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2012 (3) TMI 131 - AT - Income TaxValidity of Re-assessments Proceedings - Computation of MAT u/s 115JB - Book profit wrongly set-off against brought forward loss - Held That - AO himself prepared computation it cannot be said there was no application of mind. In view of Kelvinator of India (2010 - TMI - 35201 - SUPREME COURT OF INDIA), CIT(Appeals) was correct in holding that reopening done was invalid.
Issues Involved:
1. Validity of reopening the assessment under Section 148 of the Income-tax Act. 2. Correctness of the computation of book profit under Section 115JB of the Act. Detailed Analysis: 1. Validity of Reopening the Assessment under Section 148 of the Income-tax Act: The Revenue challenged the order dated 5.10.2010 by the Commissioner of Income Tax (Appeals)-V, Chennai, which declared the reopening of the assessment for the impugned year invalid. The original assessment was completed under Section 143(3) on 3.3.2006, but a notice under Section 148 was issued on 25.3.2008 due to perceived escapement of income from the incorrect adjustment of carried forward business loss/depreciation. The assessee argued that the reopening was based on a change of opinion, as all relevant facts and computations were already provided during the original assessment. The CIT(Appeals) supported this view, stating that the Assessing Officer (AO) had all necessary information during the initial assessment and was merely attempting to review the order without any new material. The Revenue contended that the AO had not applied his mind to the computation of book profit under Section 115JB during the original assessment, as evidenced by the lack of discussion on this issue in the assessment order. Therefore, the reopening was justified. However, the Tribunal concluded that the reopening was invalid, referencing the Supreme Court's decision in CIT v. Kelvinator of India Ltd. (320 ITR 561), which held that reopening based on a change of opinion is not permissible. The Tribunal found that the AO had indeed considered the computation of book profit during the original assessment, as evidenced by the detailed work-out provided by the assessee and the AO's own computation included in the assessment order. The Tribunal emphasized that the AO's application of mind could be presumed under Section 114(e) of the Evidence Act, even without explicit discussion in the order. 2. Correctness of the Computation of Book Profit under Section 115JB of the Act: The AO had reworked the book profit computation, allowing only Rs. 4,30,97,010/- for setoff against the book profit instead of the Rs. 12,24,86,294/- claimed by the assessee. The CIT(Appeals) found that the assessee's method of adjustment was correct and that the AO had not demonstrated any specific mistake in the assessee's methodology. The Revenue argued that the AO in the original assessment had ignored the substantial adjustments made to the book losses in earlier years, resulting in an incorrect computation of carried forward loss/depreciation. However, the Tribunal did not address the merits of this argument, as it upheld the CIT(Appeals)'s decision on the jurisdictional aspect, rendering the reassessment invalid. Conclusion: The Tribunal dismissed the appeal filed by the Revenue, affirming the CIT(Appeals)'s decision that the reopening of the assessment was invalid due to it being based on a change of opinion. Consequently, the Tribunal did not adjudicate on the merits of the adjustment to the book profit computation. The order was pronounced in the open court on 5th January 2012.
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