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TMI Blog2023 (7) TMI 1274X X X X Extracts X X X X X X X X Extracts X X X X ..... . Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member For the Assessee : Shri M.J. Shah, Shri Jimi Patel And Shri Rushin Patel, A.Rs. For the Revenue : Shri A.P. Singh, CIT-DR ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Revenue as against the appellate order dated 29.01.2018 passed by the Commissioner of Income Tax (Appeals)-1, Vadodara arising out of the reassessment order passed under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as the Act ) relating to the Assessment Year (A.Y) 2011-12. 2. The brief facts of the case is that the assessee is a Public Sector Company engaged in the business of Transmission of Power. For the Assessment Year 2011-12, the assessee filed its Return of Income declaring total income of Rs. Nil after setting off brought forward losses of Rs. 2,66,33,64,437/- and Book Profit u/s. 115JB was returned at Rs. 2,65,73,22,107/-. The return was subject to regular assessment u/s. 143(3) of the Act vide assessment order dated 05-02-2014 wherein business income was assessed at Rs. 3,09,99,15,987/- and income from other sources was assessed at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer following the decision in the case of ACIT Vs. Gujarat State Energy Generation Ltd. observing as follows: .4.2. Ground No. 2 pertains to the addition of 40,82,91,000/- to the book profit u/s 115JB. This addition pertains to additional 5% of the capital grant and subsidies added to the total income under normal Income-tax provisions. My predecessor, vide letter dated 22.09.2015 in the case of the appellant itself in AY 2012-13 contained in Appeal No.CAB- 1/300/2014-15, after relying upon the decision of the Hon'ble ITAT in ACIT vs Gujarat State Energy Generation Ltd., ITA No. 1777/Ahd/2009 and 2028/Ahd/2009 (AY 2006-07) dated 15.04.2011, has held that addition of capital grant and subsidies made under normal provisions, cannot be made to the book profit u/s 115JB because it is not covered by any of the items specifically mentioned in the Explanation-1 to section 1153B(2). Accordingly, he has deleted the addition made to the book profit on this account. Since, the facts are identical in this year also, I respectfully following the above order of my predecessor, hold that the addition of capital grant and subsidies made under normal provisions at 40,82,91,000/- cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der. 9. Adverting to rest of the cases where notices have been issued within a period of four years and also as an additional ground pressed into service in the cases where notices have been issued beyond the period of four years, we may examine the assessee's contention of Assessing Officer recking up a scrutinized issue. 14. He finally worked out the assessee's book profit under Section 115JB of the Act at Rs. 32.11 Crores. It can thus be seen that the Assessing Officer was of the opinion that instead of 10% of the government subsidy, 15% thereof should be reflected in the assessee's books of account He accordingly made such additions in the normal computation of assessee's income. While the Assessing Officer was so examining the assessee's treatment to the Government grants and subsidies, he simultaneously also examined the assessee's computation of Book-profit under Section 1151B of the Act. Both issues were thus clearly interconnected and were not possible for consideration separately. The fact that the Assessing Officer did not make any similar upward revision of the assessee's book profit under Section 115JB of the Act, that too without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he addition. 7. Per contra, the Ld. CIT-D.R. Mr. A.P. Singh appearing for the Revenue filed written submission as follows: During the hearing the A.R. of the assessee has taken plea that though the assessee has not appealed the order of CIT(A) but he may be allowed to appeal the grounds of reopening decided against him by the CIT(A) in accordance with the Rule 27 of Appellate Tribunal Rules, 1963. He has also relied on the decisions of Hon'ble Gujarat High Court in the case of Dahod Sahakari Kharid Verchan Sangh Ltd. vs. CIT - 282 ITR 32 (Guj.) (2006) and Madhya Gujarat Vij Co. Ltd. vs. ACIT - 94 taxmann.com 337 (Guj.) dated 07.03.2018. In this regard, it is submitted that case laws relied upon by the A.R. is not applicable in this case as facts are different in above mentioned case laws. In the case of Dahod Sahakari Kharid Verchan Sangh Ltd. issue was relating to penalty where quantum addition was confirmed by the CIT(A) and the assessee has accepted the same whereas in the present case the issue involved is reopening of assessment u/s. 147. Further, in second case law relied upon the reopening was done after 6 years whereas in present case, the case was reopen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pendent appeal or cross-objection. 12. Rule 27 of the Rules is akin to Rule 22 Order XLI of the Civil Procedure Code. Sub-rule (1) provides that any respondent, though he may not have appealed from any part of the decree, may not only support the decree but may also state that the finding against him in the Court below in respect of any issue ought to have been decided in his favour; and may also take any cross-objection to the decree which he could have taken by way of an appeal. In case of Virdhachalam Pillai v. Chaldean Syrian Bank Ltd. AIR 1964 SC 1425 in context of the said Rule the Supreme Court observed as under: 32. Learned Counsel for the appellant raised a short preliminary objection that the learned Judges of the High Court having categorically found that there was an antecedent debt which was discharged by the suit-mortgage loan only to the extent of Rs. 59,000/- and odd and there being no appeal by the Bank against the finding that the balance of the Rs. 80,000/- had not gone in discharge of an antecedent debt, the respondent was precluded from putting forward a contention that the entire sum of Rs. 80,000/- covered by Exs. A and B went for the discharge of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o occasion for the assessee to feel aggrieved and hence, it was not necessary for the assessee to prefer an appeal. The position in law is well settled that a cross objection, for all intents and purposes. would amount to an appeal and the cross objector would have the same rights which an appellant has before the Tribunal. 18. Section 253 of the Act provides for appeal to the Tribunal. Under subsection (1), an assessee is granted right to file an appeal; under subsection (2), the Commissioner is granted a right to file appeal by issuing necessary direction to the assessing officer; sub-section (3) prescribes the period of limitation within which an appeal could be preferred. Section 253(4) of the Act lays down that either the assessing officer or the assessee, on receipt of notice that an appeal against the order of Commissioner (Appeals) has been preferred under sub-section (1) or subsection (2) by the other party, may, notwithstanding that no appeal had been filed against such an order or any part thereof, within 30 days of the notice, file a memorandum of cross objections verified in the prescribed manner and such memorandum shall be disposed of by the Tribunal as if it we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct on account of grants and subsidies, it is submitted that the company has not received any revenue grant. The company has accounted the Government Grants and subsidies, etc., in terms of the mandatory accounting standard(A) 12 on Accounting for Government Grants prescribed by apex Accounting Body ICAI. It is submitted that there is no provision whatsoever in the companies Act of the Accounting Standards to reduce such a kind of Govt. Grants from the cost of fixed assets. It has been prescribed in the AS that only the Specific Grants/Subsidies received for the specific assets are to be reduced from the cost of such Assets. The Grants in question are capital Grant and have been received. Hence, no adjustments to the book profits are warranted on account of the same. 8.3. However the Ld. A.O. was not made addition u/s. 115JB of the Act. Thus there is no failure on the part of the assessee in disclosing the income to the authorities. Therefore reopening of the assessment even within four years period is also amount to change of opinion which is not permissible u/s. 147 of the Act. In this connection, the Ld. Counsel relied upon Jurisdictional High Court in the case of M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature where a quasi- judicial order previously passed after full hearing and which has otherwise become final is subject to reopening on certain grounds. Ordinarily, a judicial or quasi-judicial order is subject to appeal, revision or even review if statute so permits but not liable to be reopened by the same authority. Such powers are vested by the Legislature presumably in view of the highly complex nature of assessment proceedings involving large number of assesses concerning multiple questions of claims, deductions and exemptions, which assessments have to be completed in a time frame. To protect the interest of the revenue, therefore, such special provisions are made under section 147 of the Act. However, it must be appreciated that an assessment previously framed after scrutiny when reopened, results into considerable hardship to the assessee. The assessment gets reopened not only qua those grounds which are recorded in the reasons, but also with respect to entire original assessment, of course at the hands of the revenue. This obviously would lead to considerable hardship and uncertainty. It is precisely for this reason that even while recognizing such powers, in special req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, in our opinion, would be devoid of merits. If a claim made by the assessee in the return is not rejected, it stands allowed. If such a claim is scrutinized by the Assessing Officer during assessment, it means he was convinced about the validity of the claim. His formation of opinion is thus complete. Merely because he chooses not to assign his reasons in the assessment order would not alter this position. It may be a non-reasoned order but not of acceptance of a claim without formation of opinion. Any other view would give arbitrary powers to the Assessing Officer. 43. We are, therefore, of the opinion that in a situation where the Assessing Officer during scrutiny assessment, notices a claim of exemption, deduction or such like made by the assessee, having some prima facie doubt raises queries, asking the assessee to satisfy him with respect to such a claim and thereafter, does not make any addition in the final order of assessment, he can be stated to have formed an opinion whether or not in the final order he gives his reasons for not making the addition. 16. In view of such discussion, it is not necessary to examine assessee's remaining two contentions of noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l gain on the sale of shares. In paragraph 12, he called upon the assessee to justify the claim of exemption under section 10(23G) of the Act vis-a-vis interest earned from SSNNL/GIPCL bonds. The assessee gave detailed reply to the query raised in para 5 with respect to capital gain. The assessee, thereafter, contended that such justification would apply with respect to interest on the bonds also. Contents of the letter of the assessee would demonstrate that the assessee offered its explanation for claiming exemptions under section 10(23G) of the Act. If for some reason the Assessing Officer was not satisfied with such explanation, surely it was open for him to call for further explanation. In the final order of assessment, it is not as if the Assessing Officer totally lost sight of such claims. He in fact took into account the fact that the assessee was claiming exemption on the interest income from the bonds. He, therefore, examined as to what extent expenditure for earning such tax free income should be disallowed. In the order of assessment, he gave detailed reasons why a portion of the expenditure relating to earning tax free interest should be disallowed. 50. In the reas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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