2017 (12) TMI 1396 - AT - Income Tax

Reopening of assessment - assessee company failed to furnish profit & loss account, balance sheet and other relevant financial statements of power generation unit and is not eligible for 80-IA deduction - Held that - The details of employees employed in power plant unit, details of raw material used for production of power and its bye product steam with quantity-wise details, photostat copy of balance sheet enclosed along with detailed letter. The details of month- wise production of power production, register and the same is produced along with covering letter (These details filed, are not disputed by the Department). The Assessing Officer after considering the detailed explanation along with details, passed an assessment order by allowing deduction under section 80IA of the Act. We find that the assessee has discharged his duty by furnishing all the details which are necessary for completion of assessment. In this case, notice issued by the Assessing Officer under section 148 is beyond four years. As per proviso to section 147 of the Act, the Assessing Officer has to allege specifically that there a failure on the part of the assessee to disclose fully and truly all material facts necessary for completing the assessment. We find that there is no such specific finding given by the Assessing Officer in the reasons recorded. Insofar as adoption of unit rate at ₹ 4.50 ps. is concerned, in the reasons recorded, Assessing Officer after considering the submissions made by the assessee accepted the rate adopted by the assessee that the rate on which per unit paid by the assessee to the AP Transco i.e. ₹ 4.5 per unit. Therefore, it is not correct to say that the Assessing Officer has completed assessment without considering the relevant material. The assessee has submitted the relevant material to the Assessing Officer i.e. bills paid by the assessee to the AP Transco and after considering the same, the Assessing Officer allowed, therefore it is not correct to say that there is an escapement of income. We also find that after considering all the details filed by the assessee in paper book at page Nos. 20 to 25, in respect of claim of 80IA as well as adoption of rate per unit after considering the same assessment is completed. - Decided in favour of assessee Deduction u/s 80IA - profit from the eligible business computation - Held that - As decided in the case of M/s. Eveready Spinning Mills Pvt. Ltd 2011 (11) TMI 368 - ITAT CHENNAI for the purpose of 80IA, profit of eligible undertaking has to be determined on the basis of actual lending cost of electricity purchased by the assessee from Tamilnadu Electricity Board and the tribunal has come to a conclusion by following the decision in the case of Addl. CIT v. Jindal Steel & Power Ltd. (2007 (6) TMI 308 - ITAT DELHI) - Decided in favor of the assessee.

Summary

Issues Involved:
1. Validity of notice under section 148 of the Income Tax Act.
2. Validity of reassessment proceedings under section 147 of the Act.
3. Eligibility for deduction under section 80IA.
4. Adoption of rate per unit for power generation.

Detailed Analysis:

1. Validity of notice under section 148:
The core issue in the cross objection was whether the notice issued under section 148 was in accordance with law. The assessee argued that the notice was invalid as all relevant details were provided during the original assessment proceedings. The Tribunal noted that the original assessment was completed under section 143(3) read with section 153A, and all necessary details such as books of account, profit & loss account, balance sheet, and other relevant information were furnished. The Tribunal found that the notice issued beyond four years lacked a specific finding of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Consequently, the notice under section 148 was quashed as invalid.

2. Validity of reassessment proceedings under section 147:
The reassessment proceedings were initiated on the grounds that the assessee failed to furnish the profit & loss account, balance sheet, and other relevant financial statements of the power generation unit, thus making the assessee ineligible for deduction under section 80IA. The Tribunal observed that all necessary details were provided during the original assessment, and the Assessing Officer had considered these details before allowing the deduction. The Tribunal concluded that there was no failure on the part of the assessee to disclose material facts, and hence, the reassessment proceedings were invalid.

3. Eligibility for deduction under section 80IA:
The Tribunal examined whether the assessee was eligible for deduction under section 80IA. The original assessment had allowed the deduction based on the details provided by the assessee. The Tribunal noted that the assessee had maintained separate books of account for the power generation unit and had furnished all required details. The reassessment proceedings, which disallowed the deduction, were found to be invalid as they were based on the same grounds already dealt with in the original assessment. Therefore, the Tribunal upheld the eligibility of the assessee for the deduction under section 80IA.

4. Adoption of rate per unit for power generation:
The issue of the rate per unit for power generation was also addressed. The assessee had adopted a rate of ?4.50 per unit, which was the rate paid to AP Transco. The Assessing Officer, however, contended that the rate should be ?3.25 per unit, which was the rate at which AP Transco obtained power from other similar units. The Tribunal noted that the rate of ?4.50 per unit was accepted in previous assessments and was based on the rate paid by the assessee to AP Transco. The Tribunal referred to the decision in the case of M/s. Eveready Spinning Mills Pvt. Ltd., which supported the assessee's adoption of the rate paid to the state electricity board. Consequently, the Tribunal upheld the rate of ?4.50 per unit adopted by the assessee for determining the eligible deduction under section 80IA.

Conclusion:
The Tribunal dismissed the appeals filed by the revenue and allowed the cross objections filed by the assessee. The notice under section 148 and the reassessment proceedings were quashed as invalid. The eligibility for deduction under section 80IA and the adoption of the rate per unit for power generation at ?4.50 were upheld in favor of the assessee.