2019 (6) TMI 612 - HC - Income Tax

Reopening of assessment u/s 148 - allowability of write off of bad debts from export receivables during the pendency of the application for approval from RBI - HELD THAT - The petitioner submitted all the required details called upon by the AO in respect of the claim of bad debts written off including the bad debts written off pertaining to export receivables. With respect to foreign debts, the petitioner was called upon to furnish RBI permission. The petitioner replied vide communication dated 21.10.2015 pointing out that the application for permission to write off the bad debts is already made to the Reserve Bank of India. The AO accepted the contention of the petitioner that upon application of RBI pending final approval, debts could be written off and the amount of bad debts written off was allowed and the AO did not make any addition on this ground in the original assessment. In view of the aforesaid undisputed facts emerging from the record, the respondent could not have formed a belief that the income chargeable to tax has been under assessed. With regard to writing off of bad debts from export receivables resulting into income escaping assessment within the meaning of section 147 the reassessment proceedings have been initiated merely on reviewing the same subject matter of original assessment proceedings amounting to assessing the same set of facts already available with the department which is mere change of opinion on part of the respondent. AO during the course of original assessment has formed an opinion that the bad debts from export receivables can be written off during the pendency of the application for approval from Reserve Bank of India and as such, the respondent could not have formed a different opinion that income has escaped assessment as the petitioner did not have permission from the Reserve Bank of India to write off the bad debts from the export receivables. Therefore, in facts of the present case, impugned notice u/s 148 is without jurisdiction and authority of law as the respondent has reopened the proceedings merely on the ground that from the material once a view earlier adopted was erroneous one, such facts cannot be a ground for reassessment. - Decided in favour of assessee.

Issues Involved:
1. Legality of the notice issued under section 148 of the Income Tax Act, 1961.
2. Reopening of assessment based on the same set of facts and material.
3. Requirement of Reserve Bank of India (RBI) permission for writing off foreign receivables as bad debts.
4. Allegation of income escapement due to non-disclosure of RBI permission.

Issue-wise Detailed Analysis:

1. Legality of the notice issued under section 148 of the Income Tax Act, 1961:

The petitioner challenged the notice dated 28.03.2018 issued by the respondent under section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the Assessment Year (A.Y.) 2013-2014. The petitioner argued that all details pertaining to bad debts written off, amounting to ?3,00,73,657 from export receivables, had been scrutinized by the Assessing Officer during the original assessment under section 143(3) of the Act. The court found that the reassessment proceedings were initiated merely on reviewing the same subject matter of the original assessment proceedings, amounting to a mere change of opinion, which is not permissible under the law.

2. Reopening of assessment based on the same set of facts and material:

The court observed that the Assessing Officer had already considered the details submitted by the petitioner during the original assessment proceedings. The petitioner had provided all required details, including the application for RBI permission to write off bad debts. The Assessing Officer accepted the petitioner's contention and allowed the claim of bad debts written off. The court held that the respondent could not have formed a belief that the income chargeable to tax had been underassessed based on the same set of facts already available with the department. The reopening of assessment based on a mere change of opinion is not permissible.

3. Requirement of Reserve Bank of India (RBI) permission for writing off foreign receivables as bad debts:

The respondent argued that there is a mandatory requirement of RBI permission for writing off foreign debt as per Circular No.88, and the petitioner had not obtained such permission before claiming bad debts. The court noted that the petitioner had communicated to the Assessing Officer that the application for RBI permission was already made, and the Assessing Officer accepted this during the original assessment. The court held that the respondent could not form a different opinion that income had escaped assessment merely because the petitioner did not have the final RBI permission at the time of the original assessment.

4. Allegation of income escapement due to non-disclosure of RBI permission:

The respondent contended that the income had escaped assessment because the petitioner did not make full and true disclosures regarding the RBI permission. The court found that the petitioner had disclosed all relevant details during the original assessment proceedings, and the Assessing Officer had accepted the claim of bad debts written off. The court held that the reassessment proceedings initiated on the same set of facts and material, without any new tangible material, amounted to a mere change of opinion, which is not a valid ground for reopening the assessment.

Conclusion:

The court concluded that the initiation of reassessment proceedings under section 147 of the Act by issuing the notice under section 148 was based on a change of opinion on the same facts and circumstances already known to the Assessing Officer during the original assessment proceedings. The impugned notice dated 28.3.2018 was quashed and set aside, and the petition was allowed.

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