2015 (10) TMI 2297 - AT - Income Tax

Reopening of assessment - condonation of delay - Held that - In the matter of condonation of delay, no doubt lenient view has to be taken while interpreting the sufficient cause of delay however, this does not mean that the litigant has a free license to approach the court on its will. Therefore, in the absence of any satisfactory or cogent explanation, the inordinate delay in filing the CO remains unexplained with sufficient or reasonable cause. Accordingly, we decline to condone the delay of 803 days in filing the CO and consequently the CO filed by the assessee is dismissed being barred by limitation. Alternative plea that this issue can be raised under rule 27 of the ITAT Rules even without filing CO or appeal against the impugned order - Held that - As per rule 27 of the ITAT Rules, 1963, the respondent even without filing an appeal can support the order of the CIT(A) on any of the grounds which have been decided against the respondent. Thus, the scope of raising a plea against the maintainability of the appeal without filing the appeal is limited under rule 27 of the ITAT Rules. In other words, if the respondent succeeds on the plea raised under rule 27, then the impugned order of the CIT(A) would stand and will have full effect insofar as it is against the revenue. Thus if the plea raised by the assessee is accepted as regards the validity of the assessment order then the effect of the same would be only to the extent that the appeal filed by the revenue will be defeated. - Decided against assessee and revenue both.

Summary

Issues Involved:
1. Validity of reopening the assessment under section 147.
2. Condonation of delay in filing cross-objection by the assessee.
3. Validity of adjustments made to book profits under section 115JB.

Detailed Analysis:

1. Validity of Reopening the Assessment under Section 147:
The assessee challenged the reopening of the assessment, arguing it was based on a change of opinion rather than new material. The original assessment was completed under section 143(3) on 22/3/2006. The AO reopened the assessment on 27/3/2008, citing the need to add back site restoration costs and provisions for doubtful advances to the book profit under section 115JB. The CIT(A) had deleted the addition regarding site restoration costs, and the revenue did not appeal this decision. The assessee argued that the reopening was based on the same records available during the original assessment, thus constituting a change of opinion, which is not permissible. The Tribunal agreed, noting that no new material was presented, and the issue of site restoration costs was already settled in favor of the assessee. Additionally, the provision for doubtful advances was not an unascertained liability, as clarified by the Supreme Court in CIT vs. HCL Comnet Systems & Services (305 ITR 409) and the jurisdictional High Court in Rallies India vs. ACIT (323 ITR 54). Therefore, the reopening was deemed unsustainable.

2. Condonation of Delay in Filing Cross-Objection by the Assessee:
The assessee filed the cross-objection 803 days late, explaining that it initially believed no further action was required after the CIT(A) allowed the appeal on merits. Upon changing their authorized representative, they were advised to file a cross-objection. The Tribunal considered the explanations but found them insufficient to justify such an inordinate delay. It emphasized that the assessee, being well-advised by professionals, should have known the legal requirements. Consequently, the Tribunal declined to condone the delay, dismissing the cross-objection as barred by limitation.

3. Validity of Adjustments Made to Book Profits under Section 115JB:
The AO added back site restoration costs and provisions for doubtful advances to the book profits, considering them unascertained liabilities. The CIT(A) deleted the addition regarding site restoration costs, finding them scientifically estimated and required under the production sharing contract. The revenue accepted this finding for the subsequent assessment year, indicating it was settled in favor of the assessee. Regarding provisions for doubtful advances, the Tribunal noted that at the relevant time, section 115JB did not allow adjustments for such provisions, as they were not unascertained liabilities. This position was supported by the Supreme Court's decision in HCL Comnet Systems & Services and the jurisdictional High Court's decision in Rallies India. Thus, the Tribunal upheld the CIT(A)'s order, dismissing the revenue's appeal.

Conclusion:
The Tribunal dismissed both the revenue's appeal and the assessee's cross-objection. The reopening of the assessment was deemed invalid due to a lack of new material and constituting a change of opinion. The delay in filing the cross-objection was not condoned due to insufficient justification. The adjustments to book profits under section 115JB were found unsustainable based on settled legal precedents.