Akil Kureshi, J. - (1.) These petitions are filed by the same assessee challenging respective notices for reopening of assessment. Three of these petitions ie., Special Civil Applications No. 22717 of 2017; 22730 of 2017 and 23181 of 2017 concern such notices which have been issued beyond the period of four years from the end of relevant assessment year. Rest of the petitions involve notices which have been issued within four years.
(2.) Since facts are very similar, we may record those stated in Special Civil Application No. 22717 of 2017. The petitioner is Madhya Gujarat Vij Company Limited, a company wholly owned by the Government of Gujarat. For the Assessment Year 2010- 2011, the petitioner e-return of income on 14th October 2010 showing nil income after set off of brought forward losses under normal computation and income of Rs. 32.11 Crore [rounded off] for the MAT provisions under Section 115JB of the Income-tax Act, 1961 ["the Act" for short]. The return of the petitioner was taken in scrutiny during which the Assessing Officer raised multiple queries. One of the issues examined was that of the petitioner's treatment to the deferred Government Grants, Subsidies and Contributions. The petitioner had offered 10% of such Government Grants to tax for normal as well as MAT computations. The Assessing Officer however was of the opinion that the depreciation rate applied was 15% and that therefore, 15% of such grant should have been offered to tax. This issue we would advert at a later stage. For the time being, we may record that the Assessing Officer passed the order of assessment under Section 143 [3] of the Act on 10th December 2012. To reopen such assessment, he issued notice dated 30th March 2017. In order to do so, he recorded the following reasons. As per Explanation [1] below Section 115JB , the Book Profit to be computed from the net profit as shown in the P&L Account. Further, as per AS-12 "Accounting for Government Grants : (a) the grant can be reduced from the gross value of the asset and depreciation charge will automatically stand reduced to lower cost recognized; or (b) the grant be treated as deferred income and periodically a part of this income to be recognized in the P&L Account in the same proportion as the depreciation. In view of the above discussion and since Rs. 26,41,88,950/- as per provisions Explanation [1] below, Section 115JB was not added to the Book Profit u/s. 115JB of the I.T Act, I have reasons to believe that income to the tune of Rs. 26,41,88,950/- [Book Profit] which was income chargeable to tax has escaped assessment within the meaning of Section 147 of the I.T Act, 1961. Therefore, I am satisfied that this is a fit case for initiation of proceedings under section 147 of the Act." "Facts of the case is that the assessee company Madhya Gujarat Vij Company Limited filed its return of income for AY 2010-11 on 14/10/2010 declaring total income of Nil after set-off of brought forward loss and unabsorbed depreciation. Further, assessee had paid total tax and interest of Rs. 5,86,83,213/- under Section 115JB showing Book profit of Rs. 32,11,80,195/-. Thereafter, scrutiny assessment was finalized on 10/12/2012 under Section 143 [3] determining assessed income at Nil after set off of unabsorbed loss and depreciation of Rs. 12,80,22,803/- against income from other sources and book profit u/s. 115JB as mentioned above. While framing assessment, the addition was made on account of subsidy grant being capital in nature to the extent of depreciation availed on capital goods of Rs. 26,41,88,950/- along with other disallowance. The above addition was made in the regular income and not in the book profit derived u/s. 115JB of the I.T Act, 1961. It was seen that the assessee had shown capital gain/subsidy of Rs. 52,837.79 lacs at the year end. Out of this the assessee had offered only 10% of the grant received from the Central/State Government as revenue receipt and deferred the remaining grant to 10 years. The Assessing Officer took the view that in accordance with the Accounting Standard 12 and provision of Section 43 [1] of the I.T Act., the assessee has to transfer the 15% grant received from Central/State Government instead of 10%. Accordingly, the Assessing Officer added Rs. 26,41,88,950/- [5% of Rs. 52837.79 lakhs] to the total income under normal provision. The said addition under normal provision was confirmed by CIT [A] in the case of Dakshin Gujarat Vij Corporation Limited in earlier years, wherein, it was held that 15% grant was required to be offered for the profit and loss account out of every year end balance. As per Explanation [1] below Section 115JB [2], the Book Profit to be computed from the net profit as shown in the P&L Account. Further, as per AS-12 "Accounting for Government Grants : (a) the grant can be reduced from the gross value of the asset and depreciation charge will automatically stand reduced to lower cost recognized; or (b) the grant be treated as deferred income and periodically a part of this income to be recognized in the P&L Account in the same proportion as the depreciation. It is noticed that the assessee itself has offered 10% of the subsidy grant as revenue receipt for computation of Book Profit under Section 115JB. However, as per Explanation (1) below, Section 115JB (2) and AS-12 "Accounting for Government Grant's the balance amount of Rs. 26,41,88,950/- [5% of Grant received from Central/State Government] on account of subsidy grant is required to be added to the book profit under Section 115JB of the Act. In the case of the assessee for A.Y 2013-14 and 2014-15, the addition on the same issue has already been made for purpose of computing book profit under Section 115JB of the IT Act, 1961. In view of the above discussion and since Rs. 26,41,88,950/- as per provisions Explanation [1] below, Section 115JB [2] was not added to the Book Profit u/s. 115JB of the I.T Act, I have reasons to believe that income to the tune of Rs. 26,41,88,950/- [Book Profit] which was income chargeable to tax has escaped assessment within the meaning of Section 147 of the I.T Act, 1961. Therefore, I am satisfied that this is a fit case for initiation of proceedings under section 147 of the Act."
(3.) The petitioner raised objections to the notice of reopening under a letter dated 11th October 2017. Such objections were rejected by the Assessing Officer by an Order dated 17th November 2017. Hence, the petition.;