- (1.) This Appeal under Sec. 260A of the Income Tax Act 1961 (Act) takes exception to the order dated 28th February 2013 passed by the Income Tax Appellate Tribunal (Tribunal). The impugned order is a common order for AYs 2003 -04, 2004 -05 and 2005 -06. This Appeal relates to AY 2004 -05.
(2.) Although the Revenue has formulated multiple questions of law for our consideration, the only question arising from the impugned order is as under: - - "Whether on the facts and circumstances of the case, the Tribunal was correct in taking a view that the Assessing Officer did not have jurisdiction to issue the reopening notice dated 30th March 2010 seeking to reopen assessment for AY 2004 -05 -
(3.) Facts: - - "(a) Respondent - Assessee had established captive power plants/units which generate and supply power to its manufacturing units. The captive power units are entitled to deduction under Sec. 80IA of the Act in respect of its profits on account of generation and distribution of power. For the subject Assessment Year, the Appellant filed its return of income claiming the benefit of Sec. 80IA of the Act. The Assessing Officer, on examining the same, by an order dated 27th November 2006 passed under Sec. 143(3) of the Act inter alia allowed the benefit as available under Sec. 80IA of the Act. (b) On 30th March 2010, a notice under Sec. 148 of the Act was issued by the Assessing Officer seeking to reopen assessment for AY 2004 -05. This notice for reopening of assessment beyond the period of four years from the end of the relevant assessment year was issued in view of Revenue's audit objection. This audit objection had been resisted to by the Assessing Officer. Nevertheless the Assessing Officer issued the reopening notice and communicated the following reasons as recorded in support of the reopening notice: - - "Reasons for reopening under Sec. 148 1. Assessee company filed return of income on 01/11/2004 declaring total income of Rs. 898,19,32,151/ - under normal provisions of the Income Tax Act 1961 and book profit of Rs. 4264,14,81,346/ - u/s. 115JB. Order u/s. 143(3) was passed on 27/11/2006 assessing the total income of Rs. 16,46,57,20,196/ - under normal provisions of the Income Tax Act 1961 and book profit of Rs. 5748,58,77,147/ - u/s. 115JB. Thereafter order u/s. 250 dt. 29/01/2009 was passed to give effect to CIT(A) order dt. 31/10/2008 and total income was revised at Rs. 1060,60,50,316/ - under normal provisions of the Income Tax Act 1961 and book profit of Rs. 5428,02,97,561/ - u/s. 115JB. 2. Sub -section (10) to 80IA provides that "where it appears to AI that owing to the close connection between assessee carrying on the eligible business to which this Sec. applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to assessee more than the ordinary profits which might be expected arise in such eligible business, the Assessing Officer shall, in computing the profits and gains of such eligible business for the purposes of the deduction under this Sec. take the amount of profits as may be reasonably deemed to have been derived there from." Explanation to Sec. B defines that Market value means the price that such goods or services would ordinarily fetch in the open market. The market value cannot be the purchase value of electricity but the price of the electricity, which the assessee can fetch in the open market. There was no open market for electricity during the period under review and regulatory bodies fixed the price of electricity during the period under. Regulatory bodies in respective states regulate the sale of electricity. The tariff fixed for sale by the State Power Distribution Agency for industrial consumers cannot be called as market price as the regulatory fixes the tariff considering the wheeling charges, transmission losses due to leakage, past losses of the distribution agency, standby charges as well as Grid Support Charges. Tariff for purchase of power from the independent Power Producers by State Distribution Agency is determined on the basis of the normative parameters determined by the Government of India under its Notification No. SO251(E) dt. 30th March 1992. The Tariff structures, both for the Central Sector and IPPs are on COST PLUS BASIS, Ministry of power has fixed the 16% rate of return of investment as reasonable rate of return and 0.50% on loan funds. All regulatory bodies to fix tariff chargeable by State Electricity Boards as well as independent power suppliers follow this principle. Hence, the profit of the generating station cannot exceed the reasonable return of investment. Considering the above tariff policy adopted for fixing tariff for supply of electricity the profit cannot exceed 16 percent of the investment of capital base. It is seen from the records that the assessee has so arranged the affairs as to show extra ordinary profits from generation of electricity to avail higher 80IA deduction than admissible. The estimated excess profit shown was as follows: - - This has resulted in excess profit being exhibited for the purpose of claiming deduction to the extent of Rs. 262.29 crores. Assessee faded to disclose in its return of income that the power transferred to non -80IA units was at a price more than the tariff fixed by regulatory authorities and the same was not allowable as this inflates the profits eligible for deduction u/s. 80IA. As there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment, I have reason to believe that income chargeable to tax has escaped assessment for this assessment year, coming within the meaning of Sec. 147 of the Income Tax Act 1961 on this issue. Thus, as above, total estimated income that has escaped assessment is Rs. 262,91,1,309/ -. In view of the same, notice u/s. 14B is issued after approval of CIT -LTU, vide CIT(LTU)/41/Reopening 147/2009 -10/694 dt. 30/03/2010." (c) Thereafter, the Assessing Officer by order dated 30th November 2010 passed under Sec. 143(3) r/w Sec. 147 of the Act determined the Respondent's income at Rs. 1,323.51 crores under the normal provisions of the Act. This after reducing the deduction available to the eligible profits under Sec. 80IA of the Act and sustaining the reopening of the assessment. (d) In Appeal, the CIT(A) held that the reopening notice dated 30th March 2010 is without jurisdiction. This is the ground that the Assessing Officer could never have reason to believe that income chargeable to tax has escaped assessment. This for the reason that he had himself resisted the Revenue's audit objection on the issue of market value of the power generated. Besides, holding that there was no failure to disclose all material facts necessary for assessment and that the Assessing Officer had applied his mind to the issue of Sec. 80IA, benefit claimed during the regular assessment proceedings. On appeal, the Tribunal by the impugned order upheld the order of the CIT(A) and held the reopening notice to be without jurisdiction. In the above view, the merits of the claim for deduction under Sec. 80IA of the Act was not examined.";