2019 (3) TMI 1549 - HC - Income Tax

Reopening of assessment - deduction u/s 80(IA) - scope of change of opinion - Allegation that assessee was not engaged in running Diesel Power Generator Unit to generate electricity - as per Memorandum of Association it was never mentioned that manufacture and production of electricity as part of the object of the Company - HELD THAT - The concept of change of opinion must be treated as an in-built test to check the abuse of power as such, after 01.04.1999. The Assessing Officer has power to re-open an assessment, provided there is tangible material to come to the conclusion that there was escape of income from the assessment. It is asserted that, reason must have a link with the formation of belief. See KELVINATOR OF INDIA LIMITED 2010 (1) TMI 11 - SUPREME COURT OF INDIA We do not have any hesitation to hold that the finding rendered by the Tribunal is within the four wall of law. This is more so, since the deviation was made by the Assessing Officer only with reference to the assessment year 2005 - 06; whereas in the case of other assessment years, the benefit was granted, since by virtue of the mandate of Section 80(IA) of the Act, it has to flow over a period of 10 years. There is no case for the Revenue that the assessment in respect of the other assessment years concerned has been interdicted for the said reason. Whether the profit generated from the Diesel Power Generating Unit is entitled to get deduction in terms of Section 80 (IA) - specific reference is made by the Tribunal to a Circular issued by the Government of India Ministry of Finance - CBDT dated 03.10.2001. from which it is clear that the stand taken by the assessee to sustain the claim, which has been upheld by the Tribunal while passing Annexure C order, is quite in order, as the assessee is entitled to have the benefit in respect of such Diesel Power Generating Unit. As it stands so, the said finding rendered by the Tribunal on merits, based on the actual facts and circumstances, does not involve any question of law; much less any substantial question of law. These appeals have been preferred by the appellant/revenue on the basis of a misconceived notion as to the scope of the legal provision. No substantial question of law - Decided against revenue

Summary

Issues:
- Reopening of assessment under Section 147 of the Income Tax Act
- Eligibility for deduction under Section 80(IA) for profit derived from Diesel Power Generator Unit

Reopening of Assessment:
The appeals were filed by the Revenue challenging the Tribunal's order on the reopening of assessments for the years 2001-02 and 2002-03 under Section 147 of the Income Tax Act. The Tribunal upheld the reopening of the assessments, citing that the benefit of deduction under Section 80(IA) was disallowed for the assessment year 2005-06. The Commissioner of Income Tax [Appeals] found the Assessing Officer justified in reopening the assessments but allowed the deduction under Section 80(IA) for the profit derived from the Diesel Power Generator Unit, leading to the Revenue filing the appeals.

Eligibility for Deduction under Section 80(IA):
The main issue revolved around the deduction claimed by the assessee under Section 80(IA) for the profit derived from the Diesel Power Generator Units. The Assessing Officer reopened the assessments based on the belief that the assessee did not disclose running the Diesel Power Generator Unit to generate electricity. The Tribunal referred to judicial precedents and held that the assessments were reopened mainly on a change of opinion without the assessee failing to disclose relevant facts. The Tribunal annulled the reopening proceedings and set aside the order of the CIT (A). The High Court upheld the Tribunal's decision, emphasizing that the Assessing Officer's deviation was only for one assessment year, and the benefit under Section 80(IA) had to flow over a period of 10 years. Additionally, the Tribunal's finding on the eligibility for deduction under Section 80(IA) was based on a government circular and did not involve any substantial question of law. Consequently, the appeals were dismissed as no substantial question of law was found to warrant interference under Section 260A of the Income Tax Act.