration, the reopening constitutes a review disguised as a reassessment, which is impermissible. According to proviso to section 147. Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason 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 fully and truly all material facts necessary for his assessment, for that assessment year: Printed from counselvise.com 14 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR The Ld AO has not find any additional / tangible material which were not provided by the assessee neither during the course of scrutiny assessment proceedings under section 143(3) of the Act, nor during any enquiry by the assessee. Hence the assessment proceedings initiated under section 147/148 of the Act are not according to the law and facts of the case. The Hon'ble Madras High Court also decided in the case of Commissioner of Income-tax, Chennai V India Cements Ltd [2020] 118 taxmann.com 99 that Where reopening notice was issued against assessee company on ground that it was not eligible for deduction under section 80-1 on dividend income and interest income, since all particulars relating to such dividend and interest income were available with Assessing officer during original assessment proceedings which was concluded under section 143(3) and, further, department did not bring any material facts which was not disclosed in original return of income, impugned reopening notice after four years was unjustified. 5. The Hon'ble Commissioner of Income tax appeals has further not justified to appellant by confirm the additions made by the Ld AO being reason to believe recorded only on surmises is contrary to the provisions of law and facts of the case and the same kindly be quashed. As per the Para 5 & 6 of the reason recorded i.e findings by the Ld AO and reason to believe by the Ld AO stated that the subsidy received by the assessee is capital in nature and related to fixed assets, explanation 10 of sub clause (1) of section 43 applicable, excess depreciation provided by Rs 1077958.00, only on the basis of suspicious without making any enquiry from the assessee. The nature of subsidy received by the assessee is in the form of VAT Exemption given by the Himachal Pradesh State Government to promote establishment of new unit/expansion of existing unit in the state of Himachal Pradesh in such area (Baddi). The assessee has to pay 65% of its Gross VAT liablity and balance 35% is exempted by the government which is credited to subsidy account. Hence it is clear that reason to believe recorded by the assessee only on surmises. Para 2 of CIRCULAR NO.40/2016 (F.NO.225/326/2016/ITA.II), DATED 9-12-2016 clearly states that It is hereby clarified that reopening of cases u/s 147 of the Act is feasible only when the Assessing Officer \"has reason to believe that any income chargeable to tax has escaped assessment for any assessment year\" and not merely on the basis of any reason to suspect. Copy of Circular is attached here with. 6. The Hon'ble Commissioner of Income tax appeals has further not justified to appellant by confirm the additions made by the Ld AO being proceedings initiated u/s 147/148 neither complied the provisions of the Act amended by the Finance Act 2021, though the notice is served on or after 01st April 2021, nor complied the notice under section 148, dated 31.03.2021, was served or dispatched on 01.04.2021 and thus does not comply with the provisions of pre-2021 law. Printed from counselvise.com 15 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR The Ld AO had also mentioned at para 3 in letter having din ITBA/AST/F/17/2021- 22/1039909763(1) dated 18.02.2022, received by assessee on 23rd march 2022 that notice u/s.148 for AY 2015-16 has been issued to you as per the old provisions of Income Tax Act 1961. Copy of letter is hereby enclosed for your kind perusal. Since 01st April 2021 new provisions are applicable for reassessment proceedings and notice was issued under old provisions hence the last date to issue such notice was 31st March 2021. Further the assessee company would like to submit that the notice issued by the Id AO under section 148 of the Income Tax Act dated 31st March 2021, received by the assessee in the mail box on 01st April 2021 i.e. beyond the time limit. Copy of Email Inbox attached here with to prove the same. Screen shot of E proceeding Tab also enclosed here with in which also date of issue of notice not available. Further if Notice issued under section 148 in old regime should be served on assessee on or before 31.03.2021 being The change introduced by the Finance Act, 2021 affects the interpretation of \"issue\" vs. \"service\" dates. Serving notice after the sunset date makes the reassessment void in the pre finance act 2021. it would be considered time-barred under the pre-2021 regime. Further the assessee would like to submit that according to section 149: 149. [(1) No notice under section 148 shall be issued for the relevant assessment year,- [(a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) (or clause (c)]; (b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year;] [(c) if four years, but not more than sixteen years, have elapsed from the end of the relevant assessment year unless the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment.] Explanation. In determining income chargeable to tax which has escaped assessment for the purposes of this sub-section, the provisions of Explanation 2 of section 147 shall apply as they apply for the purposes of that section.] (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151. In Kanubhai M. Patel (HUF) v. Hiren Bhatť [2011] 12 taxmann.com 198/202 Taxman 99/334 ITR 25 (Guj.), it was held by the Gujarat High Court that \"date of Printed from counselvise.com 16 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR issuance of notice under section 148 Income-tax Act has to be reckoned not from the date when it was issued, but on the date when it was actually delivered on the assessee\". The relevant paragraphs of the same are profitably extracted below:- 14. The core issue that arises for consideration is as to when can the notice under section 148 of the Act be said to have been issued. In this context, it would be necessary to examine the true import of the expression \"shall be issued\" as employed in section 149 of the Act. 15. The expression 'issue' has been defined in Black's Law Dictionary to mean \"To send forth; to emit; to promulgate; as, an officer issues orders, process issues from court. To put into circulation; as, the treasury issues notes. To send out, to send out officially; to deliver, for use, or authoritatively; to go forth as authoritative or binding. When used with reference to writs, process, and the like, the term is ordinarily construed as importing delivery to the proper persons, or to the proper officer for service etc, 15.1 In P. Ramanathan Aiyer's Law Lexicon the word 'issue' has been defined as follows:- \"Issue. As a noun, the act of sending or causing to go forth; a moving out of any enclosed place; egress; the act of passing out; exit, egress or passage out (Worcester Dict.); the ultimate result or end. As a verb, \"To issue\" means to send out, to send out officially; to send forth; to put forth; to deliver, for use, or unauthoritatively; to put into circulation; to emit; to go out Burrill); to go forth as a authoritative or binding, to proceed or arise from; to proceed as from a source (Century Dict.) Issue or process: Going out of the hands of the clerk, expressed or implied, to be delivered to the Sheriff for service. A writ or notice is issued when it is put in proper form and placed in an officer's hand for service, at the time it becomes a perfected process. Any process may be considered 'issued' if made out and placed in the hands of a person authorised to serve it, and with a bona fide intent to have it served\" 16. Thus, the expression to issue in the context of issuance of notices, writs and process, has been attributed the meaning, to send out; to place in the hands of the proper officer for service. The expression \"shall be issued\" as used in section 149 would therefore have to be read in the aforesaid context. Thus, it is apparent from the aforesaid decisions that the issuance of notice under section 149 is complete only when the same is issued in the manner as prescribed under section 282 r/w rule 127 of the Income-tax Rules prescribing the mode of service of notice under the Act. The signing of notice would not amount to issuance of notice as contemplated under section 149 of the Act. In other words, the requirement of issuance of notice under section 149 is not mere signing of the notice under Printed from counselvise.com 17 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR section 148, but is sent to the proper person within the end of the relevant assessment year. The assessee would also like to relied on the decision given by Hon,ble Madras High Court in Smt. Parveen Amin Bhathara V. Income-tax Officer [2022] 143 taxmann.com 353 (Madras) The assessee is hereby already enclosed the proof of receiving email on 01st April 2021. Now emails are delivered almost instantly, typically within a few seconds to minute, hence it is clearly established that notice was not sent on 31st March 2021. Hon'ble ITAT Delhi Bench D in the case of Brett Lee V. ACIT, International Taxation [2024] 163 taxmann.com 71 (Delhi Trib.) also decided that the notice under section 148 was not served within the period of limitation. Therefore, the facts discussed above inescapably leads to only one conclusion that there was no valid service of notice under section 148 on the assessee. That being the factual position emerging on record, the assessment order passed has to be declared as invalid. Hence the Notice issued under section 148 received in mail box on or after 01st April 2021 liable to quashed and void ab initio. 1.The Hon'ble Commissioner of Income tax appeals has not justified to appellant by confirm the additions made by the Ld AO regarding Subsidy received Rs. 7186388 as business income only on the basis of surmises, without passing the speaking order regarding to all objections raised by the assessee, without considering the object for which subsidy was given, without following the proper procedure with respect with respect to reassessment and without giving the deduction under section 80IC, are not according to the law and facts of the case. The assessee would like to submit as under: a) The assessee's plant is situated at Khasra No 4,5 & 58, Mauza Kulhariwala PO Barotiwala Tehsil, Baddi District Solan (HP) 174103 which is backward area and the assessee is also eligible to claim deduction under section 80IC(ii)(b) of the Income Tax Act. The assessee has also claimed deduction under section 801C(ii)(b) since A Y 2010-11 and also claimed for this year also. Copy of Audit Report under section 80IC in form No 10CCB filed by the assessee for the year under consideration is enclosed here with. The Ld AO during the course of Scrutiny assessment proceedings under section 143(3) of the Act, also verify the claim of deduction under section 80IC(ii)(b) of the Act. Further the Ld. AO has also passed the rectified order u/s 154 r.w.s. 147 on 06.10.2022 in which the Ld AO allowed the 80IC deduction on additions made in Assessment order u/s 147 dated 26.03.2022. Copy of Order u/s 154 is here by enclosed for your kind perusal. Printed from counselvise.com 18 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR b) The assessee would like to enclosed here sanction letter dated 01.12.2011 related to subsidy. In such sanction at page no 4 that the period of sanction is 01.12.2011 to 30.03.2015 and also stated at para 6 page 2 of the sanction that this being a new industrial unit located in Barotiwala which comes in the category of industrially developing area and does not come in the description of unit specified in negative list. Hence it is clear that subsidy received by the assessee due to establishment of new Industrial Unit in Himachal Pradesh. c) Further the assessee would like to enclosed the relevant extract from Notification regarding Industrial Policy 2004, in which at para 2 page no 2 of the policy states objective and aim of the policy and at para 24 page 21 states conclusion, which clearly spells that various incentives given by government to accelerate the growth of industrial development, to increase the employment opportunities, to spur economic growth in the state and contribute to the overall economic prosperity and welfare of our people. At page no 39 & 40 para 10 Rules related to Sales Tax concessions defined by the Government. Amended notification dated 07.02.2009 is also hereby enclosed for your kind perusal, in which also objective of government Explained. d) Copy of EM II dated 30.06.2011 and Form -1 referred in sanction is also hereby enclosed stating date of commercial production is 31,03,2010 and, in which also government focused on employment opportunities in the state. e) From the above discussion i.e 80IC deduction, sanction stating that subsidy provided to new industrial unit, EM II issued by the Department of Industries, Industrial policies of Himachal Pradesh Government, it is clear that subsidy given by the government to establish a new industrial unit and the entire subsidy must be of capital receipts as also stated by you at para 7 of the draft assessment order. The Ld AO referred the case of Sahney Steel & press works Vs CIT in the assessment order. Hence It is crucial to differentiate the legal principle established (the \"purpose test\") from the specific factual outcome of Sahney Steel. The Supreme Court in Sahney Steel classified the subsidy as revenue because, based on the facts of that particular case, it was found to be assistance for carrying on the business after production had commenced, and not for acquiring capital assets. However, the enduring contribution of Sahney Steel is the framework it provided for analyzing subsidies. When this established \"purpose test\" is applied to the specific facts of the assessee's case-where the subsidy was directly added to fixed assets and reserves, and intended for capital investment and industrial growth in a backward area 1-the subsidy clearly qualifies as a capital receipt. This demonstrates a sophisticated application of legal precedent, where the underlying principle is adopted while distinguishing the factual matrix. Printed from counselvise.com 19 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR Further Sahney Steel & Press works Ltd case decided in 1997. Thereafter so many cases decided reproduced as under applied the concept of purpose test and decide that such subsidy is capital receipt. Hon'ble Supreme Court also decided in the case of Commissioner of Income-tax, Madras V Ponni Sugars & Chemicals Ltd. [2008] 174 Taxman 87 that:- The character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. In other words, in such cases one has to apply the 'purpose test'. The point of time when the subsidy is paid is not relevant. The source is immaterial; the form of subsidy is also immaterial. If the object of the subsidy scheme was to enable the assessee to run the business more profitably, then the receipt was on revenue account. On the other hand, if the object of the assistance under the subsidy scheme was to enable the assessee to set up a new unit or to expand its existing units, then the receipt of the subsidy was on capital account. Therefore, it is the object for which the subsidy/assistance is given which determines the nature of the incentive subsidy. The form of the mechanism through which the subsidy is given is irrelevant. The Hon.ble Supreme Court also stated in Commissioner of Income Tax-l, Kolhapur V Chaphalkar Brothers Pune [2017] 88 taxmann.com 178 Subsidy scheme of State Governments provided for an exemption of entertainment duty in Multiplex Theatre Complexes newly set up, for a period of three years, and thereafter payment of entertainment duty at rate of 25 per cent for subsequent two years Whether since object of incentive schemes was to encourage development of Multiple Theatre Complexes, incentives would be held to be capital in nature and not revenue receipts. The assessee would also like to place the reliance on the principle followed by Hon'ble Rajasthan High Court in the case of Principal Commissioner of Income- tax, Ajmer v Nitin Spinners Ltd [2020] 116 taxmann.com 26 (Rajasthan). Hon'ble Supreme Court also dismissed the SLP filed by the department in the abovesaid case Principal Commissioner of Income-tax, Ajmer v Nitin Spinners Ltd [2021] 130 taxmann.com 402 In the case of Shiv Shakti Flour Mills (P.) Ltd V Commissioner of Income-tax, Assam [2017] 77 taxmann.com 115, the Hon'ble Gauhati high Court States Whether question of subsidy being revenue or capital receipt need not be answered on basis of accounting procedure followed by assessee but on basis of applicable principle of law Held, yes Assessee flour mills, situated in North Eastern State received transport subsidy - Purpose of transport subsidy was to stimulate industrial activity in this backward region and to bring about developments of this area It was could not be treated as revenue receipt: it was capital receipt and, Printed from counselvise.com 20 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR thus, not taxable in not meant to provide higher profit for existing entrepreneur- Whether subsidy received hands of assessee. In the case of Shree Balaji Alloys V Commissioner of Income-tax 198 Taxman 122 (Jammu & Kashmir) [2011], the Hon'ble Jammu & Kasmir high court states Amounts of excise refund and interest subsidy received by industrial units in pursuance of incentives announced in terms of new industrial policy for accelerated industrial development in State of Jammu and Kashmir for creation of such industrial atmosphere and environment which would provide additional regular sources of employment to unemployed in State, were, in fact, in nature of creation of new assets of industrial atmosphere and environment, having potential of employment generation to achieve a social object and such incentives would be capital receipts in hands of such industrial units. In the case of Crystal Crop Protection (P.) Ltd. V Principal Commissioner of Income-tax [2022] 143 taxmann.com 61 (Delhi), Hon'ble Delhi High Court affirming the decision of tribunal accepting the additional ground that excise duty, subsidy and interest subsidy received by it from State under 'New Industrial Policy and Other Concessions Scheme' were to be treated as 'capital receipt', however, assessee had wrongly reported same as revenue receipt in return of income. Hon'ble Calcutta High Court in the case of Principal Commissioner of Income-tax V. Budge Budge Refineries Ltd. [2022] 139 taxmann.com 124 (Calcutta) held that where assessee was granted subsidy under West Bengal Incentive Scheme, 2000 and amount of subsidy which was given, was in nature of reimbursement of 75 per cent of sales tax/VAT actually paid by assessee, since object of assistance under subsidy scheme was to enable assessee to set up a new unit and reimbursement of 75 per cent of sales tax paid had been termed as Industrial Promotion Assistance, receipt of subsidy would be a capital receipt. Hon'ble ITAT Gauhati Bench in the case of Sunrise Biscuit Co. (P.) Ltd. V. Income- tax Officer [2022] 140 taxmann.com 6 (Gauhati - Trib) said that Where assessee- company had received VAT subsidy under State industrial scheme for substantial expansion of its existing industrial unit, since object of subsidy was to accelerate industrial development and generation of employment in State, such VAT subsidy received by assessee was capital in nature. Hon'ble ITAT Mumbai Bench in the case of Deputy Commissioner of Income-tax V. Patanjali Foods Ltd [2024] 161 taxmann.com 815 (Mumbai - Trib) held that Subsidy received in form of excise duty refund and remission of sales tax/VAT is in nature of capital receipt not liable to tax, as object of granting subsidy is to encourage setting up new industries for industrial growth of industrially non- developed area. Printed from counselvise.com 21 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR Hon'ble ITAT Jaipur Bench in the case of Shree Cement Ltd. V. Additional Commissioner of Income-tax [2014] 49 taxmann.com 274 (Jaipur Trib.) also decided that Sales-Tax subsidy was capital in nature not chargeable to tax. From the above it is clear the object of the assistance under the subsidy scheme was to enable the assessee to set up a new unit, then the receipt of the subsidy was on capital account and not chargeable to tax accordingly. In light of the foregoing submissions, arguments, and reliance on established legal principles and judicial precedents, it is most respectfully prayed that the Hon'ble Appellate Authority may be pleased to: 1. Quash the assessment order passed under Section 147 read with Section 143(3) of the Income Tax Act, 1961, for Assessment Year 2015-16, on the grounds of jurisdictional defects and fundamental procedural irregularities in the initiation and conduct of the reassessment proceedings. 2. Alternatively, without prejudice to the above, direct the Assessing Officer to reclassify the subsidy received by the assessee as a capital receipt, thereby deleting the entire addition made to the total income on this account. 3. Grant any other relief or reliefs as may be deemed appropriate and just in the facts and circumstances of the case. The assessee would like to request your honour to permit the paper book submission shortly. Further If any more information desired by you on the above grounds the assessee feel pleasure to submit the same.’’ 2.5 The ld. DR relied upon the order of the lower authorities and filed the following written submission to counter the point of the assessee that ‘’signature of the authority who recorded the reason is missing from the annexure appended with the approval. However, this contention is vague, baseless and not tenable. The approval order u/s 151 is automatically generated by ITBA and bears the name of the approving authority’’; ‘’Kindly refer to your letter vide No. CIT (SDR-II)/ITAT JPR/PE/2025-26/410 dated 03.07.2025 In reference to the above, point-wise comments are being submitted as below: Printed from counselvise.com 22 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR 1. The undersigned is unable to comment on the opportunities of bearing granted during the appellate proceedings by the Ld. CIT(A), as the relevant information regarding notices issued and opportunities given to the assessee could not be gathered due to non-functioning of CPC 2.0. However, upon perusal of the order of the Ld. CIT(A), it is clearly evident that, despite sufficient opportunities being given, the assessee did not submit any reply during the appellate proceedings 2. The assessee has contended that the signature of the authority who recorded the reasons is missing from the annexure appended with the approval. However, this contention is vague, baseless, and not tenable The approval order under section 151 is automatically generated by ITBA and bears the name of the approving authority. A copy of the said approval under section 151 is attached as Annesare A. It is, therefore, verified from the records that before issuing the notice under section 148 dated 31.03.2021 in the above case, all necessary approvals were duly obtained from the competent authority. 1. The assessee has stated that the Ld. A merely analyzed the III, balance sheet, and P&I account and formed the opinion that the subsidy directly added to the Reserve & Surplus was related to fixed assets and thus capital in nature. It is the that the ITR, balance sheet, and PA1, accoast tud already been provided by the assessee during the course of scrutiny assessment proccodings under section 143(3) of the Act. However, the assessee's contention that this constitutes a \"change of opinion\" is not tenable. Explanation I to section 147 clearly states that mere production of material evidence does not necessarily amount to full and truc disclosure. The determination of whether a disclosure was made fully and truly depends on the specific facts and circumstances of each case: Where primary facts are embedded within the record, including books of accounts filed or produced before the Assessing Authority-whether with the return or subsequently detailed exercise and deep analysis may be required to detect of discern them Therefore, such disclosure cannot be considered full and true within the meaning of Explanation 1 to section 147, and the Assessing Officer is well within his power to reassess the income. 4. The assessee's contentions are not found acceptable. The assessee received subsidy from public funds to assist in carrying on its business. The VAT amount constitutes public funds of the State. Where such subsidy is granted to assist the acquisition of new plant and machinery for expansion of business or for setting up of new industries in backward areas, it may qualify as capital receipt. However, in the present case, it is observed that the assessee has not set up any new unit during the financial year under consideration. The subsidy was received to assist the ongoing business, in the form of VAT refund, which is clearly part of public funds. The Hon'ble Supreme Court in the case of Sahney Steel & Press Works Lat. vs. CIT has held that if a payment in the nature of subsidy from public funds is made available to assist an assessee in carrying on its trade or business, it constitutes a revenue receipt. Accordingly, the receipts in this case are revenue in Printed from counselvise.com 23 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR nature and taxable in the hands of the assessee The Assessing Officer, therefore had tangible material on record to form the belief that income had escaped assessment, and the reasons recorded had a live link with such formation of belief 5. Same as point no. 4. 6. The assessee has challenged the date of service of notice under section 148 dated 31.03.2021, which was served on the assessee on 01.04.2021, contending that the amended provisions of the Act introduced by the Finance Act. 2021 are applicable. As already stated, the notice under section 148 dated 31.03.2021 was issued under the old provisions of the Income-tax Act. The Finance Act, 2021 prescribes applicability from notices issued on or after 01.04.2021 and not based on the date of service 7. Same as point no. 4.’’ 2.6 We have heard both the parties and perused the materials available on record. Brief facts of the case are that the assessee company is engaged in the business of manufacturing Kraft Paper in the State of Himachal Pradesh. The assessee had filed its original Income Tax Return on 28-09-2015 for the assessment year 2015-16 thereby declaring total income at Rs.64,21,240/- under the head of Income from Business and Interest Income. The case of the assessee was selected for Scrutiny assessment through CASS and assessment proceedings u/s 143(3) of the Act was completed on 21-11-2017 accepting returned income/loss. Thereafter, ld. AO on perusal of the available records observed that during the assessment year 2015-16, the assessee had received a subsidy of capital nature of Rs.71,86,388/- and the same is directly added under the head Reserve and Surplus’ of the balance sheet for the year ending on 31- Printed from counselvise.com 24 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR 03-2015. The AO noted that the assessee had not reduced the subsidy from WDV of Assets and claimed depreciation leading to the excess claim of depreciation of Rs.10,77,958/-. The assessee was required to subtract the subsidy amount from the assets to ascertain the WDV of the assets. Accordingly, the assessment was reopened u/s 147 of the Act after recording reasons for reopening and obtaining approval from the competent authorities. The notice u/s 148 of the Act was issued and duly served upon the assessee on 31-03-2021. In response to the said notice the assessee was required to furnish its return of income within 30 days from the date of service of notice but the assessee did not file the same. Therefore, notice u/s 142(1) of the Act was issued on 13-07-2021 requiring the assessee to file its return of income. In response to the same, the assessee had filed its return of income for A.Y. 2015-16 on 28-07-2021 declaring total income at Rs.64,21,420/-. Subsequently, the case had been transferred to the National Faceless Assessment Unit on 11-11-2021 to complete the assessment proceedings in a faceless manner. Hence, the notice u/s 143(2) of the Act dated 9-12-2021 along with the reasons for reopening the case had been issued and served on the assessee but the assessee did not respond to Printed from counselvise.com 25 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR the same. The AO on perusal of the balance sheet noticed that the assessee had shown subsidy received from the Himachal State Govt. in the form of VAT exemption of Rs.71,86,388/- as Capital Receipt under the head ‘’Reserve and Surplus’’. In this case the assessee vide letter dated 24-01-2022 stated that the subsidy received by the assessee in the form of VAT exemption was given by the Himachal Pradesh State to promote establishment of new Unit/ expansion of existing unit in the State of Himachal Pradesh in such area (Baddi).The assessee has to pay 65% of the Gross Vat Liability and balance 35% is exempted by the Govt. which is credited to subsidy account by the assessee. It is noted that the assessee had also furnished copies of letter issued by the Concerned Department and copies of all months VAT returns along with details of subsidy received. On verification of the details filed by the assessee, the AO noted that they have not set up any new unit during the financial under consideration. The assessee has received subsidy to assist them in carrying on business, in the form of VAT which forms part of the public fund. To support his contentions, the AO took resort to the decision of Hon’ble Apex Court in the case of Sahney Steel & Press Works vs CIT wherein it is mentioned that if the payment in nature of the subsidy from Public Funds, if made available to the assessee to assist him to carry on Printed from counselvise.com 26 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR his trade or business, the same are considered as Revenue Receipts. Hence, the entire receipts, being receipts from the Public Fund is nothing but a Revenue Receipt and the same is taxable in the hands of the assessee. Thus the AO treated the subsidy received by the assessee amounting to Rs.71,86,388/- as income of the assessee and added the same to the total income of the assessee. In first appeal, the ld. CIT(A) has confirmed the action of the AO as the assessee did not respond to the notices issued by the ld. CIT(A). The relevant observation of the ld.CIT(A) is as under:- ‘’5.7 In view of the above. I am of the considered view that the Assessing Officer was justified in addition of Rs.71,86,388/-in his order passed u/s 147 read vi section 144B of the Income-tax Act, 1961. As such, the addition of Rs. 71,86,388- made by the AO is confirmed.’’ The grievance of the assessee was that the ld. CIT(A) was not justified in confirming the addition made by the AO in absence of signature of the person who has recorded the reasons on the annexure appended along with approval where reason for reopening the assessment mentioned the reopening of assessment by the AO is void ab initio and not sustainable in the eye of law. It is noted that objection no.1 raised by the company and reply submitted by the AO is also mentioned on Page 3 of assessment order u/s 147 of the Act and the details are as under:- Printed from counselvise.com 27 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR Objection Category Assessee's Objection (Brief) Assessing Officer's Reply (Brief) Validity of Notice under Section 148 and Procedural Issues 1. Unclear designation of approving authority (\"ACIT/DCIT Cir 6 Jaipur\") on Section 151 approval 2. lack of signature of PCIT on approval under section 151 3. lack of signature of person who has recorded the reason 1.\"ACIT/DCIT\" is a rank- based designation; 2. Section 151 approval is system-generated 3. No reply The Bench noted the reply and found that the approval u/s 151 is system generated. Hence, the PCIT has not given his satisfaction personally, which can be seen from the paper book pages 25 to 28 filed by the assessee. It is pertinent to mention that according to Section 151 of the Act, no notice shall be issued u/s 148 of the Act by the AO, after the expiry of a period of four years from the end of the relevant assessment year unless the ld. Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the AO. We also take support from the decision of Hon’ble Supreme Court in the case of ITO vs Tia Enterprises (P) Ltd. [2024] 167 Taxmann.com 56 (SC), SLP dismissed against the order of Hon’ble High Printed from counselvise.com 28 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR Court where Assessing Officer did not obtain approval of specified authority and the impugned notice issued u/s 148 was liable to be quashed. 2.7 Further, it is noticed that the ld.CIT(A) confirmed the addition made by the AO being reopening the assessment only on the basis of change of opinion while all the material on the basis of the AO reopened the assessment had already been provided by the assessee during the scrutiny assessment u/s 143(3) of the Act. In this case, the brief objection no. 2 raised by the company and reply submitted by the AO is mentioned on page no.4 of the assessment order u/s 147 and the details are as under:- Objection Category Assessee's Objection (Brief) Assessing Officer's Reply (Brief) Change of Opinion as Basis for Reopening AO had already analyzed ITR, balance sheet, and P&L during Section 143(3) scrutiny, forming an opinion that subsidy was capital. Reopening based on mere change of opinion is impermissible. Cited Explanation 1 to Section 147, arguing that mere production of material does not amount to full disclosure if primary facts are \"hidden or immersed\" and require \"detailed exercise and deep study.\" It is observed that mere change of opinion cannot be the basis for reopening the assessment u/s 148 of the Act. We take support of Hon’ble Supreme Court in the case of CIT vs Kelvinator of India Ltd. [2010] 187 Taxman 312 (page 61 to 64) wherein it is held that concept of 'change of opinion' must be treated as an in-built test to check abuse of power by Printed from counselvise.com 29 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR Assessing Officer therefore, after 1-4-1989, Assessing Officer has power to reopen, provided there is 'tangible material' to come to conclusion that there is escapement of income from assessment and reasons must have a live link with the formation of the belief. It is pertinent to note that the AO has not founded any additional / tangible material which were not provided by the assessee neither during the course of scrutiny assessment proceedings under section 143(3) of the Act, nor during any enquiry by the assessee. Hence the assessment proceedings initiated under section 147/148 of the Act are not according to the law and facts of the case is liable to be quashed. 2.8 We further noted that the grievance of the assessee was that ld. CIT(A) was not justified in confirming the addition made by the AO being reason to believe recorded only on surmises and it is contrary to the provisions of the law. It is noted from the records that as per the Para 5 & 6 of the reason recorded i.e findings by the AO and reason to believe by the AO stated that the subsidy received by the assessee is capital in nature and related to fixed assets, explanation 10 of sub clause (1) of section 43 applicable, excess depreciation provided by Rs 10,77,958/- only on the basis of suspicious without making any enquiry from the assessee. The Printed from counselvise.com 30 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR nature of subsidy received by the assessee is in the form of VAT Exemption given by the Himachal Pradesh State Government to promote establishment of new unit/expansion of existing unit in the state of Himachal Pradesh in such area (Baddi). The assessee has to pay 65% of its Gross VAT liability and balance 35% is exempted by the government which is credited to subsidy account. Hence it is clear that reason to believe recorded by the assessee only on surmises, change of opinion and there being no tangible material. It is worthwhile to mention that Subsidy received in form of excise duty refund and remission of sales tax/VAT is in nature of capital receipt not liable to tax, as object of granting subsidy is to encourage setting up new industries for industrial growth of industrially non- developed area for which reference can be drawn from ITAT Mumbai Bench in the case of Deputy Commissioner of Income-tax V. Patanjali Foods Ltd [2024] 161 taxmann.com 815 (Mumbai - Trib). Similar findings have been given by the ITAT Jaipur Bench in the case of Shree Cement Ltd. V. Additional Commissioner of Income-tax [2014] 49 taxmann.com 274 (Jaipur Trib.) also decided that Sales-Tax subsidy was capital in nature not chargeable to tax. From the above, it is clear the object of the assistance under the subsidy scheme was to enable the assessee to set up a new Printed from counselvise.com 31 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR unit, then the receipt of the subsidy was on capital account and not chargeable to tax accordingly. The bench also noted that the above decision of the ITAT in the case of Shree Cement has also been confirmed by the view of Jaipur bench by our own Jurisdictional High Court, [ 116 taxmann.com 26 (Rajasthan) ]. The finding of the High Court reads as under : 5. In its order, the ITAT took note of several previous Bench ruling as well as judgment of the Punjab and Haryana High Court in CIT v. Sham Lal Bansal [2011] 11 taxmann.com 396/200 Taxman 14 (Mag.) (Punj & Har.). In Shyam Lal Bansal (supra) the Punjab and Haryana High Court observed as follows: \"6. The purpose of scheme under which the subsidy is given, has been discussed by the Tribunal. To sustain and prove the competitiveness and overall long term viability of the textile industry, the concerned Ministry of Textile adopted the TUFS scheme, envisaging technology upgradation of the industry. Under the scheme, there were two options, either to reimburse the interest charged on the lending agency on purchase of technology upgradation or to give capital subsidy on the investment in compatible machinery. In the present case, the assessee has taken term loans for technology upgradation and subsidy was released under agreement dated 12-7-2005 with Small Industry Development Bank of India. The relevant clause of the agreement under which the subsidy was given is as under:- \"Para8. to prevent mis-utilization of capital subsidy and to provide an incentive for repayment, the capital subsidy will be treated as a non interest bearing term loan by the Bank/Fis. The repayment schedule of the term loan however will be worked out excluding the subsidy amount and subsidy will be adjusted against the term loan account of the beneficiary after a lock in period of three years on a pro-rate basis in terms of release of capital subsidy. There is no apparent or real financial loss to a borrower since the countervailing concession is extended to the loan amount.\" 7. In view of the above, the view taken in Sahney Steel & Press Works Ltd., could not be applied in the present case, as in said case the subsidy was given for running the business. For determining whether subsidy payment was 'revenue receipt' or 'capital receipt', character of receipt in the hands of the assessee had to be determined with respect to the purpose for which subsidy is given by applying the purpose test, as held in Sahney Steel & Press Works Ltd. itself and reiterated Printed from counselvise.com 32 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR in later judgment in CIT v. Ponni Sugars & Chemicals Ltd. & Ors . (2008) 306 ITR 392, referred to in the impugned order of the Tribunal.\" 6. This Court notices that the Punjab and Haryana High Court took into account the previous binding ruling of the Supreme Court in CIT v. Ponni Sugars & Chemicals Ltd. [2008] 174 Taxman 87/306 ITR 392 and Sahney Steel & Press Works Ltd. v. CIT [1997] 94 Taxman 368/228 ITR 253. In these circumstances, the Court is of the opinion that the amount was received as capital stream and therefore, not taxable. 7. A similar view was taken by the Calcutta High Court in CIT v. Gloster Jute Mills Ltd . [2018] 96 taxmann.com 303/257 Taxman 512/[2019] 416 ITR 458. 8. As far as the question with regard to Focus Marketing Scheme was concerned, apparently the Central Government gave the subsidy to enhance indian export potential in the international market. It was not granted to meet the cost of expenditure to meet the competition of the Indian textile market. The ITAT took note of judgment in Ponni Sugars & Chemicals Ltd. (supra) and held that the amount was not an export incentive, but rather capital receipt and therefore, not taxable. This Court is of the opinion that there is no infirmity with the reason. 9. As far as the electricity subsidy is concerned, the third ground i.e. electricity subsidy under the Rajasthan Investment Promotion Scheme was held to be a capital receipt by the CIT(A). It was held that this was granted in larger public interest and it was linked to capital interest, a similar scheme was that the amounts received in the similar scheme have to be capital receipt by a Division Bench of this Court in CIT v. Shree Cement Ltd. [D.B. Income Tax Appeal No. 204 of 2010, dated 22-8-2017]. This Court notices that the ratio of the rulings in Ponni Sugars & Chemicals Ltd. (supra) and Sahney Steel & Press Works Ltd. (supra), applied. Consequently, we find no infirmity with the approach of the ITAT on this aspect as well. 10. For the above reasons, no question of law arises for consideration. Thus, the case of the assessee is covered by the above view of our High Court. The bench also conscious above the fact that issue of taxing the subsidy income by changing the definition vide Finance Act 2015. Vide that amendment in section 2(24)(xviii) any form of subsidy was brought into definition of income but that section is not retrospective and therefore, even Printed from counselvise.com 33 ITA NO.414.JPR/2025 SYLVAN GREEN PRIVATE LTD VS DCIT,CIRCLE-6 , JAIPUR otherwise for the year under consideration the assessee was eligible to claim that receipt as capital receipt. Hence, in view of the above facts and circumstances of the case, we do not concur with the findings of the ld. CIT(A). Thus, the appeal of the assessee is allowed. 3.0 In the result, the appeal of the assessee is allowed Order pronounced in the Open Court on 25/ 07/2025. Sd/- Sd/- ¼Mk0 ,l- lhrky{eh ½ ¼jkBksM deys'k t;UrHkkbZ ½ (DR. S. SEETHALAKSHMI) (Rathod Kamlesh Jayantbhai) U;kf;dlnL;@Judicial Member ys[kklnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 25 /07/2025 *Mishra vkns'k dh izfrfyfivxzsf’kr@Copy of the order forwarded to: 1. The Appellant- Sylvan Greens Private Ltd. ,Jaipur 2. izR;FkhZ@ The Respondent- The DCIT, Circle-6,Jaipur 3. vk;djvk;qDr@ The ld CIT 4. foHkkxh; izfrfuf/k] vk;djvihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 5. xkMZQkbZy@ Guard File (ITA No. 414/JPR/2025) vkns'kkuqlkj@ By order, lgk;diathdkj@Asstt. Registrar Printed from counselvise.com "