2011 (1) TMI 1370 - AT - Income Tax

Reopening of assessments under section 147/148 - Deduction u/s 80IA - profits of Wind mill activity - non-maintenance of separate books of account for the Wind mill activity - Change of opinion - HELD THAT - Regarding validity of the proceedings initiated under section 147/148 of the Act, it is found that assessee has to fail. No doubt, it is not permissible for the Assessing Officer to reopen an assessment under section 147/148 of the Act on a mere change of opinion. However, in the present case, the factual matrix does not support the plea of the assessee that notice under section 148 of the Act dated 30.3.2006 has been issued in this case on a change of opinion . The plea of the assessee that the Assessing Officer formulated an opinion while processing the return under section 143(1) is untenable is based on the proceedings under section 143(3) for assessment year 2001-02, which were in progress at the relevant point of time. However, such proceedings culminated only on 29.2.2003, much after the processing under section 143(1) for the impugned assessment year. Therefore, acceptance of the claim in assessment year 2001-02 in a proceeding under section 143(3) on 29.4.2003 cannot be construed as formulation of an opinion by the Assessing Officer in relation to assessment year 2002-03 in the processing done under section 143(1) of the Act dated 28.3.2003. Factually speaking, it is not case of a change of opinion and, therefore, initiation of proceedings under section 147/148 cannot be said to be vitiated on this count. The assessee has to fail - appeal dismissed.

Summary

Issues:
1. Denial of deduction under section 80IA of the Income Tax Act in relation to Wind mill activity.
2. Validity of initiation of proceedings under section 147/148 of the Act for assessment year 2002-03.

Issue 1: Denial of Deduction under Section 80IA:
The Appellate Tribunal ITAT Pune dealt with two appeals by the assessee challenging orders of the Commissioner of Income-tax (Appeals) related to the denial of deduction claimed under section 80IA of the Income Tax Act for the assessment years 2002-03 and 2003-04. The primary contention was the denial of the deduction claimed by the assessee for Wind mill activity profits due to the absence of separate books of account for this activity. The Assessing Officer observed that the claim was not proper as the Wind mill activity income was not treated as business income by the assessee. The Tribunal upheld the denial of deduction based on the specific provisions of section 80IA, emphasizing the need to compute profits from the eligible business after deducting notional losses and depreciation, even if they were set off against other incomes previously. The Tribunal referred to a previous Special Bench decision to support its ruling, ultimately declining the deduction claim for the Wind mill activity.

Issue 2: Validity of Initiation of Proceedings under Section 147/148:
In addition to the denial of the deduction under section 80IA, the assessee raised a ground related to the validity of initiating proceedings under section 147/148 of the Act for assessment year 2002-03. The assessee argued that the reopening of the assessment constituted a "change of opinion," as the claim under section 80IA was initially accepted during the processing of the return under section 143(1) of the Act. However, the Tribunal found that the factual circumstances did not support the assessee's claim, as the acceptance of the claim in a previous assessment year did not imply an opinion for the current assessment year. The Tribunal held that the initiation of proceedings under section 147/148 was not vitiated by a "change of opinion," ultimately ruling against the assessee on this aspect as well.

In conclusion, the Appellate Tribunal upheld the denial of deduction under section 80IA for the Wind mill activity profits and dismissed the appeals by the assessee for both assessment years. The judgment emphasized the importance of separate computation of profits for eligible businesses and highlighted the need to adhere to the specific provisions of the Income Tax Act in determining deductions.