2016 (1) TMI 1485 - AT - Income Tax

Validity of re-assessment u/s 147 - eligibility of reasons to believe - HELD THAT - As there was no new material that had come to the possession of the Assessing Officer and since the assessment originally completed under section 143(3) was reopened by him on the basis of same material, which was available at the time of completion of original assessment under section 143(3), we are of the view that the reopening of assessment made by the Assessing Officer merely on the basis of change of opinion was bad in law. Thus we are of the view that the reopening of assessment by the Assessing Officer in the present case itself was bad in law and the assessment computed by him under section 143(3) read with section 147 in pursuance thereof is invalid, which is liable to be cancelled - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reassessment proceedings under section 147/148.
2. Inclusion of tax or levy in the computation of "Transfer Price" for deduction under section 80IA.
3. Allocation of interest expenditure to the power undertaking.
4. Allocation of common expenditure to the power undertaking.
5. Treatment of DEPB receipts under section 80HHC.
6. Reduction of interest received from "Profits and Gains of Business and Profession" for section 80HHC.
7. Levy of interest under section 234A.
8. Market value definition under section 80IA(8).
9. Allocation of interest expenditure for computing profit under section 80IA.
10. Allowance of MAT credit before charging interest under section 234B.

Detailed Analysis:

1. Validity of Reassessment Proceedings under Section 147/148:
The assessee challenged the validity of the reassessment proceedings initiated by the Assessing Officer (AO) under section 147/148, arguing it was based on a mere change of opinion and not on new material. The Tribunal noted that the AO reopened the assessment based on the same records available during the original assessment under section 143(3), without any new material. The Tribunal cited the Supreme Court's decision in CIT vs. Kelvinator of India Limited, which held that reopening an assessment based on a change of opinion is not permissible. The Tribunal concluded that the reopening was invalid and the assessment under section 143(3) read with section 147 was liable to be canceled.

2. Inclusion of Tax or Levy in "Transfer Price" for Deduction under Section 80IA:
The AO had disallowed the assessee's claim for deduction under section 80IA, arguing that the transfer price of power included an element of duty/tax which the assessee did not actually pay. The Tribunal did not delve into this issue in detail as the reassessment itself was declared invalid.

3. Allocation of Interest Expenditure to the Power Undertaking:
The assessee contended that the interest expenditure attributable to the power units had already been considered in the separate books of accounts maintained for the power units. The Tribunal did not adjudicate on this issue due to the invalidity of the reassessment proceedings.

4. Allocation of Common Expenditure to the Power Undertaking:
The assessee argued that the common expenditure allocated to the power undertaking was not related to the power units. The Tribunal did not address this issue due to the cancellation of the reassessment.

5. Treatment of DEPB Receipts under Section 80HHC:
The assessee contended that DEPB receipts should not be reduced from the profit of the business for the computation of deduction under section 80HHC. The Tribunal did not consider this issue as the reassessment was invalid.

6. Reduction of Interest Received from "Profits and Gains of Business and Profession" for Section 80HHC:
The assessee argued that only 90% of the net interest income should be reduced from the profits of the business for section 80HHC, not the gross income. This issue was not addressed by the Tribunal due to the invalidity of the reassessment.

7. Levy of Interest under Section 234A:
The assessee challenged the levy of interest under section 234A, arguing that the return filed in response to the notice under section 148 was within the time limit specified. This issue was not adjudicated by the Tribunal due to the invalid reassessment.

8. Market Value Definition under Section 80IA(8):
The Revenue contended that the market value for power should be the price at which the assessee sold surplus power to customers, not the price at which power was purchased from KEB. The Tribunal did not address this issue due to the invalid reassessment.

9. Allocation of Interest Expenditure for Computing Profit under Section 80IA:
The Revenue argued that the interest expenditure allocated by the AO was justified. The Tribunal did not consider this issue due to the invalid reassessment.

10. Allowance of MAT Credit before Charging Interest under Section 234B:
The Revenue contended that MAT credit should be allowed before charging interest under section 234B. The Tribunal did not address this issue due to the invalid reassessment.

Conclusion:
The Tribunal concluded that the reassessment proceedings initiated by the AO under section 147/148 were invalid as they were based on a mere change of opinion without any new material. Consequently, the assessment under section 143(3) read with section 147 was canceled, rendering the other issues raised by both the assessee and the Revenue infructuous. The appeal of the assessee was allowed, and the appeal of the Revenue was dismissed.