2016 (6) TMI 740 - HC - Income Tax

Reopening of assessment - eligibility of deduction under section 80IA - Held that - The entire issue was examined by AO during the original assessment proceedings. We may recall, during scrutiny assessment, the Assessing Officer raised several queries calling upon the assessee to satisfy him regarding the same. One direction was to submit complete note on deduction claimed under Section 80IA and to show how the company satisfied the provisions of the said section. In response to such query, the petitioner gave detail work out of its claim of deduction under section 80IA of the Act from generation of power. The assessee also provided the reason for transaction price interdivision since the power was generated for captive consumption. In the details so supplied, the petitioner pointed out that the cost of steam per kg was taken at ₹ 0.74. In the same table, the assessee had also pointed out that cost of steam is charged to the process at ₹ 0.80 per kg. Thus, the assessee in the process of substantiating its claim for deduction under section 80IA of the Act, pointed out the price for transferring generated electricity by one division to another. Such working out included the cost of production of steam and the cost at which it was charged to the consuming unit. It was only after verifying such details that the Assessing Officer in the order of assessment dated 31.10.2012, made no alteration in the petitioner s claim of deduction under section 80IA of the Act. He disallowed certain part of the petitioner s claim for depreciation, but no disallowance was made on the claim for deduction under section 80IA of the Act. In fact, in the assessment order he noted that the petitionerassessee had claimed the deduction on such power generation though, the power is captively used by separate industrial undertaking of the assessee company. It can thus, be clearly seen that the entire claim of deduction of the petitioner under section 80IA was minutely scrutinized by the Assessing Officer in the original assessment proceedings. As long as the claim was examined and no additions made, it would not be open for the Assessing Officer to reopen the assessment on the premise that in the original assessment, no reasons were recorded for not disturbing the claim. - Decided in favour of assessee

Summary

Issues Involved:
1. Reopening of assessments by the Assessing Officer.
2. Validity of the reassessment notices issued beyond the period of four years.
3. Examination of the claim for deduction under Section 80IA of the Income Tax Act.

Detailed Analysis:

1. Reopening of Assessments by the Assessing Officer:
All petitions pertain to notices for reopening issued by the Assessing Officer. The assessments were previously framed after scrutiny. The petitioner company had filed its return of income and claimed deduction under Section 80IA of the Income Tax Act. During the original scrutiny assessment, the Assessing Officer examined various issues, including the claim of deduction under Section 80IA, and called for detailed information from the petitioner. The petitioner provided detailed calculations and justifications, which the Assessing Officer reviewed before passing the final assessment order. However, the Assessing Officer later issued notices to reopen the assessments, citing that the profit from the sale of steam, which was not a commercial commodity, was arbitrarily determined and should be recalculated at the cost of production, resulting in an alleged income escape of ?64.60 lacs.

2. Validity of the Reassessment Notices Issued Beyond the Period of Four Years:
For the assessment years 2008-09 and 2009-10, the notices for reopening were issued beyond the period of four years from the end of the relevant assessment year. The petitioner contended that the entire claim was accepted after due scrutiny, and there was no failure on their part to disclose material facts fully and truly. The court observed that the reasons recorded by the Assessing Officer for reopening did not indicate any failure on the part of the assessee to disclose material facts. The court held that the Assessing Officer had no authority to reopen the assessment based on the same material facts already scrutinized during the original assessment.

3. Examination of the Claim for Deduction under Section 80IA of the Income Tax Act:
The court noted that during the original assessment proceedings, the Assessing Officer had thoroughly examined the claim for deduction under Section 80IA. The petitioner had provided detailed responses to the queries raised by the Assessing Officer, including the cost and sale price of steam. The Assessing Officer, after verifying the details, did not make any disallowances on the claim for deduction under Section 80IA. The court cited previous judgments, including those from the Gujarat High Court and the Delhi High Court, emphasizing that once a claim is scrutinized and accepted, it cannot be reopened on the same grounds unless there is new material or failure to disclose material facts by the assessee.

Conclusion:
The court concluded that the Assessing Officer had no authority to reopen the assessments as the entire issue was already examined during the original assessment proceedings. Additionally, for the notices issued beyond four years, there was no indication of any failure on the part of the assessee to disclose material facts. Therefore, all the petitions were allowed, and the respective impugned notices for reassessment were quashed.