2010 (3) TMI 1196 - AT - Income Tax

Summary

Issues Involved:
1. Validity of reopening of assessment u/s 147.
2. Computation of book profit u/s 115JB.
3. Imposition of interest u/s 234D.
4. Addition of notional expenses for earning dividend income to book profits u/s 115JB.

Summary:

1. Validity of Reopening of Assessment u/s 147:
The assessee challenged the reopening of assessment, arguing that it was based on a mere change of opinion without any new material. The Tribunal agreed, citing the jurisdictional High Court's decision in Asian Paints Ltd. vs. DCIT, which held that reopening based on a change of opinion is not permissible. The Tribunal noted that the AO had originally computed both the income under normal provisions and book profits u/s 115JB, and no new information had come to light to justify reopening. Consequently, the reassessment was quashed as it was based on a fresh application of mind to the same set of facts.

2. Computation of Book Profit u/s 115JB:
The Tribunal addressed several grounds related to the computation of book profits:
- The AO's addition of assets written off and debited to the profit and loss account was contested. The Tribunal held that the write-off of an asset does not fall within the adjustments contemplated in the Explanation to section 115JB.
- The issue of starting point of computation of book profits was decided in favor of the assessee, referencing decisions in M.S. Estates Pvt. Ltd. vs. DCIT and Gulf Oil Corporation Ltd. vs. ACIT.
- The Tribunal also noted that the retrospective amendment to section 115JB by Finance Act, 2009, did not apply to the assessee's case as it referred to a provision for diminution in the value of any asset, not the actual write-off.

3. Imposition of Interest u/s 234D:
The Tribunal upheld the CIT(A)'s decision that the provisions of section 234D could not be applied as the refund was granted prior to the insertion of section 234D w.e.f. 01.06.2003. This was supported by the Special Bench decision in ITO vs. Ekata Promoters.

4. Addition of Notional Expenses for Earning Dividend Income to Book Profits u/s 115JB:
The Tribunal agreed with the assessee that the AO's addition of notional expenses for earning dividend income to book profits was not justified. The first appellate authority had deleted a similar adjustment in the original assessment, and the Revenue had not appealed against it, thus the issue had attained finality.

Conclusion:
The Tribunal allowed the assessee's appeal, quashing the reassessment order as it was based on a change of opinion without new material. Consequently, the Revenue's appeal was dismissed.