2016 (5) TMI 624 - AT - Income Tax

Reopening of assessment - non explanation of working of the book profit - Held that - We are of the considered view that assuming of jurisdiction by the AO in this case is bad in law for the reasons inter alia that when the assessee had specifically placed on record profit and loss account and books of account, audited balance sheets, tax audit report and certificate in Form No.29B in response to the query raised by the AO during the assessment proceedings that, as to why assessment be not made at the book profit u/s 115JB of the Act , the assessee has duly explained the working of the book profit and it certainly amounts to change of opinion. A bare perusal of the order passed by the CIT according approval for reopening goes to prove that he has accorded the approval in mechanical manner without applying his mind particularly when AO himself has not enunciated the reasons except quoting the language of section 147, the approval accorded by CIT is not sustainable. Where Commissioner approved suggestions made by the audit party, such approval could not be seen as substantial compliance of section 151 where notice for reopening was issued after a period of four years from end of the assessment year. Judgment of Vijay Rameshbhai Gupta vs. ACIT (2013 (5) TMI 157 - GUJARAT HIGH COURT ) is applicable to the facts and circumstances of this case. Moreover, all the three adjustments on account of provision of diminution of value of assets, loss u/s 10B and provision for doubtful debts and advances respectively have been made by invoking the retrospective amendments made to section 115JB which is not permissible as has already been discussed by us in the preceding paras. - Decided in favour of assessee.

Summary

Issues Involved:
1. Jurisdiction under Section 148 of the Act.
2. Reassessment under Section 147/143(3) based on change of opinion.
3. Calculation of book profit under Section 115JB.
4. Charging of interest under Sections 234B and 234D.
5. Addition of fresh/additional grounds of appeal.

Detailed Analysis:

1. Jurisdiction under Section 148 of the Act:
The assessee challenged the reopening of the assessment after four years based on material already on record, claiming it was merely due to a revenue audit objection. The Tribunal examined whether there was any failure on the part of the assessee to disclose full and true material facts at the time of the original assessment. It was noted that the assessee had provided all necessary documents, including the profit & loss account, books of account, audited balance sheet, tax audit report, and Form 29B. The Tribunal concluded that there was no failure to disclose material facts, and the reopening based on retrospective amendment was not justified.

2. Reassessment under Section 147/143(3) based on change of opinion:
The Tribunal addressed whether the assessment could be reopened after four years based on a change of opinion. The original assessment under Section 143(3) had already considered the relevant facts. The Tribunal cited the case of Madhukar Khosla vs. ACIT, emphasizing that reopening based on a mere change of opinion is not permissible. The Tribunal ruled that the AO's action was based on a change of opinion and thus invalid.

3. Calculation of book profit under Section 115JB:
The AO had recalculated the book profit by adding back provisions for diminution in the value of investment, loss under Section 10B, and provision for doubtful debts and advances. The Tribunal found that these adjustments were made based on retrospective amendments, which is not permissible for reopening the assessment after four years. The Tribunal held that the AO should have considered these aspects during the original assessment.

4. Charging of interest under Sections 234B and 234D:
The Tribunal also addressed the issue of charging interest under Sections 234B and 234D based on the recalculated book profit. Since the reassessment itself was found to be invalid, the Tribunal ruled that the charging of interest based on this reassessment was also unjustified.

5. Addition of fresh/additional grounds of appeal:
The Tribunal allowed the assessee to add fresh or additional grounds of appeal or modify existing ones, either before or at the time of the hearing of the appeal.

Conclusion:
The Tribunal concluded that the reopening of the assessment was not justified as it was based on a change of opinion and retrospective amendments. The original assessment had already considered all necessary facts, and there was no failure on the part of the assessee to disclose material facts. Consequently, the Tribunal allowed the appeal filed by the assessee, setting aside the reassessment and related adjustments.

Order Pronounced:
The order was pronounced in open court on the 22nd day of April, 2016.