2012 (12) TMI 119 - AT - Income Tax

Reopening of assessment and issuance of notice after the expiry of period of four years from the end of the relevant assessment year - Held that - There is no failure on the part of the assessee to make a return u/s 139 or to disclose fully and truly all material facts necessary for assessment - assessment was completed u/s 143(3) of the Act and as per sub-section (iii) of section 148 there was no failure on the part of the assessee in computing the book profit for the purposes of section 115JB of the Income-tax Act, 1961 - there is no whisper that there was failure on the part of the assessee to disclose fully and truly all material facts for the calculation of book profit u/s 115JB. In view of these facts, reopening of assessment after the expiry of four years is not justified as notice u/s 148 was issued on 9.4.2007, consequently, the assumption of jurisdiction u/s 147/148 is also unjustified In favor of assessee

Issues Involved:
1. Validity of jurisdiction assumed by the Assessing Officer under Section 147.
2. Legality of notices issued under Section 148.
3. Correctness of the book profit calculation under Section 115JB.
4. Priority of business loss over brought forward unabsorbed depreciation in the matter of set off while working the MAT liability.

Detailed Analysis:

1. Validity of Jurisdiction Assumed by the Assessing Officer under Section 147:
The revenue contended that the Assessing Officer (AO) did not assume valid jurisdiction under Section 147, as the notices issued under Section 148 were deemed bad in law. The AO believed that the taxable book profit and hence the income of the assessee had escaped assessment within the meaning of Section 147 due to incorrect calculations by the assessee. It was argued that the assessee's reduction of book profit by Rs. 22,230,625 was erroneous and should have been Rs. 13,154,486, leading to an escapement of income amounting to Rs. 9,076,139. However, it was found that the assessee had correctly claimed the book profit under Section 115JB by reducing the unabsorbed depreciation, which was lower of the two (brought forward business loss and unabsorbed depreciation). Therefore, there was no escapement of income, and the initiation of proceedings under Sections 147/148 was deemed without jurisdiction.

2. Legality of Notices Issued under Section 148:
The notices under Section 148 were issued after the expiry of four years from the end of the relevant assessment year. The proviso to Section 147 stipulates that no action shall be taken under this section after the expiry of four years unless there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. It was concluded that the assessee had disclosed all material facts necessary for the assessment, and the AO's interpretation of the information was incorrect. Consequently, the assumption of jurisdiction under Sections 147/148 was unjustified, rendering the notices under Section 148 invalid.

3. Correctness of the Book Profit Calculation under Section 115JB:
The revenue argued that the assessee's calculation of book profit was incorrect, asserting that the book profit should have been reduced by Rs. 13,154,486 instead of Rs. 22,230,625. However, the assessee contended that the calculation was based on facts and supported by the decision of the Hon'ble Apex Court in JCIT v. Rolta India Limited (2011) 330 ITR 470. The assessee had adjusted the positive book profit earned in previous years from the brought forward losses, which was in accordance with the provisions of Section 115JB. It was found that the assessee's calculation was correct, and there was no error in the reduction of book profit by the lower of brought forward loss and unabsorbed depreciation.

4. Priority of Business Loss over Brought Forward Unabsorbed Depreciation:
The assessee argued that the business loss had priority over brought forward unabsorbed depreciation in the matter of set off while working the MAT liability under Section 115JB. The revenue's contention was that the calculation should be based on the lower of the two. The Tribunal found that the assessee had correctly reduced the book profit by the amount of unabsorbed depreciation, which was lower of the two, thereby affirming the assessee's stand.

Conclusion:
The Tribunal dismissed the revenue's appeals and upheld the order of the Commissioner of Income Tax (Appeals), which annulled the assessment orders framed under Sections 147/143(3) for the assessment years 2001-02 and 2002-03. The cross objections of the assessee were dismissed as infructuous. The Tribunal concluded that the AO did not assume valid jurisdiction under Section 147, the notices under Section 148 were invalid, the assessee's calculation of book profit under Section 115JB was correct, and there was no failure on the part of the assessee to disclose material facts necessary for the assessment.

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