2009 (3) TMI 594 - AT - Income Tax

Income escaping assessment - In the assessment order passed under s. 147 on 8th Feb., 2006, the total income was assessed at5,52,14,264 and the book profit under s. 115JA was computed at ₹ 7,03,89,722 - s. 147 of the Act does not postulate conferment of power upon the AO to initiate reassessment proceedings upon a mere change of opinion - Where the initiation of proceeding under s. 147 takes place after the expiry of four years from the end of the relevant assessment year, the proviso to s. 147 is attracted and no action can be taken under s. 147 unless such income has escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts for his assessment for the assessment year. - the said period of four years has not expired, the conduct of the assessee regarding disclosure of material facts need not be the basis for initiating the proceedings and they can be commenced if the AO has reason to believe that the income has escaped assessment notwithstanding that there was full disclosure of material facts on record. - It was held that the impugned notice under s. 148 was issued within a period of four years from the end of the relevant assessment year Section 72A - The accumulated loss and the unabsorbed depreciation of the amalgamating company shall be deemed to be the loss/depreciation of the amalgamated company for the previous year in which the amalgamation takes place - AO reduced the net profit accordingly - he language of s. 72A(1) and of cl. (iii) of Explanation to s. 115JA(1), as reproduced above, are unambiguous and leave no scope for doubt. The accounts prepared under the Companies Act must be modified, wherever necessary, to comply with the provisions of s. 115JA of the Act, for the computation of minimum alternative tax. This is precisely what the AO did in this case.Accordingly the appeal is dismissed

Issues Involved:
1. Jurisdiction under Section 147 without fresh materials.
2. Validity of reassessment proceedings under Section 147.
3. Claim of set-off for unabsorbed depreciation and business loss of amalgamating company.
4. Computation of book profit under Section 115JA.

Issue-wise Detailed Analysis:

1. Jurisdiction under Section 147 without fresh materials:
The assessee challenged the initiation of proceedings under Section 147, asserting that the Assessing Officer (AO) assumed jurisdiction without any fresh material. The assessee argued that the proceedings were based on material already available on record during the initial assessment. The CIT(A) held that no opinion was formed earlier, thus there was no change of opinion, validating the reassessment proceedings. The tribunal observed that the power to reopen assessment under the post-1989 Section 147 is broader and can be exercised even if full disclosure was made, provided the AO has 'reason to believe' that income has escaped assessment. The tribunal concluded that the notice issued within four years was valid, rejecting the assessee's grounds.

2. Validity of reassessment proceedings under Section 147:
The tribunal emphasized that the words 'reason to believe' do not require the AO to have final evidence but a rational connection between the information and the belief that income has escaped assessment. The tribunal referenced the Madras High Court's decision in CIT vs. Annamalai Finance Ltd., distinguishing it from the present case, and upheld the validity of the notice under Section 148. It stated that the AO cannot assume jurisdiction on a mere change of opinion but can act if an error or mistake is detected in the initial assessment.

3. Claim of set-off for unabsorbed depreciation and business loss of amalgamating company:
The assessee contended that the CIT(A) erred in denying the set-off of unabsorbed depreciation of the amalgamating company (IPBM) in the computation of 'book profit' under Section 115JA. The tribunal noted that Section 72A deems the loss and unabsorbed depreciation of the amalgamating company as that of the amalgamated company for the year of amalgamation. The AO applied Clause (iii) of the Explanation to Section 115JA, reducing the net profit by the lesser of the loss brought forward or unabsorbed depreciation. The tribunal found no infirmity in the CIT(A)'s order, stating that the language of Section 72A(1) and Clause (iii) of the Explanation to Section 115JA(1) is clear and unambiguous.

4. Computation of book profit under Section 115JA:
The tribunal upheld the AO's computation of book profit, which included adjustments for unabsorbed depreciation and business loss of the amalgamating company. The tribunal referenced the ruling of the Authority for Advance Rulings in the case of Rashtriya Ispat Nigam Ltd., which required bifurcation of consolidated loss into loss brought forward and unabsorbed depreciation for calculating book profit under Section 115JB. The tribunal concluded that the AO correctly modified the accounts prepared under the Companies Act to comply with Section 115JA, affirming the CIT(A)'s order.

Conclusion:
The tribunal dismissed the appeal filed by the assessee, upholding the validity of the reassessment proceedings and the computation of book profit under Section 115JA. The tribunal found that the AO acted within jurisdiction and correctly applied the provisions of the Income Tax Act.

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