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TMI Blog2017 (11) TMI 1144X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. However, on receipt of representations from the Companies against omission of the words "reason to believe", Parliament reintroduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the Assessing Officer.” The appeal of the assessee is allowed on the ground that the CIT(A) erred in upholding the re-opening of the assessment u/s 147 of the Act - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in law and facts of the case in upholding the estimates of expenses by assessing officer attributable to earning of income for deduction u/s 80-0. 5.d The learned CIT (A) has erred in law and facts of the case in no considering the full amount of exchange variation realized. 6.a That the learned CIT (A) has erred in law and facts of the case in upholding the disallowance of the deduction u/s 80-IA in respect of Nuclear Steam Generator (Tiruchy) in the order u/s 147 although the same was allowed in assessment u/s 143(3). 6.b That the learned CIT(A) has erred in laws and facts of the case in upholding the disallowance of the deduction u/s 80-IA in respect of Nuclear Steam Generator (Tiruchy), the full facts of which were given in the return, tax audit report and considered by the assessing officer and specific finding was given on this issue in assessment u/s 143(3). This is only a change of opinion. 6.c. The learned CIT(A) has erred in laws and facts of the case in upholding the disallowance of the deduction u/s 80-IA in respect of Nuclear Steam Generator (Tiruchy), even though evidence was given by the company that the production started in May, 1991 and hence ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, the following points remained unattended while completing the assessment u/s 143(3) for the A.Y. 1999-00. The assessee had credited simple interest in the accounts, on credits extended to Andhra Pradesh State Electricity Board (APSEB) in respect of supplies made to Vijayawada TPS, although the Memorandum of Understanding provided for charging of compound interest. The assessee had credited simple interest on the plea that the matter was under discussion with APSEB and it would be adjusted at the time of final settlement. As the assessee was following mercantile system of accounting, interest accrued to the extent of difference between simple interest and compound interest was required to be brought to tax. The assessee had also debited prior period expenses of ₹ 18.56 lakhs to the profit and Loss account for the A.Y. 1999-2000. As the assessee was following mercantile system of accounting, the expenses which were not relevant to the previous year 1998-99 were required to be disallowed. The assessee had claimed a deduction u/s 80-0 amounting to ₹ 197.69 lakhs on account of technical services rendered to the foreign enterprises. The accounts of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer in Assessment u/s 143(3) of the Act. Hence notice issued by the Assessing Officer itself is defective and assessment is void ab initio. The same is change of opinion which is not covered by "reason to believe" and it is not permissible for re-opening of the proceedings. 5.1 As relates to merit of the case, the Ld. AR submitted that issue relating to interest on credit extended to APSEB, i.e. Ground Nos. 4.a to 4.e, the company extended a line of credit to APSEB in respect of supplies made to Vijayawada TPS. Simple interest was paid by the customer and the same was reckoned as income although the MOU provides for charging of compound interest. Negotiations were on with the customer with regard to BHEL's claim of differential interest, which did not yield fruitful results. Since APSEB is one of the valued customer of BHEL, it was felt commercially prudent not to press the claim on the differential interest upto settlement of dues. The full facts of the case were given in note 11 of Schedule 19 of the annual accounts attached with the income tax return for the assessment year. That the similar issue was raised by the assessing officer during the course of assessment p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h reference to any particular industrial undertaking. The deduction is allowed in respect of 10 assessment years including the initial assessment year. Initial assessment year means the assessment year relevant to previous year in which the industrial undertaking begins to manufacture of produce articles or things. In respect of Nuclear' Steam Generator expansion scheme the commercial production started in May, 1991. Hence the initial assessment year was 1992-93 relevant to previous year 1991-92. Accordingly, the company is entitled for deduction u/s 80IA from A.Y. 1992-93 to 2000-01. The details of claim u/s 80-IA on account of nuclear steam generator were given in the income tax return filed by the company. The details of 80-IA were also given in the tax audit report attached with the income tax return of the company. These details were examined and the assessing officer gave a specific finding for the allowability of claim u/s 80-IA in respect of nuclear steam generator and the same was given in the assessment order in respect of above assessment year, where the assessing officer has clearly indicated that the claim is for the tenth year. Therefore, the present view taken in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A). 7. We have heard both the parties and perused the material available on record. The CIT(A) held that the assessee pleaded against reopening of the case on account of wrong calculation of 80-O, 80HHC & 80IA deduction and interest payable at compound interest rate to APSEB. These matters had come up for appeal in the year 1997-98 & 98-99 and dealt by him in detail in the orders of those years which were identical in present appeal. Therefore, the CIT(A) dismissed these grounds relying on his earlier years order. The said earlier years orders were set aside by the ITAT vide order dated 11.03.2011. The ITAT held as under: "9. It is evident that for neither of the years has there been any allegation by the AO that the assessee failed to disclose fully and truly all material facts necessary for its assessment for these years. Now, this is in direct violation of the provisions of the first proviso to section 147 of the Act. The said proviso carries a mandate when it emplogs the word "shall" in requiring that no completed assessment shall be reopened unless income chargeable has escaped assessment for the reason of the failure of the assessment to disclose fully and truly all mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Deputy Commissioner, only if the Joint Commissioner is satisfied on the reasons recorded by such AO that it is a fit case for the issuance of such notice. The provisions of Section 141(1), in no way override the provisions of the first proviso to section 147 of the Act. It is rather, the stipulation contained in the first proviso to section 147, as discussed hereinabove, which takes precedence and unless there is an allegation of the assessee having failed to disclose fully and truly all material facts necessary for his assessment, no completed assessment can be reopened after the expiry of four years from the end of the relevant assessment year. 12. Therefore, for the above discussion alone, following Indian Farmers Fertilizers Coop. Ltd. (supra), the reopening of the completed assessments for both assessment years 1997-98 and 98-99 are cancelled. 13. Since the reopening of the completed assessment for both the assessment years has been cancelled for the primary reason of there being no allegation against the assessee of not having disclosed fully and truly all material facts for its assessment for both the assessment years 1997-98 and 98-99, there remains nothing further to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere change of opinion", which cannot be per se reason to re-open. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to Section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but als ..... X X X X Extracts X X X X X X X X Extracts X X X X
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