ACIT, Circle-16(2),, Hyderabad v. M/s. Matrix Power Private Limited, Hyderabad

ITA 1654/HYD/2011 | 2004-2005
Pronouncement Date: 03-02-2012 | Result: Dismissed

Appeal Details

RSA Number 165422514 RSA 2011
Assessee PAN AACCM2002M
Bench Hyderabad
Appeal Number ITA 1654/HYD/2011
Duration Of Justice 4 month(s) 13 day(s)
Appellant ACIT, Circle-16(2),, Hyderabad
Respondent M/s. Matrix Power Private Limited, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 03-02-2012
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 03-02-2012
Assessment Year 2004-2005
Appeal Filed On 20-09-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B HYDERABAD BEFORE SHRI CHANDRA POOJARI ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN JUDICIAL MEMBE R. ITA NO.1654/HYD/2011 (ASSESSMENT YEAR 2004-05) ASSTT . COMMISSIONER OF INCOME - TAX CIRCLE 16(2) HYDERABAD. V/S M/S. MATRIX P OWER PVT. LTD. HYDERABAD (PAN AACCM 2002 M) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B.V.PRASAD REDDY RESPONDENT BY : SHRI A.V.RAGHURAM DATE OF HEARING 25. 1.2012 DATE OF PRONOUNCEMENT 3.2.2012 O R D E R PER ASHA VIJAYARAGHAVAN JUDICIAL MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A) V HYDERABAD DATED 12.7.2011 FOR THE ASS ESSMENT YEAR 2004-05. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL RELATES TO THE LEGALITY AND VALIDITY OF THE REOPENING OF THE ASSESSMENT BY THE ASSESSING OFFICER UNDER S.147 OF THE ACT. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESS EE COMPANY ENGAGED IN THE BUSINESS OF GENERATION OF POWER FROM ITS PLANT LOCATED IN KARAMPUDI VILLAGE OF GUNTUR DISTRICT OF ANDHRA P RADESH FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2004-05 D ECLARING NIL INCOME AFTER CLAIMING DEDUCTION OF RS.21 46 106 UN DER S.80IA OF THE ACT. ASSESSMENT WAS ORIGINALLY COMPLETED ON A TOT AL INCOME OF RS.17 57 890 AFTER RESTRICTING THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER S.80IA OF THE ACT TO RS.3 88 417 BY EXCLUDIN G THE INTEREST ON FIXED DEPOSITS OF RS.17 57 689 FROM THE PROFITS AND GAINS FROM ITA NO.1654/HYD/2011 M/S. MATRIX POWER PVT. LTD. HYDERABAD 2 BUSINESS DERIVED BY THE ASSESSEE VIDE ORDER DATED 26.6.2006 PASSED UNDER S.143(3) OF THE ACT. 4. IT WAS NOTICED FROM SCHEDULE 13 FORMING PART OF THE RETURN OF INCOME THAT BESIDES INTEREST RECEIPT ON FDRS OF RS.17 57 689 THE ASSESSEE HAS ALSO SHOWN INSURANCE CLAIMS AT RS.27 21 524 UNDER THE HEAD OTHER INCOME. ACCORDING TO THE ASSESSING OF FICER THE INSURANCE CLAIMS SHOWN AT RS.27 21 524 ALSO DO NOT QUALIFY F OR DEDUCTION UNDER S.80IA IN VIEW OF RATIO OF THE DECISIONS OF THE HO NBLE MARAS HIGH COURT IN THE CASE OF PANDIAN CHEMICALS LTD. (233 IT R 497) (LATER CONFIRMED BY THE APEX COURT IN 262 ITR 278) AND OF THE APEX COURT IN STERLING FOODS (237 ITR 579). IN THIS VIEW OF THE MATTER ASSESSMENT WAS REOPENED BY ISSUANCE OF NOTICE UNDER S.148. IN RESPONSE TO SHOW-CAUSE NOTICE ISSUED IN THE COURSE OF RE-ASSESS MENT PROCEEDINGS THE ASSESSEE BESIDES SUBMITTING THAT THE RE-ASSESSM ENT WAS PROMPTED BY MERE CHANGE OF OPINION AND AS SUCH NOT LEGAL AND VALID SUBMITTED ON MERITS THAT THE INSURANCE CLAIMS REPRESENT THE A MOUNT RECEIVED TOWARDS LOSS OF PROFITS DUE TO MACHINERY BREAKDOWN AND BUT FOR THE CLAIM THE PROFITS OF THE COMPANY WOULD HAVE BEEN M UCH LESSER AND AS SUCH THE INSURANCE CLAIM PARTAKES THE CHARACTER OF INCOME DERIVED FORM CORE BUSINESS ACTIVITY AND THEREFORE THE SAM E IS ELIGIBLE FOR DEDUCTION UNDER S.80IA OF THE ACT. NOT CONVINCED W ITH THE EXPLANATION OF THE ASSESSEE AND PLACING RELIANCE ON THE DECISI ONS OF APEX COURT IN THE CASE OF CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. L TD.(118 ITR 84); OF THE MADRAS HIGH COURT IN PANDIAN CEHMCIALS LTD. (23 3 ITR 497) AND OF THE SUPREME COURT IN STERLING FOODS (237 ITR 597) THE ASSESSING OFFICER COMPLETED THE RE-ASSESSMENT EXCLUDING THE AMOUNT OF INSURANCE CLAIM FROM THE SCOPE OF COMPUTATION OF RE LIEF UNDER S.80IA OF THE ACT AND DETERMINING THE TAXABLE INCOME OF T HE ASSESSEE AT RS.21 46 106. ITA NO.1654/HYD/2011 M/S. MATRIX POWER PVT. LTD. HYDERABAD 3 5. ON APPEAL THE CIT(A) FOLLOWING HIS APPELLATE ORDER IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 INVOLVING IDENTICAL SET OF FACTS WHEREIN ALSO ASSESSEES CLA IM FOR DEDUCTION UNDER S.80IA WAS SPECIFICALLY EXAMINED DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS UNDER S.143(3) AND AMOUNT OF INTEREST ON FIXED DEPOSITS ALONE WAS EXCLUDED FROM THE SCOPE OF ELIGIBLE INCOME OF THE BUSINESS FOR PURPOSES OF COMPUTATION OF RELIEF UNDER S.80IA OF THE ACT CONCLUDED THAT THE RE-ASSESSMENT PROCEEDINGS INITIATED BY THE ASSESSING OFFICER IN THE PRESENT CASE IS ALSO BASED ON MERE CHANGE OF OPINION AND CONSEQUENTLY THE ASSESSING OFFICER WA S NOT CORRECT IN ISSUING THE NOTICE UNDER S.148 AND AS SUCH HE D ECLARED THE ENTIRE RE-ASSESSMENT AS NULL AND VOID. 6. AGGRIEVED BY THE ORDER OF THE CIT(A) REVENUE I S IN APPEAL BEFORE US. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE SHRI B .V.PRASAD REDDY STRONGLY SUPPORTING THE ORDER OF THE ASSESSI NG OFFICER SUBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN CONC LUDING THAT THE INITIATION OF THE PROCEEDINGS FOR RE-ASSESSMENT WA S BASED ON MERE CHANGE OF OPINION. 8. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI RAG HURAM ON THE OTHER HAND STRONGLY SUPPORTED THE ORDER OF THE CIT(A). TAKING US THROUGH THE ORIGINAL ASSESSMENT MADE UNDER S.143(3 ) OF THE ACT HE SUBMITTED THAT THE ASSESSING OFFICER HAS SPECIFICAL LY EXAMINED THE ALLOWABILITY OF DEDUCTION UNDER S.80IA OF THE ACT IN RESPECT OF CERTAIN ITEMS OF INCOME LIKE INSURANCE CLAIMS ETC. AND A S SUCH THE INITIATION OF THE PROCEEDINGS FOR RE-ASSESSMENT WAS BASED ON M ERE CHANGE OF OPINION WHICH IS NEITHER VALID NOR LEGAL. HE ALSO PLACED RELIANCE ON THE UNREPORTED DECISION OF THE HONBLE MADRAS HIGH COUR T DATED 3.8.2010 ITA NO.1654/HYD/2011 M/S. MATRIX POWER PVT. LTD. HYDERABAD 4 IN THE CASE OF CIT VS/. M/S. BAER SHOES (INDIA) PVT . LTD. (TAX CASE(APPEAL ) NO.706 OF 2010); AND OF THE DELHI HIG H COURT IN THE CASE OF LEGATO SYSTEMS (INDIA) (P) LTD. V/S. DY. CI T( 187 TAXMAN 294). 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. IT IS THE ALLOWA NCE OF RELIEF UNDER S.80IA IN RESPECT OF INSURANCE CLAIMS OF RS.27 21 5 24 RECEIVED BY THE ASSESSEE WHICH HAS PROMPTED THE ASSESSING OFFICER TO INITIATE THE PRESENT ASSESSMENT PROCEEDINGS UNDER S.148 OF THE ACT. IT IS THE CONTENTION OF THE ASSESSEE RIGHT FROM THE BEGINNING THAT THE INITIATION OF PRESENT PROCEEDINGS IS PROMPTED BY MERE CHANGE O F OPINION ON THE MATERIAL ALREADY AVAILABLE ON RECORD. IN SUPPORT O F THIS CONTENTION THE LEARNED COUNSEL FOR THE ASSESSEE HAS FURNISHED BEFO RE US A COPY OF THE ORIGINAL ASSESSMENT ORDER DATED 26.6.2006 PASSED U NDER S.143(3) OF THE ACT AND INVITED OUR SPECIFIC ATTENTION TO THE FOLLOWING PORTION PORTION THEREOF- ..THOUGH SOME OTHER INCOMES SUCH AS INSURANCE CL AIMS PERFORMANCE GUARANTEES DISCOUNTS AND REBATES ARE A DMITTED UNDER THE HEAD OTHER INCOME THEY HAVE DIRECT NEX US WITH THE BUSINESS OF THE UNDERTAKING.. IT IS VERY MUCH EVIDENT FROM THE ABOVE OBSERVATIONS OF THE ASSESSING OFFICER THAT THE ASSESSING OFFICER HAS TAKEN NOTE O F SOME OTHER INCOMES SUCH AS INSURANCE CLAIMS ETC. WHICH WERE ADMITTED UNDER THE HEAD OTHER SOURCES IN RESPECT OF WHICH ALSO ASSESSEE CLAIMED RELIEF UNDER S.80IA OF THE ACT. HE ALLOWED RELIEF UNDER S. 80IA OF THE ACT IN RESPECT OF SUCH ITEMS OF OTHER INCOME OBSERVING T HAT THEY HAVE DIRECT NEXUS WITH THE BUSINESS OF THE UNDERTAKING . CONSIDERING THESE SPECIFIC OBSERVATIONS OF THE ASSESSING OFFICER IN THE ORIGIN AL ASSESSMENT ORDER IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAS NO T APPLIED HIS MIND WITH REGARD TO ALLOWABILITY OF DEDUCTION UNDER S.80 IA IN RELATION TO ITA NO.1654/HYD/2011 M/S. MATRIX POWER PVT. LTD. HYDERABAD 5 RECEIPTS OF THE ASSESSEE BY WAY OF INSURANCE CLAIMS AND THE QUESTION WHETHER SUCH RECEIPTS FORM PART OF THE INCOME DERIV ED BY THE ASSESSEE FROM THE BUSINESS. 10. IN VIEW OF THE ABOVE DISCUSSION SINCE THE ASS ESSING OFFICER HAS CLEARLY APPLIED HIS MIND TO THESE ASPECTS AND A RRIVED AT A DEFINITE CONCLUSION THAT THE INSURANCE CLAIMS AMONG OTHERS HAVE DIRECT NEXUS WITH THE BUSINESS OF THE UNDERTAKING IT IS NOT PERMISSIBLE FOR THE ASSESSING OFFICER TO TAKE A CONTRARY VIEW BY MAKING RECOURSE TO THE PROVISIONS OF S.148 OF THE ACT. IT IS SETTLED POSI TION OF LAW AS PRONOUNCED BY VARIOUS COURTS SOME OF WHICH HAVE BE EN NOTED BY THE CIT(A) IN THE IMPUGNED ORDER BESIDES THE ONES RELI ED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US BEFORE U S THAT BASED ON MERE CHANGE OF OPINION THE ASSESSING OFFICER CANNO T REOPEN THE ASSESSMENT UNDER S.148 OF THE ACT. IN THIS CONTEX T WE MAY REFER TO THE RECENT DECISION OF THE APEX COURT IN THE CASE O F CIT V/S. KELVINATOR OF INDIA LTD. (320 ITR 561) WHEREIN EXPLAINING THE CONCEPT OF CHANGE OF OPINION ON THE PART OF THE ASSESSING OFFICER IN THE LIGHT OF AMENDMENT TO THE PROVISIONS OF S.147 OF THE ACT BY THE DIRECT TAX LAWS (AMENDMENT) ACTS 1987 AND 1989 IT HAS BEEN H ELD VIDE HEAD- NOTE ON P.562 OF THE REPORTS(320 ITR) AS FOLLOWS- THE CONCEPT OF CHANGE OF OPINION ON THE PART OF THE ASSESSING OFFICER TO REOPEN AN ASSESSMENT DOES NOT STAND OBL ITERATED AFTER THE SUBSTITUTION OF SECTION 147 OF THE INCOM E-TAX ACT 1961 BY THE DIRECT TAX LAWS (AMENDMENT) ACTS 1987 AND 1989. AFTER THE AM ENDMENT THE ASSESSING OFFICER HAS TO HAVE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMEN T BUT THAT DOES NOT IMPLY THAT THE ASSESSING OFFICER CAN REOPE N AN ASSESSMENT ON MERE CHANGE OF OPINION. THE CONCEPT OF CHANGE OF OPINION MUST BE TREATED AS AN IN-BUILT TEST TO CHECK THE ABUSE OF POWER. HENCE AFTER APRIL 1 1989 THE ASS ESSING OFFICER HAS POWER TO REOPEN AN ASSESSMENT PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE AS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASON M UST HAVE A LINK WITH THE FORMATION OF THE BELIEF. ITA NO.1654/HYD/2011 M/S. MATRIX POWER PVT. LTD. HYDERABAD 6 ADMITTEDLY IN THE PRESENT CASE THERE IS NO NEW MAT ERIAL WHICH HAS COME TO THE KNOWLEDGE OF THE ASSESSING OFFICER SO A S TO PROMPT HIM TO BELIEVE THAT THERE IS ESCAPEMENT OF INCOME. ON THE OTHER HAND BASED ON THE VERY SAME MATERIAL APPLY8ING HIS MIND TO WH ICH HE HAS COME TO A CONCLUSION THAT THE ASSESSEE IS ELIGIBLE FOR D EDUCTION UNDER S.80IA IN RESPECT OF INSURANCE CLAIMS THAT HE DEVELOPED A N OPINION THAT ASSESSEE IS NOT ELIGIBLE FOR SUCH DEDUCTION. IN TH E FACTS OF THE PRESENT CASE THEREFORE THE ASSESSING OFFICERS REASON TO BELIEVE HAS NO LINK WITH THE FORMATION OF BELIEF. IN THE CIRCUMSTANC ES RESPECTFULLY FOLLOWING THE SETTLED POSITION OF LAW AND MORE SPEC IFICALLY APPLYING THE RATIO LAID DOWN BY THE APEX COURT IN THE CASE OF KE LVINATOR OF INDIA LTD. (SUPRA) WE HOLD THAT THE ACTION OF THE ASSESSING O FFICER IN REOPENING THE ASSESSMENT IS NOT LEGAL OR VALID. WE ACCORDIN GLY UPHOLD THE ORDER OF THE CIT(A) AND REJECT THE GROUNDS OF THE REVENUE IN THIS APPEAL. 11. IN THE RESULT REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE COURT ON 3.2.2012 SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER. JUDICIAL MEMBER. DT/- 3RD FEBRUARY 2012 COPY FORWARDED TO: 1. M/S. MATRIX POWER PVT. LTD. 8-2-277/12 H.NO.29 6 ROAD NO.3 BANJARA HILLS HYDERABAD 500 034. 2. ASST. COMMISSIONER OF INCOME - TAX CIRCLE 16(2) HYDERABAD 3. COMMISSIONER OF INCOME-TAX(APPEALS)-V HYDERABAD 4. COMMISSIONER OF INCOME - TAX IV HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE ITAT HYDERABAD B.V.S.