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2025 (3) TMI 812 - HC - Income TaxReopening of assessment u/s 147 - notice beyond the period of four years - Reason to believe - HELD THAT - Judgments of the Supreme Court in the case of Kelvinator 2010 (1) TMI 11 - SUPREME COURT Bimal Kumar Damani 2003 (2) TMI 49 - CALCUTTA HIGH COURT Srikrishna (P) Ltd. 1996 (7) TMI 2 - SUPREME COURT Phool Chand Bajrang Lal 1993 (7) TMI 1 - SUPREME COURT Lakhmani Mewal Das 1976 (3) TMI 1 - SUPREME COURT and Calcutta Discount Co. Ltd. 1960 (11) TMI 8 - SUPREME COURT were taken into consideration by the Court and the re-assessments were ultimately quashed on the ground that the Department had not established any failure on the part of that assessee to make available relevant material for completion of assessment even at the original stage. As admitted and apparent position that the Department has not brought on record any material to establish failure of the Appellant to make a full and true disclosure the assumption of jurisdiction under section 147 if held to be bad in law. Write-off of bad debts - In the present case the assessing authority finds that the assessee has during the year in question written off bad debts of a sum of Rs. 4.94 crores restricted to a sum of Rs. 4.07 crores (incidentally the assessee states that it has filed an appeal as against the said restriction which is pending before the Commissioner of Income Tax (Appeals)). With the aforesaid finding the claim as regard bad debts is liable to be allowed applying the ratio of the judgement in TRF Ltd. 2010 (2) TMI 211 - SUPREME COURT Writ Court has proceeded on the basis that the assessee should be relegated to appeal. In light of the settled legal position as have we have adumbrated above we see no necessity for the same
ISSUES PRESENTED and CONSIDERED
The primary legal issues considered in this judgment are:
ISSUE-WISE DETAILED ANALYSIS 1. Validity of Re-assessment Proceedings Beyond Four Years The relevant legal framework involves Section 147 and Section 148 of the Income Tax Act, which govern the re-assessment of income. The proviso to Section 147 stipulates that if a notice for re-assessment is issued beyond four years from the end of the relevant assessment year, it is necessary for the assessing authority to demonstrate that the assessee failed to make a full and true disclosure of all material facts necessary for the assessment. The Court's interpretation emphasized that the original assessment order dated 23.12.2011 contained clear findings that all necessary materials were available to the assessing authority, indicating that there was no failure on the part of the assessee to disclose material facts. The Court noted that the reasons provided for re-assessment did not introduce any new tangible material, thus rendering the re-assessment notice invalid. In support of this conclusion, the Court referenced precedents such as CIT V. Kelvinator of India Ltd. and CIT V. ICICI Bank Ltd., which establish that mere change of opinion does not justify re-assessment. 2. Allowability of Bad Debt Write-off The legal framework for this issue involves Section 36(1)(vii) of the Income Tax Act, which allows for the deduction of bad debts written off as irrecoverable in the accounts of the assessee. The Supreme Court's judgment in TRF Ltd. clarified that post-1989, it is sufficient for an assessee to write off the debt in their accounts without needing to prove that the debt has become irrecoverable. The Court found that the assessee had indeed written off bad debts amounting to Rs. 4.94 crores, with the assessing authority allowing Rs. 4.07 crores. The Court applied the TRF Ltd. precedent, concluding that the write-off was permissible under the law. SIGNIFICANT HOLDINGS The Court held that the re-assessment proceedings initiated under Section 148 were invalid due to the lack of any new material evidence indicating a failure by the assessee to disclose material facts. The re-assessment notice issued beyond four years was thus quashed. On the issue of bad debts, the Court reiterated the principle from TRF Ltd. that post-amendment, the mere act of writing off a bad debt in the accounts suffices for claiming a deduction. The Court allowed the deduction of Rs. 4.07 crores as a bad debt write-off. In conclusion, the Court set aside the impugned order dated 22.04.2021, allowing the writ appeal and negating the need for the assessee to pursue an appeal, as the legal position was clear and undisputed facts were involved.
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