Clarion Power Corporation Limited, Hyderabad v. Asst. Commissioner of Income Tax, Circle-1(2), Hyderabad

ITA 1336/Hyd/2018 | 2008-2009
Pronouncement Date: 06-05-2021 | Result: Allowed

Appeal Details

RSA Number 133622514 RSA 2018
Assessee PAN AABCC5697M
Bench Hyderabad
Appeal Number ITA 1336/Hyd/2018
Duration Of Justice 2 year(s) 10 month(s) 14 day(s)
Appellant Clarion Power Corporation Limited, Hyderabad
Respondent Asst. Commissioner of Income Tax, Circle-1(2), Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 06-05-2021
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB-A
Tribunal Order Date 06-05-2021
Last Hearing Date 23-03-2021
First Hearing Date 23-03-2021
Assessment Year 2008-2009
Appeal Filed On 22-06-2018
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI S.S.GODARA JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU ACCOUNTANT MEMBER I.T.A. NO. 1336/HYD/2018 ASSESSMENT YEAR: 2008-09 CLARION POWER CORPORATION LTD. HYDERABAD [PAN: AABCC5697M] VS ASST. COMMISSIONER OF INCOME TAX CIRCLE-1(2) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI P.MURALI MOHANA RAO AR FOR REVENUE : SHRI SUNIL KUMAR PANDEY DR DATE OF HEARING : 24-03-2021 DATE OF PRONOUNCEMENT : 06-05-2021 O R D E R PER S.S.GODARA J.M. : THIS ASSESSEES APPEAL FOR AY.2008-09 ARISES FROM TH E CIT(A)-1 HYDERABADS ORDER DATED 08-01-2018 PASSED IN CASE NO.0406/CIT(A)-1 HYD/2013-14/2017-18 IN PROCEEDING S U/S.143 R.W.S.147 OF THE INCOME TAX ACT 1961 [IN SHO RT THE ACT]. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. IT TRANSPIRES AT THE OUTSET THAT THIS ASSESSEES INSTANT APPEAL SUFFERS FROM 39 DAYS DELAY STATED TO BE ATTRIBUTAB LE TO THE REASON(S) BEYOND ITS CONTROL AS PER CONDONATION PETITION/AFFIDAVIT DT.19-06-2018. NO REBUTTAL HAS COME F ROM ITA NO. 1336/HYD/2018 :- 2 -: THE DEPARTMENTAL SIDE. THE IMPUGNED DELAY IS CONDONED THEREFORE. 3. THE ASSESSEES PLEADINGS IN THE INSTANT APPEAL RAIS ES INTER ALIA RAISES THREE FOLDED SUBSTANTIVE GRIEVANCES I.E. VALIDITY OF SECTION 147/148 PROCEEDINGS FOLLOWED BY CHALLENGE THE CORRECTNESS OF BOTH THE LOWER AUTHORITIES ACTION MAI NLY CARBON CREDITS SALES ADDITION OF RS.5 87 82 516/- AND SECTION 43B DISALLOWANCE OF PROVISIONS OF GRATUITY AND LEAVE ENCASHMENT PAYMENTS OF RS.5 16 594/-; RESPECTIVELY MAD E IN THE COURSE OF ASSESSMENT AND UPHELD IN THE CIT(A)S OR DER. 4. LEARNED AUTHORISED REPRESENTATIVE REITERATED THE ASSESSEES STAND THAT BOTH THE LOWER AUTHORITIES HAVE ERRE D IN LAW AND ON FACT IN TAKING RECOURSE TO THE IMPUGNED RE-O PENING THEREBY MAKING THAT THE TWIN ADDITIONS/DISALLOWANCES IN ABOVE TERMS. WE PROCEED IN THIS FACTUAL BACKDROP AND COME TO THE FORMER ISSUE OF CARBON CREDITS SALES ADDITION TO THE TU NE OF RS.5 87 82 516/-. IT EMERGES AT THE OUTSET THAT THIS TRI BUNALS FIRST ROUND ORDER DEALING WITH THE REVENUES APPEAL IN SECTION 143(3) PROCEEDINGS ITA NO.1482/HYD/2013 HAS ALREADY DECIDED THE ISSUE IN REVENUES FAVOUR HOLDING THAT S UCH RECEIPT IS CAPITAL IN NATURE AS UNDER: 2. IN GROUND NO.2 THE DEPARTMENT HAS CHALLENGED T HE. DECISION OF LEARNED CIT(A) IN DELETING THE ADDITION MADE BY AO BY HOLDING THAT THE AMOUNT RECEIVED ON SALE OF CARBON CREDITS IS CA PITAL IN NATURE HENCE NOT TAXABLE. 3. BRIEFLY THE FACTS RELATING TO THE AFORESAID ISS UE ARE ASSESSEE A COMPANY IS ENGAGED IN GENERATION OF POWER. FOR THE AY UNDER CONSIDERATION ASSESSEE FILED ITS RETURN OF INCOME D ECLARING 'NIL' INCOME. DURING THE COURSE OF ASSESSMENT PROCEEDING AO WHILE EXAMINING ASSESSEE'S CLAIM OF DEDUCTION U/S 80IA N OTICED THAT ASSESSEE HAS RECEIVED AN AMOUNT OF RS.5 07 45 000 F ROM SALE OF ITA NO. 1336/HYD/2018 :- 3 -: CERS (CARBON CREDITS) WHICH HAVE BEEN INCLUDED IN T HE GROSS SALES AND CREDITED TO P&L A/C AND THE ASSESSEE HAS ALSO C LAIMED DEDUCTION U/S. 80IA ON THE SAME. WHEN AO PROPOSED T O DISALLOW THE DEDUCTION CLAIMED U/S. 80IA ON SALE OF CARBON CREDI TS ON THE GROUND THAT SALE OF CARBON CREDITS CANNOT BE CONSIDERED TO BE INCOME DERIVED FROM ELIGIBLE BUSINESS OF ASSESSEE THOUGH ASSESSE E OBJECTED TO THE PROPOSED DISALLOWANCE' AO ULTIMATELY. DISALLOWED T HE CLAIM OF DEDUCTION U/S. 80IA OF RS. 5 07 45 000 BY EXCLUDING IT FROM BUSINESS INCOME IN THE ASSESSMENT ORDER PASSED BY HIM. ASSES SEE CHALLENGED THE DECISION OF AO IN APPEAL PREFERRED BEFORE THE C IT(A). THE LEARNED CIT(A) FOLLOWING THE DECISION OF THE ITAT. HYDERABA D BENCH IN CASE OF M/S MY HOME POWER LTD. VS. DCIT 151 TTJ 616 DELETE D THE ADDITION BY HOLDING THAT THE AMOUNT OF RS.5 07 45 000 ON SAL E OF CARBON CREDITS IS IN THE NATURE OF CAPITAL RECEIPT HENCE IS NOT TAXABLE. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIAL ON RECORD. AT THE OUTSET BOTH LEARNED DR AND LEARNED AR AGREED BEFORE US THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE DECISION OF THE ITAT HY DERABAD BENCH IN CASE OF M/S MY HOME POWER LTD. VS. DCIT (SUPRA) WH ICH HAS BEEN CONFIRMED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN CASE OF SAME ASSESSEE WHILE DISMISSING DEPARTMENT'S APPEAL AS RE PORTED IN 365 ITR 82 / 46 TAXMAN.COM 314. CONSIDERING SUCH SUBMIS SION OF BOTH THE COUNSELS AND AFTER GOING THROUGH THE JUDGMENT O F THE HON'BLE JURISDICTIONAL HIGH COURT AS AFORESAID WE DO NOT F IND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(A) AS THE ISSUE IS SQUAREL Y COVERED IN FAVOUR OF ASSESSEE BY VIRTUE OF THE AFORESAID JUDGMENT OF THE JURISDICTIONAL HIGH COURT. ACCORDINGLY WE UPHOLD THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE AND THE GROUND RAISED BY THE DEPARTMENT IS DISMISSED. 5. COUPLED WITH THIS WE FIND THAT THE LEGISLATURE HAS INSERTED SECTION 115BBG IN THE ACT VIDE FINANCE ACT 20 17 W.E.F.01-04-2018 TREATING THE SAID CARBON CREDITS AS TAX ABLE INCOME. WE MAKE IT CLEAR THAT WE ARE IN AY.2008-09 ONL Y. THIS IS NOT IN REVENUES CASE THAT THE SAID STATUTORY PROVISIO N CARRIES ANY RETROSPECTIVE EFFECT. WE THUS HOLD THAT BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AND ON FACTS IN TRE ATING THE ASSESSEES CARBON CREDITS RECEIPTS AS TAXABLE INCOME. THE IMPUGNED ADDITION OF RS.5 87 82 516/- IS DIRECTED TO B E DELETED THEREFORE. ITA NO. 1336/HYD/2018 :- 4 -: 6. NEXT COMES EQUALLY IMPORTANT QUESTION AS WHETHER THE IMPUGNED RE-OPENING IS LIABLE TO BE SUSTAINED IN THE F ACTS OF THE INSTANT CASE OR NOT. WE REPEAT AS PER OUR DISCUSSIO N IN THE PRECEDING PARAGRAPHS THAT THE ASSESSING OFFICERS SOLE RE-OPENING REASON RECORDED TO THIS EFFECT DT.30-03-2013 GOES CONTRARY TO THE TRIBUNALS LANDMARK DECISION DT.02-11-20 12 IN MY HOME POWER LTD. VS. DCIT (2012) [27 TAXMANN.COM 2 7] HYDERABAD TRIBUNALS DECIDING THE ISSUE IN ASSESSEE S FAVOUR AS UPHELD IN HONBLE JURISDICTIONAL HIGH COURT IN CIT V S. MY HOME POWER LTD. (2014) [365 ITR 82] AP. THE ASSESSEES CASE IN THE LIGHT OF HONBLE APEX COURTS LANDMARK DECISION IN GK N DRIVESHAFTS (INDIA) LTD. VS. ITO [(2003) 259 ITR 10 1 (SC)] THAT ALL THE FACTS INVALIDATE THE IMPUGNED RE-OPENING A S WELL SINCE THEIR LORDSHIPS HAVE MADE IT CLEAR THAT THERE AR E TWIN STAGES OF POSING CHALLENGE TO CORRECTNESS THEREOF I.E. BY FILING OBJECTIONS BEFORE THE ASSESSING OFFICER AT THE THRESHOL D STAGE AS WELL AS DURING THE COURSE OF SCRUTINY ASSESSMENT S APPEALS. THIS TRIBUNALS CO-ORDINATE BENCHS DECISION IN JOGIN DER SINGH VS. ITO ITA NO.222/ASR/2014 DT.11-06-2015 HOLDS THE INSTANT ISSUE AS UNDER: 16. THE REASON IS THIS. THE REASONS FOR REOPENING THE ASSESSMENT AS IS THE SCHEME OF LAW VISUALIZED AND SET OUT BY H ONBLE SUPREME COURT IN THE GKN DRIVESHAFTS CASE (SUPRA) ARE TO BE CONFRONTED TO THE ASSESSEE AND THE ASSESSEE HAS AN OPPORTUNITY TO REB UT THESE REASONS. THIS IS A STAGE PRIOR TO THE ASSESSING OFF ICER PROCEEDING WITH THE REASSESSMENT PROCEEDINGS AND AFTER HE HAS ISSUE D NOTICE FOR REOPENING THE ASSESSMENT. IN A SITUATION IN WHICH T HE ASSESSEE CAN CONVINCE THE ASSESSING OFFICER THAT THESE REASONS A RE NOT GOOD ENOUGH TO MAKE THE ADDITIONS THE REASSESSMENT PROC EEDINGS ARE TO BE DROPPED ANYWAY. 17. THERE IS NO BAR ON THE NATURE OF MATERIAL THAT THE ASSESSEE MAY SEEK TO RELY UPON EVEN AT THE FIRST STAGE TO DEMO NSTRATE THAT THE REASONS FOR REOPENING ARE UNSUSTAINABLE IN LAW AND EVEN THIS ITA NO. 1336/HYD/2018 :- 5 -: ADJUDICATION BY THE ASSESSING OFFICER IS SUBJECT MA TTER OF LEGAL SCRUTINY BY THE APPELLATE AUTHORITIES IN THE COURSE OF THE SAME APPELLATE PROCEEDINGS AS AGAINST THE REASSESSMENT O RDER. THE SCHEME OF LAW AS LAID DOWN BY THE HONBLE SUPREME COURT IN GKN DRIVESHAFTS CASE THUS PROVIDES FOR DUAL ADJUDICAT ION BY THE ASSESSING OFFICER ON THE CORRECTNESS OF THE REASONS RECORDED FOR REOPENING THE ASSESSMENT- ONE AT THE STAGE OF DEALI NG WITH THE OBJECTIONS OF THE ASSESSEE PRIOR TO PROCEEDING WITH THE REASSESSMENT PROCEEDINGS AND THE OTHER AT THE POINT OF TIME WHE N DURING THE REASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAS TO TAKE A CALL ON ADDITIONS TO BE MADE IN RESPECT OF THESE REASONS. T HAT IS WHERE THERE IS A PARADIGM SHIFT IN THE SCHEME OF THINGS POST GK N DRIVERSHAFT DECISION. IN A SITUATION IN WHICH DURING THE REASS ESSMENT PROCEEDINGS THE ASSESSING OFFICER FINDS THESE REAS ONS TO BE SO INCORRECT THAT HE CONCLUDES THAT NO INCOME HAS ESCA PED THE ASSESSMENT AND THE ADDITIONS ON THAT COUNT ARE UNWA RRANTED THE SAME SHOULD HAVE BEEN THE POSITION AT THE STAGE OF ADJUDICATING ON THE CORRECTNESS OF THE REASONS RECORDED IN THE PRE- REASSESSMENT PROCEEDINGS. IN THE LATTER PROCEEDINGS ALSO THE AS SESSEE HAS THE LIBERTY TO BRING THE MATERIAL OTHER THAN THAT AVAI LABLE TO THE ASSESSING OFFICER ON HIS RECORDS THAT NO INCOME HA S ESCAPED ASSESSMENT. THE CONCLUSIONS IN THESE TWO SETS OF SO MEWHAT PARALLEL EXERCISES CANNOT THEREFORE BE ORDINARILY DIFFEREN T. IN OTHER WORDS WHEN THE ASSESSING OFFICER IS SATISFIED THAT NO ADD ITIONS CAN BE MADE ON THE BASIS OF THE REASONS OF REOPENING AS RECORD ED BY HIM HE HAS TO DROP THE REASSESSMENT PROCEEDING AT THIS INITIAL STAGE ITSELF. WHEN THE EXAMINATION OF CORRECTNESS OF THE REASONS RECOR DED COME UP FOR ADJUDICATION BEFORE THE APPELLATE AUTHORITIES THE APPROACH THEREFORE CANNOT BE ANY DIFFERENT EITHER. 18. IN THE CASE BEFORE HONBLE JURISDICTIONAL HIGH COURT AS EVIDENT FROM THE EXTRACTS FROM THE CIT(A)S ORDER REPRODUCE D THEREIN THE REASSESSMENT WAS QUASHED ON THE GROUND THAT THE ASS ESSING OFFICER COULD NOT MAKE ADDITIONS IN RESPECT OF THE INCOME WHICH HAD NOT ESCAPED ASSESSMENT FOR WHICH NO NOTICE HAD BEEN GIV EN TO THE ASSESSEE UNDER SECTION 148 READ WITH SECTION 147 OF THE ACT. THEIR LORDSHIPS APPRECIATED THAT TO THAT EXTENT THE LEGAL PROPOSITION WAS INCORRECT IN THE LIGHT OF INSERTION OF EXPLANATION 3 TO SECTION 147 AND THE EARLIER JUDICIAL PRECEDENTS WHICH WERE RELIED UPON BY THE ASSESSEE DID NOT HOLD GOOD LAW AS THEIR LORDSHIPS MADE CLEAR IN NO UNCERTAIN WORDS. THE CORRECTNESS OF THE REASONS OF REOPENING WAS NOT AN ISSUE BEFORE THEIR LORDSHIPS. THE CORRECTNESS OF THE REASONS FOR REOPENING WAS NOT DIRECTLY OR INDIRECTLY IN CHALL ENGE. 19. AS IS EVIDENT FROM THE DISCUSSIONS EARLIER IN T HIS ORDER HERE IS A CASE IN WHICH THE VERY REASONS ON ACCOUNT OF WHICH THE CIT(A) HAS DELETED THE QUANTUM ADDITIONS WERE ALSO GOOD ENOUGH TO HOLD THAT THE INITIATION OF REASSESSMENT PROCEEDINGS IS BAD I N LAW AND YET THE ITA NO. 1336/HYD/2018 :- 6 -: CIT(A) WAS FIGHTING SHY OF THE LOGICAL CONCLUSIONS THERETO AND NATURAL COROLLARIES TO THESE FINDINGS. IT IS ALSO IMPORTANT TO BEAR IN MIND THE FACT THAT THE RELIEF SO GRANTED BY THE CIT(A) ON T HE BASIS OF WHICH THE ADDITIONS IN RESPECT OF THE REASONS RECORDED FOR RE OPENING THE ASSESSMENT WERE DELETED AND WHICH WERE IN OUR CONS IDERED VIEW GOOD ENOUGH TO QUASH THE REASSESSMENT ITSELF IS NO T EVEN CHALLENGED IN FURTHER APPEAL. THESE FINDINGS OF THE CIT(A) HAV E THUS REACHED FINALITY AND ARE NOT EVEN IN DISPUTE BEFORE US. IF SUCH BE THE FACTS THERE CAN BE NO JUSTIFICATION FOR TAKING THESE FIND INGS TO ITS LOGICAL CONCLUSIONS AND BASED ON THESE UNCONTROVERTED FIND INGS QUASH THE REASSESSMENT ITSELF. WHAT HELD GOOD FOR DELETING TH E ADDITIONS ON THE BASIS OF THE REASONS RECORDED THE ASSESSMENT ON TH E FACT OF THIS CASE AND IN OUR HUMBLE UNDERSTANDING WAS GOOD ENOUGH TO HOLD THE REASONS FOR REOPENING THE ASSESSMENT TO BE INCORREC T AS WELL. WE ARE UNABLE TO SEE ANY LEGALLY SUSTAINABLE REASONS TO CO ME TO DIFFERENT CONCLUSIONS. IN OUR CONSIDERED VIEW THEREFORE THE CIT(A) OUGHT TO HAVE QUASHED THE REASSESSMENT AS WELL. 20. IN VIEW OF THESE DISCUSSIONS AND BEARING IN MI ND ENTIRETY OF THE CASE WE HOLD THAT THE CIT(A) OUGHT TO HAVE ON THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE QUASHED THE REASSESSMENT PROCEEDINGS AS WELL. WE THEREFORE QUASH THE REASSESSMENT PROCEED INGS. AS REASSESSMENT ITSELF IS QUASHED AS ABOVE NOTHING EL SE SURVIVES FOR ADJUDICATION. 6.1. WE FOLLOW THE FOREGOING REASON MUTATIS MUTANDIS AND HOLD THAT THE IMPUGNED REASONING IS ALSO NOT SUSTAINABLE AS PER LAW. THE SAME STANDS QUASHED THEREFORE. THE ASSESSEES THIRD SUBSTANTIVE GROUND RAISING THE ISS UE OF CORRECTNESS OF 43B DISALLOWANCE IS RENDERED INFRU CTUOUS IN ABOVE TERMS. 7. THIS ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH MAY 2021 SD/- S D/- (LAXMI PRASAD SAHU) (S.S.G ODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER HYDERABAD DATED: 06-05-2021 TNMM ITA NO. 1336/HYD/2018 :- 7 -: COPY TO : 1.CLARION POWER CORPORATION LTD. C/O. P. MURALI & CO. CHARTERED ACCOUNTANTS 6-3-655/2/3 1 ST FLOOR SOMAJIGUDA HYDERABAD. 2.THE ASST.COMMISSIONER OF INCOME TAX CIRCLE-1(2) HYDERABAD. 3.CIT(APPEALS)-1 HYDERABAD. 4.PR.CIT-1 HYDERABAD. 5.D.R. ITAT HYDERABAD. 6.GUARD FILE.