2012 (8) TMI 935 - AT - Income Tax

Summary

Issues Involved:
1. Assumption of jurisdiction u/s 147 of the I.T. Act.
2. Addition on account of provision for doubtful debts.
3. Adjustment of carried forward unabsorbed depreciation from long-term capital gains.

Summary:

1. Assumption of Jurisdiction u/s 147 of the I.T. Act:
The original assessment was completed u/s 143(3) on an income of Rs. 16,73,26,015/-. The assessment was reopened u/s 147 due to the alleged under-assessment of income by Rs. 1,87,41,755/- on account of provision for doubtful debts not added to the other income. The assessee contested the reopening, arguing that detailed inquiries were made during the original assessment, and no new material justified the reassessment. The Tribunal found that the Assessing Officer (AO) had not applied his mind and there was no material to support the reopening. Citing the cases of Satnam Overseas Ltd. & another Vs. Addl. CIT and CIT Vs. Kelvinator of India Ltd., the Tribunal held that the reassessment was based on a mere change of opinion, which is not permissible. Consequently, the assumption of jurisdiction u/s 147 was quashed.

2. Addition on Account of Provision for Doubtful Debts:
The AO added Rs. 1,87,41,755/- to the income, claiming it was a provision for doubtful debts. The assessee provided detailed reconciliations showing that the actual bad debt claimed was Rs. 46,37,814/-, and the provision for doubtful debts was written back. The CIT(A) deleted the addition, confirming that the assessee had not claimed any deduction for the provision for doubtful debts. The Tribunal upheld this deletion, noting that the AO had no basis for the addition and had not considered the detailed reconciliations provided by the assessee.

3. Adjustment of Carried Forward Unabsorbed Depreciation from Long-Term Capital Gains:
The AO set off the brought forward unabsorbed depreciation of Rs. 4,61,24,493/- against long-term capital gains, which the assessee contested. The CIT(A) upheld the AO's decision. However, the Tribunal found that the issue was covered by the decision of the Special Bench in the case of M/s Nandi Steels Ltd., which held that brought forward depreciation cannot be set off against capital gains. Consequently, the Tribunal allowed the assessee's appeal on this ground, reversing the CIT(A)'s decision.

Conclusion:
The Tribunal allowed the assessee's appeal, quashing the reassessment and deleting the addition on account of provision for doubtful debts. It also ruled in favor of the assessee regarding the adjustment of carried forward unabsorbed depreciation from long-term capital gains. The revenue's appeal was dismissed.