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2022 (8) TMI 956 - ITAT DELHIReopening of assessment u/s 147 - Scope of the reasons recorded - Mandatory requirement of Disposal of objections - Change of opinion - HELD THAT:- AO was expected to deal with the factual assertions of such vital nature and give a conclusive finding in this regard in accordance with law - AO has failed to do so. AO has declined to entertain the objection of the assessee only on the abstract reasoning that where no opinion has been formed in the original assessment. On this issue, the question of change of opinion does not arise. We totally disagree with the course adopted by the AO while disposing of the objection. The explanation offered by the assessee is plain and simple and the AO could not have shunned aside such explanation without dealing with it. Before us as well, Mr. Jain, assessee has demonstrated on facts that the additional depreciation was claimed on ½ the per centage of the entitlement due to partial use of assets in the earlier year for lesser number of days. Assessee was entitled in law to claim remaining additional depreciation in the current year when the asset was under use. The admission of the claim by the AO in the original assessment thus cannot be said to be in defiance of law. Clearly, the AO has proceeded on wholly erroneous presumption of facts not being in the nature of liability in the first instance. There being no escapement, the reopening on this count was not justified at all. Adverting to the second reason, we take notice of the plea on behalf of the assessee that the ‘provisions for doubtful debts’ cannot be termed as unascertained liabilities in the light of the judgment in the case of CIT vs. HCL Comnet Systems & Services Ltd., [2008 (9) TMI 18 - SUPREME COURT] - The plea of the assessee being the tune of law laid down by the Hon’ble Supreme Court, we find merit in the plea of the assessee. A debt being an asset and not a liability, consequential provisions on account of doubtful recovery cannot be alleged to be an unascertained liability as correctly pleaded. Thus, no adjustment was required as per the extant law while computing the book profit on account of impairment / diminution of assets. For arriving at such conclusion, we also notice that clause (i) to Explanation-1 appended to sub Section 2 of Section 115JB does not feature in the reasons recorded and the solitary basis for escapement is allegation towards unascertained liability. As noticed earlier, the provision for doubtful debt does not bear the nature of liability per se and therefore, the foundation for claiming escapement by Assessing Officer is shaken to its roots. As regards provisions of Retirement Benefit, it was contended in the objection that the said provision was on account of leave encashment on the basis of actuarial valuation and therefore the provision was in the nature of ‘ascertained liability’ in contrast to observation of the Assessing Officer and thus does not qualify for addition/adjustment for the basis of computation of book profit under the special provisions of Section 115JB - We find merit in the aforesaid plea in the light of the factual matrix. The second reason for reopening is also thus without any legal basis. The assessment was completed in the instant case under Section 143(3) of the Act and all these facts were made available before the AO - Assessing Officer was not justified in making allegation of escapement qua book profit on this score. The third ground for reopening is based on allegation of lower reporting of prior period income - action of the AO in the original assessment cannot be assailed and the allegation of escapement could not have been made in the factual backdrop. The action of Assessing Officer is thus in the realm of review based on change of opinion which is not permissible in law. We thus find justification in the plea of the assessee on this score too as noted. Noticiably, the Assessing Officer has failed to deal with any of the objection raised before him and passed a summary order without dealing with any of the objection by a speaking order as called upon him in the judgment of the Supreme Court rendered in GKN Driveshaft[2002 (11) TMI 7 - SUPREME COURT] - This has defeated the very purpose of the procedure laid down in GKN Driveshaft (supra) for meeting the objections raised on behalf of the assessee. Notwithstanding, on scrupulous examination of factual backdrop, we are satisfied that the reasons recorded does not prima facie indicate any actual escapement and does not satisfy the pre-requisites of Section 147 in the instant case where the assessment was completed under Section 143(3) of the Act. The notice issued under Section 148 is without legal foundation and thus requires to be quashed. The re-assessment order framed on the basis of such notice is without sanction of law and thus does not survive. Re-assessment order being bad in law, we do not consider it necessary to go into the merits under challenge on behalf of the assessee.
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