Gujarat Power Corporation Ltd. vs Joint Commissioner of Income Tax

K.A Puj, J.—The Petitioner has filed this petition under Article 226 of the Constitution of India, praying for quashing the notice for reopening, issued u/s 148 of the IT Act, 1961 on 9th Feb., 2000.

This Court has admitted the petition and rule was issued on 28th June, 2000. Ad interim relief was granted till further order.

Heard Mr. J.P. Shah, learned Counsel appearing with Mr. Manish J. Shah for the Petitioner and Mr. Manish R. Bhatt, learned senior counsel appearing with Mrs. Mauna M. Bhatt, for the Respondent.

It is the case of the Petitioner that for asst. yr. 1995-96, the Petitioner submitted a return claiming amongst others, deduction of depreciation of Rs. 10,00,00,000 in respect of high efficiency boiler costing Rs. 20,00,00,000 as it was installed in the later half of the year at 100 per cent. During the course of assessment proceedings, the Petitioner addressed a letter to the Respondent dt. 10th Sept., 1997 in reply to the notice issued u/s 142 of the Act, on 26th Aug., 1997, inter alia annexing thereto the statement of addition on fixed assets along with names and addresses of the suppliers, items, quantity, rate amount, date of delivery, date of installation, depreciation etc. The said Annexure gave the details of the claim of depreciation of Rs. 10,00,00,000 in respect of the said boiler. The Respondent by his letter dt. 4th Jan., 1998, asked for the copy of the agreement between the Petitioner and Gujarat Electricity Board, in respect of the said boiler. The Petitioner gave its reply on 12th Jan., 1998 annexing therewith the lease agreement with Gujarat Electricity Board. The said agreement states that the lease was in the nature of sale and lease back. The Petitioner Corporation purchased 140 MW capacity boiler from Gujarat Electricity Board at total cost of Rs. 20,00,00,000. Copy of the invoice raised by the Gujarat Electricity Board was annexed along with the said letter. Since the lease was in the nature of sale and lease back, question of delivery did not arise. It is also stated in the said letter that boiler was installed and put to use from 31st March, 1995. The Petitioner has also produced the confirmation received from Gujarat Electricity Board on 29th March, 1995, which clearly stated that the installation was effected on 29th March, 1995. The Board has also confirmed to the effect that it has not claimed depreciation on the said assets.

Considering the information furnished by the Petitioner, the Respondent has passed an order u/s 143(1) of the IT Act, 1961 on 27th Jan., 1998, accepting the claim of depreciation of Rs. 10,00,00,000 in respect of a boiler purchased by the Petitioner from Gujarat Electricity Board under the sale and lease back agreement. The Respondent while passing the said order u/s 143(1) recorded that total depreciation claimed of Rs. 10,09,97,023 and the return was processed u/s 143(1)(a) without making any prima facie adjustment.

The Respondent, thereafter issued notice u/s 148 of the Act, on 9th Feb., 2000 stating that he has reason to believe that income from business for asst. yr. 1995-96 has escaped assessment and he, therefore, proposes to reassess the income and recompute depreciation allowance. The Petitioner filed the present petition, challenging the said reopening of assessment, inter alia contending that the AG has already formed his opinion while allowing the depreciation and hence the notice of reopening is based on mere change of opinion which is not permissible u/s 148 of the Act.

In reply to the notice issued by this Court, an affidavit-in-reply is filed along with which a copy of reasons recorded is attached.

Mr. J.P. Shah, learned Counsel appearing for the Petitioner has submitted that after detailed inquiry, the claim of the Petitioner was allowed and hence there is no question of reopening of assessment. He has further submitted that reasons recorded are also vague and while recording reasons the AO has not even seen the evidences which are on record. He has pointed out that though he has referred to the letter dt. 10th Sept., 1997 and Annex. B attached with the said letter, he has not considered the reply filed by the Petitioner on 12th Jan., 1998 along with which the necessary proof for installation of boiler was attached. This fact has not been taken into consideration and has issued notice for reopening of the assessment.

Mr. M.R. Bhatt, learned senior counsel appearing for the Revenue on the other hand, has submitted that the AO has not formed his opinion by framing the assessment u/s 143(1) of the Act. It is permissible to issue notice for reopening and frame the reassessment order as it falls within the period of four years. He has further submitted that audit report has come on record and thereafter the reassessment order was passed. He has, therefore, submitted that the Court should not interfere in the notice issued by the AO for reopening of the assessment.

We have considered the submissions made by the learned Counsel appearing for the parties and also gone through the materials produced on record. It is clear from the evidence available on record that the AO while framing the assessment has applied his mind. He has called for the details vide his communications to which the reply along with necessary evidence was furnished. The AO has accepted the claim of the Petitioner while framing the assessment u/s 143(1) of the Act. Even while passing the order u/s 143(3) r/w Section 147 of the Act, he has referred to the previous history stating therein that the Assessee had filed the return of income for asst. yr. 1995-96 on 29th Nov., 1995, declaring loss of Rs. 1,25,35,115 after deducting deduction u/s 32 of Rs. 10,09,97,023 and expenses u/s 35D, amounting to Rs. 3,03,704. He has also referred to in the assessment order that the return was processed u/s 143(1)(a) of the Act, without making any prima facie adjustment. The AO has further observed that in response to the notice u/s 143(2) necessary details were filed and thereafter he has framed the assessment. Since the claim of the Petitioner was accepted u/s 143(1)(a) of the Act, the said assessment was not disturbed, even after calling for the details u/s 143(2) of the Act. The AO has formed his opinion at the time of framing the original assessment.

Even otherwise, the AO has not considered the materials available on record. He has referred to the letter dt. 10th Sept., 1997 and Annex. B of the said letter. However, he has completely ignored the letter dt. 12th Jan., 1998 written by the Petitioner along with lease agreement and Annex.-B which the certificate is issued by Gujarat Electricity Board, certifying that the boiler was installed before 31st March, 1995. Despite the fact that there being an evidence on record which was not considered and under that misconception, the notice for reopening was issued, we are, therefore, of the view that there is no basis for reopening of the assessment and even reasons recorded by him are not sufficient to reopen the assessment which is framed after considering all the relevant materials on record.

In view of the above facts and circumstances of the case and considering the provisions of the Act, we are of the view that there is no basis for reopening of the assessment u/s 147 of the Act. We, therefore, quash and set aside the notice issued for reopening of the assessment.

This petition is accordingly allowed. Rule made absolute, without any order as to costs.