2019 (3) TMI 535 - AT - Income Tax

Reopening of assessment u/s 147 - addition made towards provision for doubtful debts as well as confirmation of disallowance of unabsorbed depreciation - HELD THAT - There is a live and clear nexus between the said information and the reasons to believe escapement of income, formed on that basis, the assumption of jurisdiction to reassess cannot be called into question as was sought to be canvassed before us. Thus, we hold that the entire reassessment in this case is valid and therefore, the reopening of assessment is upheld Allowability of provision for doubtful debts, the assessee has claimed provisions for doubtful debts and the same is disallowed and added back by the assessee itself in computing the book profit under section 115JB of the Act. At the same time, the same is required to be added in computing total income under the normal provisions of the Act. Having the assessee not done so, the Assessing Officer has disallowed the provisions for doubtful debts and advances which was rightly confirmed by the CIT(A). We find no reason to interfere with the order passed by the ld. CIT(A) on this issue. Thus, the ground raised by the assessee stands dismissed. Disallowance of unabsorbed depreciation, the assessee has claimed of depreciation of ₹.1,14,96,325/- as unabsorbed depreciation loss of the assessment year 1999-2000 to 2001-02. However, the Assessing Officer observed that the claim of unabsorbed depreciation loss of the assessment year 1999-2000 to 2001- 02 was not acceptable in view of the decision of the Mumbai Special Bench in the case of DCIT v. Times Guaranty 2010 (6) TMI 516 - ITAT, MUMBAI the same was disallowed. Since the claim of unabsorbed depreciation loss of the assessment year 1999-2000 to 2001-02 is not eligible for relief granted by amendment to section 32(2) in the assessment year 2002-03, the ld. CIT(A) confirmed the disallowance made by the Assessing Officer. The assessee has not placed reliance of any higher Court s decision against the decision of Mumbai Special Bench order in the case of DCIT v. Times Guaranty (supra), which was followed by the authorities below. - Decided against assessee.

Summary

Issues:
1. Reopening of assessment under section 147 of the Income Tax Act, 1961.
2. Allowability of provision for doubtful debts.
3. Disallowance of unabsorbed depreciation.

Reopening of Assessment under Section 147:
The appeal challenged the reopening of assessment under section 147 of the Income Tax Act. The Assessing Officer reopened the assessment as income had escaped assessment due to the non-addition of provision for doubtful debts and unabsorbed depreciation. The Tribunal decided to adjudicate the issue on merits as the assessee did not challenge it before the Commissioner. The Tribunal found that the Assessing Officer followed due procedures and issued notices for reopening. The Supreme Court's judgment in Kalyanji Mavji & Co. v. CIT was cited to support the reopening. The Tribunal upheld the reopening, emphasizing that the Assessing Officer had valid reasons to believe that income had escaped assessment.

Allowability of Provision for Doubtful Debts:
The assessee claimed provisions for doubtful debts, which were disallowed and added back in the book profit computation under section 115JB. However, the assessee failed to add them back in computing total income under the Act. As a result, the Assessing Officer disallowed the provisions, which was confirmed by the Commissioner. The Tribunal upheld the disallowance, stating that there was no reason to interfere with the Commissioner's decision.

Disallowance of Unabsorbed Depreciation:
The assessee claimed unabsorbed depreciation loss for assessment years 1999-2000 to 2001-02. The Assessing Officer disallowed this claim based on the decision of the Mumbai Special Bench. The Commissioner upheld this disallowance, noting that the claim was not eligible for relief under the relevant section. The Tribunal sustained the disallowance, as the assessee did not provide any higher court decision against the Mumbai Special Bench's order. Therefore, the Tribunal dismissed the ground raised by the assessee regarding the disallowance of unabsorbed depreciation.

In conclusion, the Tribunal dismissed the appeal filed by the assessee, upholding the reopening of assessment under section 147, the disallowance of provision for doubtful debts, and the disallowance of unabsorbed depreciation. The order was pronounced in Chennai on 14th February 2019.