2023 (7) TMI 1274 - AT - Income Tax

Reopening of assessment u/s 147 - change of opinion - receipt of capital grant/subsidy - HELD THAT - As reasons recorded by the AO for reopening of assessment, used the phrase It was seen that the assessee had shown capital grant/subsidy . Thus it is proved beyond doubt, the AO from the very same materials available on record proceeded to make reassessment without any new tangible material, which is not permissible in law and the same amount to mere change of opinion from the original assessment order passed which amounts to Review his own order, such a power is not available to the A.O. There is no failure on the part of the assessee in full and true disclosure of materials relevant for the assessment. As relying on ATUL LTD. 2020 (10) TMI 43 - SC ORDER we have no hesitation in holding that in the absence of any tangible material, reopening of assessment amounts to change of opinion only. Therefore the reopening of assessment is not valid in law - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reopening of assessment under Section 148 of the Income Tax Act, 1961.
2. Addition of capital grants and subsidies to book profit under Section 115JB of the Act.

Summary:

1. Validity of Reopening of Assessment:
The primary issue was whether the reopening of the assessment under Section 148 was valid. The Assessing Officer (A.O.) initiated reassessment proceedings, claiming that the assessee had not credited the required 15% of capital grants/subsidies to the Profit and Loss Account as mandated, thus necessitating an increase in net profit for computing book profit under Section 115JB. The assessee objected, asserting that the reopening was based on a "change of opinion" and lacked new tangible material. The Tribunal upheld the assessee's contention, citing that the A.O. had scrutinized the same issue during the original assessment and had not made the addition under Section 115JB. The Tribunal relied on the jurisdictional High Court's ruling in Madhya Gujarat Vij Co. Ltd. v. ACIT, which held that reopening based on the same material without new evidence amounts to a change of opinion, which is impermissible under Section 147. Consequently, the Tribunal quashed the reopening notice and reassessment order.

2. Addition of Capital Grants and Subsidies to Book Profit:
The second issue concerned the addition of Rs. 4082.91 lakhs of capital grants and subsidies to the book profit under Section 115JB. The Commissioner of Income Tax (Appeals) [CIT(A)] had deleted the addition, following the decision in ACIT vs. Gujarat State Energy Generation Ltd., which stated that such additions are not covered by any items specified in Explanation-1 to Section 115JB(2). The Tribunal concurred with the CIT(A), noting that the facts were identical to those in the cited case and reaffirmed that the addition of capital grants and subsidies under normal provisions cannot be made to the book profit under Section 115JB.

Conclusion:
The Tribunal allowed the assessee's application under Rule 27, quashed the reopening notice and reassessment order, and dismissed the Revenue's appeal. The Tribunal held that the reassessment was invalid due to the absence of new tangible material and that the addition of capital grants and subsidies to book profit under Section 115JB was not permissible.