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TMI Blog2011 (11) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... issue of bad debts while disposing of objections to the re-opening. There is a complete absence of material, let alone tangible material to conclude, prima facie even escapement of income on this ground - in favor of assessee. . - Special Civil Application No. 16483 of 2010 - - - Dated:- 18-11-2011 - Akil Kureshi, Sonia Gokani, JJ. Manish J. Shah for the Appellant M.R. Bhatt, Sr. Adv. with Mauna M. Bhatt for the Respondent JUDGEMENT Sonia Gokani, J 1. The petitioner, by way of present petition, preferred under Article 226 of the Constitution of India, challenges the notice dated 26.8.2009 issued by the respondent herein under Section 148 of the Income Tax Act, 1961(hereinafter referred to as "the Act"), seeking to reopen petitioner's assessment for the assessment year 2004-2005. 2. To briefly capsulize the facts of the present petition, the petitioner is a Co-operative Society established under the Gujarat Cooperative Societies Act, 1962. The petitioner filed its return of income for the assessment year 2004-05 on 1.11.2004, declaring loss of Rs.1,49,89,47,392/- under Section 139(1) of the Act along with all requisite statements and documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, this Hon'ble Court be pleased to stay further proceedings in pursuance of section 148 notice issued on 26.08.2009. D) This Hon'ble Court be pleased to grant any further or other relief as this Hon'ble Court deems just and proper in the interest of justice, and E) This Hon'ble Court be pleased to allow this application with costs against the respondent." 5. Learned counsel Mr. M.J.Shah vehemently arguing for the petitioner and assailing the notice, submitted before this Court that it is incumbent upon the Assessing Officer, for reopening assessment for the assessment year 2004-05, to show that there was no full and true disclosure made of all the material facts necessary for the assessment by the petitioner which resulted into income being escaped assessment and for the same being beyond 4 years period from the end of relevant year. The attention has, already been drawn by the learned counsel to the details filed along with return and the notes attached to Form No.3CD, specifically to note No.1(c)(d). Also pressed into service of this Court is a specific note along with the return of income and Form Nos.3CA and 3CD drawing the attention of the order of Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been revealed. While adverting to the content of the order disposing of the objections, stress was laid on the fact that there is nothing to indicate that income has escaped assessment. 7. As against that learned senior counsel Mr.M.R.Bhatt appearing for and on behalf of the respondent has opposed the petition by submitting that the petition filed by the petitioner is prematured as the assessment order for the assessment year 2004-05 under Section 143(3) read with Section 147 is still to be passed in the instant case. The petitioner has also an alternative efficacious remedy by way of filing appeal before the Commissioner (Appeals) and also thereafter before the Income Tax Appellate Tribunal. It was strenuously argued that the Assessing Officer had reason to believe that income chargeable to tax had escaped assessment and the reason for escapement of income in the original assessment was that the assessee had not debited the expenses worth Rs.1,49,35,727/- in the profit and loss account for the assessment year 2004-2005 and directly claimed them in the computation of income while filling the return of the income. Moreover, P and L Account were not signed by the Chartered Accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee having failed to file the return under Section 139 of the Act nor is there any response to the notice issued under Section 142(1) or under Section 148. The question essentially is whether there was an escapement of income on the account of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The grounds enumerated by the Assessing Officer, while seeking to reopen the assessment, as communicated to the assessee are needed to be reproduced " Any expenditure can not be allowed unless the same is debited or written off in the books of account. Moreover, during the assessment stage also, no details were called for regarding any of the above items of expenditure. It is further relevant that the write off of any advances can not be allowed as Bad Debts because the amounts written off had not been offered for tax in the preceding years. Under the circumstances, the quantum of such a proposed write off exceeds all the limits prescribed u/s. 36(1)(vii)(a) also. The most significant aspect in this case is that the amount has not been written off/debited in the books of account, but has only been claimed in the statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of income directly. Simply filing the return or placing the material on record during the assessment proceedings, according to the Revenue, does not tantamount to disclosing all the material facts. Suffice it to say at this stage that the Assessing Officer has chosen not to uphold any of the objections raised by the petitioner and undisputedly the assessment already framed under Section 143(3) of the Act is sought to be reopened after 4 years. Pressed in the service before us is the judgment of coordinate Bench of this Court passed in the case of I.P.Patel Company vs. Deputy Commissioner of Income-Tax in SCA No. 16261 of 2010 wherein various authorities enunciating the basic principles, with regard to validity of proceedings under Section 147 of the Act, have been discussed and bearing in mind all the legal principles laid down in those authorities as also as discussed hereinabove, present petition is decided with reference to the facts on the record. 12. It is necessary at this stage to minutely peruse the income tax return of the present petitioner filed for the year 2004-05, which contained, in all, 83 documents. The statement of total income is reflected where, under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mercial result becomes feasible and all these details were reflected as per Form No. 3CD. 13. We are of the firm opinion that on close perusal of all the documents and the reasons recorded go to establish that not only non-disclosure cannot be attributed to the assessee but all the facts necessary for framing the assessment with respect to the said issue were apparently before the Assessing Officer when it examined the return of the assessee for scrutiny assessment for the year under consideration. 14. The submission of the learned counsel for the respondent that mere production of material without any factual assistance and also submitting that the disclosure was not in its true spirit, can not be upheld for the reason that not only deductions in the statement of income have been in detail but they have also been specifically pointed by way of an appended note and Form 3CD. 15. Counsel for the petitioner urged that all requisite documents and materials were already submitted to the Authority. In support of his contention, reliance is placed on the decision of this Court given in case of Mihir Textiles Ltd. vs. Joint Commissioner of Income Tax in Special Civil Applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 10(1) and Section 10(2)(xv), the Apex Court did not accept such contention of Solicitor General in the following manner:- " The main contention of the learned Solicitor-General is that the assessee failed to debit the liability in its books of accounts and, therefore, it was debarred from claiming the same as deduction either under section 10(1) or under Section 10(2) (xv) of the Act. We are wholly unable to appreciate the suggestion that if an assessee under some misapprehension or mistake fails to make an entry in the books of account and although, under the law, a deduction must be allowed by the Income-tax Officer, the assessee will lose the right of claiming or will be debarred from being allowed that deduction. Whether the assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights nor can the existence or absence of entries in the books of account be decisive or conclusive in the matter. The assessee who was maintaining accounts on the mercantile system was fully justified in claiming deduction of the sum of Rs.1,49,776 being the amount of sales tax wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, there would have been reduction in losses and carry forward losses, resulting into potential gains of revenue. Objection, therefore, suggested that the said satisfaction note did not disclose any tangible materials for arriving at prima facie evidence of escapement of income and had there been such prima facie evidence there would be crystallized inference of escapement of income which is missing. It is also pleaded in the alternative that incomes of the bank which has gone in liquidation in the year 2005 are being assessed u/s. 28 to 44 of the I.T. Act. There is no condition of write off with respect to any expenditure except bad debts u/s. 36(1)(vii) of the I.T. Act. 21. While dealing with this objection, main thrust was non-debit of expenses worth Rs.1493672765/- in the Profit and Loss Account and directly having claimed them in the computation of income while filing the return and secondly, heavy reliance is placed while not accepting the contention of the assessee, on the ratio laid down in case of Indo-Aden Salt Mfg. and Trading Co. (P) Ltd. vs. CIT reported in [1986] 159 ITR 624 (SC) where, of course, there was some material for the assessment which had laid embedded ..... X X X X Extracts X X X X X X X X Extracts X X X X
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