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2012 (8) TMI 190 - AT - Income TaxRe-assessment - Assessee had claimed deduction under Section 80-IA of the Act not only with respect to electricity produced by it, but also for lignite mined by it Held that - AO considered income-tax reimbursement not as income derived from power generation activity. All these would amply show that Assessing Officer had applied his mind at the time of original assessment proceedings. Re-assessment having been started after the lapse of four years period from the end of the relevant assessment year - Re-assessment was initiated only based on change of opinion and there was no other tangible record and information available with the Assessing Officer for initiating such reassessment proceedings - Revenue s appeal for assessment year 2002-03 is dismissed Disallowance under Section 14A of the Act - exempt income earned was from tax free bonds issued by Electricity Boards and such bonds were issued pursuant to Government order. Interest was automatically credited to the bank account and there was no expenses for such income earned Held that - Even prior to that year, A.O. was duty bound to compute disallowance under Section 14A by applying a reasonable method matter remanded to AO Addition made for reversal of sale - as per the assessee, it had to be either allowed as bad debts since amounts were irrecoverable or as business loss - Held that - assessee having already accounted and offered to tax the amounts as per the tariff in the power purchase agreement, it could claim as a bad debt the excess billings which it came to know, only on determination of tariff by CERC.
Issues Involved:
1. Validity of re-assessment proceedings for the assessment year 2002-03. 2. Deletion of disallowance under Section 14A for the assessment years 2006-07 and 2007-08. 3. Deletion of addition for reversal of sale figures for the assessment year 2007-08. Issue-wise Detailed Analysis: 1. Validity of Re-assessment Proceedings for the Assessment Year 2002-03: The Revenue contested that the CIT(Appeals) held the re-assessment proceedings to be invalid. The assessee, a public sector undertaking, claimed deductions under Section 80-IA for its Thermal Power Station units. The original assessment was completed under Section 143(3), but the Assessing Officer (A.O.) issued a notice under Section 148, citing that the units did not qualify for deductions as they were started before 01.04.1994. The A.O. argued that the assessee did not fully disclose material facts, leading to income escaping assessment. The CIT(Appeals) found that the A.O. had already examined the claim under Section 80-IA during the original assessment and the re-assessment was based on a change of opinion, thus invalid. The Tribunal upheld this view, noting that the A.O. had indeed considered the eligibility of the units for deduction during the original proceedings and no new tangible information justified the re-assessment. The appeal for the assessment year 2002-03 was dismissed. 2. Deletion of Disallowance under Section 14A for the Assessment Years 2006-07 and 2007-08: For the assessment year 2006-07, the Revenue challenged the CIT(Appeals) decision to delete the disallowance under Section 14A. The CIT(Appeals) had relied on the decision of the Hon'ble Punjab & Haryana High Court in the case of CIT v. Hero Cycles Ltd., which held that no disallowance is warranted if no expenditure is incurred to earn exempt income. The Revenue argued that the CIT(Appeals) did not consider the Special Bench decision in ITO v. Daga Capital Management (P) Ltd., which applied Rule 8D retrospectively. The Tribunal noted that the Bombay High Court in Godrej and Boyce Mfg. Co. Ltd vs. Dy. CIT had held Rule 8D applicable only from the assessment year 2008-09 onwards. However, the A.O. was still required to apply a reasonable method for disallowance under Section 14A for earlier years. The Tribunal remitted the issue back to the A.O. for fresh consideration, allowing the appeal for statistical purposes. For the assessment year 2007-08, the Tribunal provided the same directions as for the assessment year 2006-07, remitting the matter back to the A.O. 3. Deletion of Addition for Reversal of Sale Figures for the Assessment Year 2007-08: The Revenue was aggrieved by the deletion of an addition of Rs. 502,15,00,000/- made by the A.O. for sales adjustments related to previous years. The assessee argued that the adjustments were due to tariff revisions by the Central Electricity Regulatory Commission (CERC), which were binding and received during the relevant previous year. The A.O. disallowed the adjustment, stating it pertained to earlier years. The CIT(Appeals) accepted the assessee's contention, holding that the adjustment was either a bad debt or a business loss, as it was determined by a statutory authority and not due to errors or omissions. The Tribunal upheld this view, noting that the adjustment was a business loss incurred in the normal course of business and deductible under Section 37 of the Act. The appeal for this issue was dismissed, affirming the CIT(Appeals) decision. Summary of Results: - Appeal for the assessment year 2002-03 dismissed. - Appeal for the assessment year 2006-07 allowed for statistical purposes. - Appeal for the assessment year 2007-08 partly allowed for statistical purposes.
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