The court emphasized the requirement for the AO to have a valid 'reason to believe' that income has escaped assessment due to failure to disclose fully and truly all material facts necessary for assessment, and the limitation on the AO's power to reopen assessments based on a change of opinion.

JUDGMENT :

KAMAL KHATA, J.

1. The Petitioner challenges the notice under section 148 of the Income-tax Act, 1961 (‘Act’) dated 27th March 2021 for the Assessment Year (‘AY’) 2015-16 issued by Respondent No. 1 for seeking to reopen the said year’s assessment on the ground that income chargeable to tax had escaped assessment as provided in section 147 of the Act. The Petitioner also challenges the order dated 2nd December 2021, rejecting the objections to the proposed action of reopening.

2. Petitioner is a Government Corporation engaged in the business of generation of electricity from atomic energy. In its return of income filed on 30th September 2015, it declared total loss of Rs. 240,87,30,919 under normal provisions and Book Profit at Rs. 2911,17,90,229/- under section (‘u/s’) 115JB of the Act. Its case was selected for scrutiny and assessment u/s 143(3).

3. By a notice u/s 142(1) dated 28th August 2017 the following details were sought from the Petitioner:

(i) A copy of the Annual report, tax audit report, e-return, computation of income, working of Book Profits with requisite report, report in form 3 CEB if any. All the above should be accompanied by all the schedules and annexure duly signed.

(ii) P & L Account and Balance Sheet for AY and three preceding years in a comparative column format.

(iii) Detailed note on nature and modus operandi of the business activities undertaken during the year under consideration. Also mention if there is any change in activities or modus operandi as compared to previous years.

(iv) Details of information as per Annexure-A and Annexure-B enclosed to this notice.

4. The Petitioner vide letter dated 20th September 2017 issued response, 6th October 2017 submitted explanation on exclusion/ deduction of certain items of income while computing Book Profits u/s 115JB, 24th October 2017 explained deductibility of expenditure made and 24th November 2017 whereby the Petitioner submitted documents and details sought and during assessment proceedings provided copies of return of income, computation of income and financial statements that were attached to letter dated 19th April 2017. After considering all material the Assessing Officer (‘AO’) passed an order of assessment u/s 143(3) dated 22nd December 2017. An appeal u/s 246A filed by the Petitioner on 25th January 2018 is pending adjudication before Commissioner of Income Tax (‘CIT’) (Appeals)

5. Respondent No. 1 issued a notice u/s 148 of the Act dated 27th March 2021 for re-assessment of income/loss for AY 2015-16 and called upon the Petitioner to file return in the prescribed form for the said AY. Petitioner filed return of income in response to the said notice on 23rd April 2021 and sought the recorded ‘reasons to believe’ for issuance of the notice u/s 148 of the Act.

6. On 17th November 2021 the recorded reasons for reopening were supplied which read as under:

(i) Subsequently on perusal of the records it was observed vide para no. 5 of the assessment order that the income of undertakings eligible for 80IA deduction had been computed at Rs. 1225,95,39,899/- after considering interest income on Renovation & Modernization (R & M) and on Research and Development (R& D) to the extent of Rs. 19,51,67,851/- as business income eligible for deduction u/s 80IA. The assessee was obliged to adhere to Government Notification issued by Department of Atomic Energy (DAE) effective from December 1988 and amended thereafter from March 2000, whereby the amount collected as Decommissioning levy, Research & Development levy and Renovation and Modernisation levy was to be kept separately distinct from the funds of NPCIL to be used for specific purposes and was not to be construed as part of the general sales income derived from the business. The levy so collected was earmarked and transferred to respective reserve funds for meeting the capital or revenue expenditure which was the sole responsibility of the DAE and any surplus of the funds so utilised was to be invested in s