2021 (8) TMI 176 - HC - Income Tax

Reopening of the assessment - MAT computation u/s 115JB - Scope of amendment - HELD THAT - The amended provision was amended retrospectively and is deemed to have been in force all along during the period commencing from 1st April of 2017.Though the provisions stands amended with retrospective effect, it cannot be said that the petitioner had failed true and full disclosure of all material facts that were required for completing the assessment. The petitioner has taken a bonafide stand that the amount debited in Profit and Loss Account towards provisions of bad and doubtful debts were not be included under Section 115JB of the IT Act. This was scrutinized and the assessment order came to be passed on 10.12.2008. Even if, the amended provision as it stands amended, vide Finance Act, 2009 in the Income Tax Act, 1961, it cannot be said that there was a failure on the part of the petitioner to truly and fully disclose all material facts/informations required for assessment. The writ petition filed by the petitioner therefore deserves to be allowed and is accordingly allowed.

Summary

Issues:
Challenge to speaking order for reopening assessment for Assessment Year 2006-2007 based on debiting bad debts not added back to book profits under Section 115JB of IT Act.

Analysis:
1. The petitioner filed returns for Assessment Year 2006-2007 on 04.11.2006 and completed the assessment under Section 143(3) of the IT Act by an order dated 10.12.2008. Subsequently, the Finance Act, 2009 was amended with retrospective effect from 01.04.2001, necessitating the Assessing Officer to issue a notice under Section 154 of the IT Act due to a debited sum of &8377; 29,35,473 in the Profit and Loss Account not added back to book profit under Section 115JB.

2. The petitioner responded to the notice, but another notice under Section 148 of the IT Act was issued on 20.03.2013 for reopening the assessment, citing reasons communicated on 06.01.2014. The reason for reopening was that the provision for bad and doubtful debts debited in the Profit & Loss Account was not added back to book profit under Section 115JB based on the latest amendment to the IT Act by the Finance Act 2008.

3. The impugned order rejected the petitioner's objections for reopening the assessment, citing that the provisions should be applied with a particular date as per the law. The order also addressed the petitioner's reliance on case laws, emphasizing that the petitioner's business was distinct from banking businesses, rendering those decisions inapplicable.

4. The petitioner contended that the assumption of jurisdiction under Section 148 of the IT Act after four years was without merit, as the law was clarified post the assessment completion. The judgment of the Hon'ble Supreme Court in Commissioner of Income Tax Vs HCL Comnet Systems & Services Ltd was pivotal in understanding the provisions of Section 115JA and 115JB of the IT Act.

5. The High Court, after considering the arguments, found that the petitioner had filed returns based on the law at the time, and there was no failure to disclose material facts. Even with the retrospective amendment, the petitioner's stance on not including the debited amount in book profits was justified. Consequently, the High Court allowed the writ petition, finding no merits in the impugned order, and closed the connected Miscellaneous Petition without costs.