2019 (5) TMI 1774 - AT - Income Tax

Reopening of assessment u/s 147 - period of limitation - reopening of beyond the period of four years - HELD THAT - When the return of income was revised for the purpose of claiming the deduction for provision of bad and doubtful debts, how can thereafter it be said that the assessee failed to disclose the fact of deduction being claimed for provision of bad debts. In the reasons recorded also, the Assessing Officer has not been able to point out how there is failure on the part of the assessee to disclose fully and truly all material facts. There was no failure on the part of the assessee to disclose fully and truly all material facts which has resulted in escapement of income and therefore, as per proviso to Section 147, the assessment cannot be reopened beyond the period of four years. The same is barred by limitation. No failure on the part of the assessee to disclose fully and truly all material facts and the original assessment having been completed under Section 143(3), the notice under Section 148 beyond the period of four years is barred by limitation. The same is quashed. - Decided in favour of assessee.

Summary

Issues Involved:
1. Jurisdiction of the Assessing Officer in reopening the assessment beyond the limitation period under Section 147 of the Income Tax Act, 1961.
2. Disallowance of bad debts written off under Section 36(1)(vii) of the Act.
3. Charging of interest under Section 234B of the Act.

Analysis:

Issue 1: Jurisdiction of the Assessing Officer in Reopening the Assessment:
The appeal pertains to the assessment year 2005-06 and challenges the order of the CIT(A) dated 25th September, 2014. The primary contention raised by the assessee is regarding the jurisdiction of the Assessing Officer in reopening the assessment beyond the limitation period under Section 147 of the Income Tax Act, 1961. The original assessment for the year in question was completed under Section 143(3) on 28th March, 2007. The notice under Section 148 was issued on 27th March, 2012, which exceeded the four-year limitation period from the end of the relevant assessment year. The proviso to Section 147 restricts the reopening of assessments completed under Section 143(3) beyond four years unless there is a failure on the part of the assessee to disclose all material facts leading to income escapement. The reasons recorded for reopening highlighted the alleged failure to disclose the deduction claimed for bad and doubtful debts, resulting in an escapement of income amounting to a specific sum. However, the Tribunal found that the assessee did not fail to disclose material facts as the deduction for bad debts was claimed in the revised return, and the original assessment accepted the revised income figure. Consequently, the Tribunal held that the reopening of assessment beyond the limitation period was unjustified and barred by limitation.

Issue 2: Disallowance of Bad Debts Written Off:
The assessee contested the disallowance of bad debts written off amounting to a specific sum under Section 36(1)(vii) of the Act. The Tribunal analyzed the facts and found that the disallowance was unjustified. The Tribunal noted that the deduction for bad debts was claimed in accordance with the provisions of the Act and should have been allowed. Therefore, the disallowance of the bad debts written off was held to be erroneous and not in line with the provisions of Section 36(1)(vii).

Issue 3: Charging of Interest under Section 234B:
Another ground of appeal challenged the charging of interest under Section 234B of the Act. The Tribunal examined this issue and found that the charging of interest under Section 234B was not sustainable based on the facts and circumstances of the case. Consequently, the Tribunal held that the charging of interest under Section 234B was erroneous both on factual and legal grounds.

In conclusion, the Tribunal allowed the appeal of the assessee, quashed the reopening of assessment beyond the limitation period, and held in favor of the assessee regarding the disallowance of bad debts written off and the charging of interest under Section 234B.