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TMI Blog2013 (6) TMI 425X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. The AO. had, while completing the assessment uls 143, computed Book Profit u/s 115JB and in such computation had t also reduced the impugned amount of Rs.2,62,76,653/- . Also the assessee had claimed and was allowed in the assessment completed u/s 143, a deduction of Rs.2,06,47,310/- towards "Written- off amount of intangible assets" as had been appropriated from Net profit in the profit & loss account as 'Extraordinary items'. The A.O. himself has noted in the reasons for reopening that he noticed the above facts "on examination of the assessment records", which means that those facts were all available on record of the AO. before the reopening. The reopening was not done on the basis of any new material. Thus it is seen that in the recorded reasons there is not a whisper by the AO that the income chargeable to tax has escaped assessment due to the failure on the part of the assessee to disclose fully and truly all material facts necessary. As decided in E.I.Dupond India Ltd. vs DCIT (2013 (2) TMI 406 - DELHI HIGH COURT) it was incumbent to the AO to demonstrate that there was failure on the part of the assessee to fully and truly disclosed all material facts neces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y adding back Rs.2,62,76,653/- as export incentive and Rs.10,32,595/-as provision for gratuity. 4. Being aggrieved against the said order of the AO the assessee filed an appeal before the ld. CIT(A) and challenged the reopening of the assessment by the AO as bad in law. The assessee submitted before the ld. CIT(A) that the present assessment year was the A.yr. 2003-04 and notice u/s 148 of the Act was issued on 31.03.2010 which was beyond the period of four years from the end of the relevant assessment year and that reopening of assessment in the case of the assessee can only be made where after passing of the original assessment order some new material or facts comes to the knowledge of the AO evidencing the fact that income chargeable to tax has escaped assessment in the assessment made. It was pointed out that from the recorded reasons for reopening of the assessment it can be seen that the information on which the AO proceeded to reopening the assessment were available in the assessment records of the AO. Thus on the very same materials on which the assessment u/s 143(3) of the Act was framed by the AO the reopening of the assessment would amount to change of opinion and ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act was allowable. Consequently, excess carry forward of unabsorbed depreciation to the tune of Rs.99,35,146/- (Rs.18,90, 773/- for A..Y2002-03 and Rs.80,44,373/- for A.Y.2003-04) was allowed in the assessment order. (B) Again, in the computation of book profit u/s.115JB of the Act, it is seen that an amount of Rs.2, 62,76,653/- had been reduced from the net profit as per Profit and Loss Alc on account of adjustment for hypothetical income credited to the Profit and Loss Ale of the year as per Note 2 of Part B of Schedule V to the audited accounts. Since the said item. does not fall within the scope of negative adjustments as provided in the Explanation below Section 115JB(2) of the Act, deduction of the above amount was not admissible in. computing the book profit u/s.115JB. Moreover, since the amount of Rs.10,,32,595/- debited to the Profit Loss Alc on account of "provision for gratuity" is an unascertained liability as per clause 17 (i) of the Tax Audit Report, the same was required to be added back to arrive at the book profit. This resulted in under-assessment of the book profit by an amount of Rs.2,73,09,248/-. In view of the above-stated underassessment of income, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any new material or facts but on the basis of application of mind to the same set of fact which has already been considered while processing return as well as in the original assessment order. The law is now well settled that the assessment cannot be reopened on the basis of change of opinion. The Hon'ble Supreme Court of India in the case of CIT v. Kelvinator (India) Lt.d. (2010) 320 ITR 561 has held that the concept of change of opinion on the part of the AO reopen an assessment does not stand obliterated after the substitution of Seciton 147 of the Act the Direct Tax Laws (Amendment) Act 1987 and 1989. After the amendment the AO has to record reason to believe that income has escaped assessment but this does not imply that the AO reopen the assessment on mere change of opinion. The concept of "change of opinion" must be treated as an in built test to check the abuse of power. In view of the Apex Court decision (supra) any reopening of assessment has to be based on tangible material rather than a mere change of opinion. High Court of Madras, in the case of Sri Sakthi Textiles ltd. vs. JCIT, appeal no.V Nos.2498 to 2500 of 2000, decided on August, 4,m 2010 has laid down as f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the Hon'ble Supreme Court holdst he filed. A reading of the above judgment would make it clear that unless the above twin conditions are satisfied, the notice issued under section 148 of the Act is without jurisdiction and on that ground above the notice is liable to be quashed. The scope and effect of section 147 as substituted with effect from April 1, 1989, as also section 148 to 152 are substantially different from the provision as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a ) two conditions were required to be satisfied firstly the Assessing Officer must have reason to believe that income profits or gains chargeable to income-tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either (i) omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment year only in the circumstances where there is failure on the part of the as,sessee to disclose fully and truly all material facts necessary for the assessment." As has been discussed earlier in this order, it is apparent that the reopening in the instant case had not been made on the basis of any new material or facts but on the basis of fresh application of mind to the same set of fact which has already been considered while processing the return as well as in the original assessment order. In light of the facts of the case and the case laws discussed above, I hold that the initiation of proceeding u/s.147 after the expiry of four years is in contravention to the proviso to Section 147 and as such bad in law. The re-assessment proceeding consequent to such initiation is, therefore, annulled. Ground no.1 of the appeal is, hence, allowed." 6. The ld. DR supported the order of the AO whereas the ld. AR supported the order of the ld. CIT(A). 7. We have heard the rival submissions and perused the orders of the authorities below and the materials available on record. The undisputed facts of the cases are that the original assessment u/s 143(3) of the Act in the instant cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the Profit and Loss Ale of the year as per Note 2 of Part B of Schedule V to the audited accounts. Since the said item. does not fall within the scope of negative adjustments as provided in the Explanation below Section 115JB(2) of the Act, deduction of the above amount was not admissible in. computing the book profit u/s.115JB. Moreover, since the amount of Rs.10,,32,595/- debited to the Profit Loss Alc on account of "provision for gratuity" is an unascertained liability as per clause 17 (i) of the Tax Audit Report, the same was required to be added back to arrive at the book profit. This resulted in under-assessment of the book profit by an amount of Rs.2,73,09,248/-. In view of the above-stated underassessment of income, notice u/s.148 was issued on 31.03. 2010. In response, the assessee filed a letter dated 20.04.2010 requesting that the Return filed u/s.139 may be treated as return filed in response to notice u/s.148. " 7.1. Thus it is seen that in the recorded reasons as quoted above there is not a whisper by the AO that the income chargeable to tax has escaped assessment due to the failure on the part of the assessee to disclose fully and truly all material fac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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