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2014 (1) TMI 953 - AT - Income TaxValidity of reopening of assessment u/s 147 of the Act Reopening made to give effect to retrospective amendment u/s 115JB of the Act - Held that - A perusal of the questionnaire issued by the AO to the assessee and the replies of the assessee demonstrate that the AO has examined the computation of book profits u/s. 115 JB of the Act - As on the date of completion of original assessment the legal position was in favour of the assessee as regards adjustment of provision for bad debts thus, it can be safely presumed that the Assessing Officer had not suggested any adjustment to book profits u/s 115 JB on account of diminution in the value of an asset i.e. provision for bad debts Relying upon CIT vs. HCL Comnet Systems and Services Ltd. 2008 (9) TMI 18 - SUPREME COURT the AO presumably has not made an adjustment u/s. 115 JB of the Act on the issue of provision for doubtful debts the order of the CIT(A) for the reopening was on a mere change of opinion and hence is bad in law Decided against revenue.
Issues:
1. Reopening of assessment u/s 147 of the Income Tax Act, 1961 based on provision for doubtful debts not added back in computation under section 115JB. 2. Legality of reopening assessment on the grounds of change of opinion or retrospective amendment to Sec.115 JB of IT Act. Issue 1: Reopening of assessment based on provision for doubtful debts: The appeal was filed by the Revenue against the order of the Ld.CIT(A)-XIII, New Delhi for the Assessment Year 2005-06. The original assessment u/s 143(3) was completed on 31.12.2007, where the profit declared u/s 115JB was accepted. However, the assessment was reopened u/s 147 as the provision for doubtful debts of Rs.28,39,451 was not added back in the computation under section 115JB. The AO initiated proceedings citing that the provision was debited to the profit and loss account but not added back while calculating the book profit u/s 115JB. The assessee contended that the provision for bad debts was an unascertained liability and not a contingent liability, which was disputed by the AO. Issue 2: Legality of reopening assessment on the grounds of change of opinion or retrospective amendment: The assessee raised objections against the reopening, arguing that it was based on a change of opinion, which is impermissible in law, and that it cannot be solely due to a retrospective amendment to Sec.115JB of the IT Act. The First Appellate Authority upheld the objections, stating that the reopening was unjustified. The Revenue appealed, questioning the justification of quashing the reopening of the assessment u/s 147. The Tribunal analyzed the facts and legal precedents, including judgments favoring the assessee, such as the case of CIT vs. M/s. Eichir Ltd., and held that the reopening was merely a change of opinion and therefore not valid in law. In conclusion, the Tribunal dismissed the appeal by the Revenue, upholding the order of the First Appellate Authority. It cited legal principles, including the judgment in DCIT vs. Simplex Concrete Piles (India Ltd.), to emphasize that a subsequent reversal of legal position does not authorize the department to reopen assessments closed based on the law prevailing at the relevant time. The Tribunal's decision was based on the binding judgment of the jurisdictional High Court and the principle that a change of opinion does not warrant reopening an assessment.
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