2017 (12) TMI 866 - HC - Income Tax

Reopening of assessment - denying carry forward of unabsorbed depreciation - Held that - Attention of this court to the decision of this court in the case of General Motors India P. Ltd. V. Deputy Commissioner of Income Tax, 2012 (8) TMI 714 - GUJARAT HIGH COURT to submit that the controversy involved in the first ground for reopening the assessment, stands concluded in favour of the assessee by this decision. Book profit determined as per section 115JB(2) on account of non-eligibility of bad debts provision - Held that - To the extent of the bad debts involved in this case is to the tune of ₹ 3,40,855/only. Considering the smallness of the amount, the court does not deem it fit to enter into the merits of the controversy, and without expressing any opinion on the merits of such ground, leaves it open to the revenue to raise such contention in an appropriate case in future.

Summary

Issues:
Challenge to common order of Income Tax Appellate Tribunal under section 260A of the Income Tax Act, 1961 regarding assumption of jurisdiction under section 148 of the Act.

Analysis:
1. The appellant revenue challenged the common order of the Income Tax Appellate Tribunal (ITA) under section 260A of the Income Tax Act, 1961, questioning the assumption of jurisdiction under section 148 of the Act. The Tribunal held that the assessment year 2006-07 was merely a transient year where the carry forward of earlier years was brought forward and found that the condition for invoking jurisdiction under section 147 of the Act was untenable in law in this case.

2. The Assessing Officer passed a reassessment order under section 144 read with section 147 of the Act, denying the carry forward of unabsorbed depreciation and revising the book profit. The Commissioner (Appeals) granted relief to the assessee on the first ground and reversed the decision disallowing the carry forward of unabsorbed depreciation. However, the issue of adjusting book profit on account of bad debts was not adjudicated due to lack of grounds before the Commissioner.

3. The Tribunal, in its order, found that the Assessing Officer's belief towards escapement of income based on bad debt reserves was not in line with the provisions of section 147 of the Act. The Tribunal held that bad debts reserves were not provisions towards unascertained liabilities and, therefore, the reasons recorded for invoking section 147 were flawed. Consequently, the reassessment order was set aside for want of jurisdiction under section 147 of the Act.

4. The appellant's counsel referred to a previous decision to support the appellant's stance on the first ground for reopening the assessment. However, the court found no legal infirmity in the Tribunal's order and dismissed the appeals, leaving it open for the revenue to raise contentions in the future on the second ground for reopening the assessment related to bad debts.

5. In conclusion, the High Court upheld the Tribunal's decision, finding no substantial question of law warranting interference. The appeals were summarily dismissed, and a copy of the order was directed to be placed in the connected matter.