9911796707
TMI Blog2013 (12) TMI 897X X X X Extracts X X X X X X X X Extracts X X X X ..... mpleted on 22.03.2006 assessing the total loss at Rs, 1,10,69,561/-. Subsequently on 10.03.2010, the AO issued notice u/s 148 of the IT Act reopening the assessment made earlier after recording the reasons for escapement of income which are reproduced below:- "The Assessee company has filed its return of income on 01.12.2003, declaring total loss of Rs. 20,45,57,310/-. The assessment was completed u/s 143(3) of the Act on22.03.2006, determining the net loss at Rs. 1,10,69,561/-. However while passing the assessment order, the book profit assessable u/s 115JB of the Act has not been determined. Further, the book profit shown by the assessee, has been considered in ITNS 150A, which has not been properly worked out by the assessee in view of the amended provisions of section 115JB(2) explanation 1 to clause (i) w.r.e.f 01.04.2010. Therefore, while computing the book profit, the assessee failed to add back the provisions made for doubtful debts of Rs. 1,09,42,910/- as per the amended provisions as well as the deferred tax asset of Rs. 5,07,78,495/- credited to profit and loss account which was reduced from the net profit though no such provision is available u/s 115JB(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered these issues at all and, therefore, there was no change of opinion involved. The AO also pointed out that it was obligatory on the part of the assessee to produce details and evidences in support of the income returned which had not been done and, therefore, there was no true and full disclosure of material facts necessary for assessment. The AO accordingly rejected the objections raised by the assessee regarding reopening of the assessment and, in the reassessment, made addition of Rs. 2,38,45,216/- in respect of claim u/s 10A; Rs. 1,09,42,910/- in respect of provisions for bad and doubtful debts and Rs. 5,07,78,495/- in respect of deferred tax income while computing book profit. 3. The assessee filed appeal against the order of reassessment before CIT(A) in which specific ground was raised challenging the legal validity of reopening of the assessment. The assessee submitted that the reopening of the assessment made by AO was based on change of opinion as no fresh material had been brought on record by the AO and addition had been made only on the basis of details given in original return of income. It was also stated that the assessee had neither under stated income nor mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has already been made u/s 143(3), notice u/s 148 could be issued only in cases of failure on part of the assessee to file truly and fully all material facts necessary for assessment. Referring to the reasons recorded by AO which has been reproduced earlier in para 2.1, the learned AR submitted that the AO had not pointed out any failure on part of the assessee in filling truly and fully all material evidence. The assessment had been re-opened only on the basis of retrospective amendment which was not permissible in cases where four years have elapsed from the end of relevant assessment year and there was no failure on part of the assessee to file truly and fully all material facts. It was pointed out that reopening of the assessment beyond the period of four years was contrary to law as there was no reference to formation of belief that there was failure on part of the assessee to disclose truly and fully all material facts in the reasons recorded. Reliance was placed on the judgment of Hon'ble High Court of Bombay in case of DIL Ltd. Vs. ACIT(18 Taxman.com 290). Reference in this regard was also made to the judgment of Hon'ble High Court of Bombay in case of Titanor Components v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs u/s 147 as both the provisions operated in different field. It was pointed out that based on the same materials on which action u/s 154 was proposed, if it was possible to form a reasonable belief for escapement of income, action could always be taken u/s 147 of the IT Act. In support of reopening of assessment the learned DR placed reliance on the judgment of Hon'ble High Court of Bombay in case of Piaggio Vehicles Ltd Vs. DCIT (290 ITR 377). Reference was also made to the judgment of Hon'ble Supreme Court in case of Kalyanji Mavji & Co. Vs. CIT (102 ITR 287). 6. In rejoinder the learned AR for the assessee submitted that there was no failure on part of the assessee to disclose truly and fully all material facts necessary for assessment. The AO, in fact, had initiated reassessment proceedings only on the basis of material disclosed in the original return. It was pointed out that the provisions for bad and doubtful debts had already been added by the assessee in the return of income. But the same had not been added while computing the book profit in view of the judgments of the courts which were in favour of the assessee. However in the return filed u/s 148, the assessee witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts, the reopening of the assessment was bad in law. The same view was reiterated by the Hon'ble High Court of Bombay in case of DIL Ltd Vs. ACIT (18 Taxman. Com 290). The Hon'ble High Court noted that there was no reference whatsoever for formation of an opinion that there was failure on part of the assessee to disclose truly and fully all material facts necessary for assessment and, therefore, the High Court held that reopening of the assessment was bad in law. Further Hon'ble High Court of Bombay in case of 3i Infotech Ltd. Vs. ACIT (192 Taxman 133) have also held that validity of reopening of the assessment has to be determined with reference to reasons which have weighed with the assessing officer and those norms could not be added to or supported on a basis which was not in the mind of assessing officer when he issued notice to reopen the assessment. We have, therefore, to evaluate the legal validity of reopening of the assessment in the light of judgments aforesaid. 8. Coming to the facts of the present case, an assessment u/s 143(3) had already been made in this case on 22.3.2006. The AO issued notice u/s 148 on 10.3.2010 which was after lapse of four years from the end o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y all material facts relating to provisions for bad and doubtful debts. Therefore, reopening on account of failure to add back the provisions to the book profit cannot be upheld. It may also be pointed out here that the decision of AO to not add the provisions was in accordance with the Court ruling on the issue which has been upheld by the Hon'ble Supreme Court in case of HCL Comnet Systems & Services Inc. (305 ITR 409). 8.2 The second reason given by the AO is that the assessee had wrongly reduced the deferred tax assets of Rs. 5,07,78,495/- from the book profit for which there was no provision. The case of the assessee is that deferred tax credit was because of reversal of provision made in earlier year, it was only an accounting entry and there was no real income and, therefore, it was reduced from the profit. The decision of the AO is supported by the subsequent amendment by the Finance Act 2008 w.e.f 1.4.2001 as per which amount of deferred tax credited to the P&L Account is required to be reduced while computing the book profit in terms of clause (viii) of Explanation 1 to section 115JB(2). The AO had reopened the assessment in 2010 when this particular provision was alread ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the assessment after expiry of four years from the end of relevant assessment year when the assessment had already been made u/s 143(3) in which computation of book profit given by the assessee had been accepted by the AO. The judgments relied upon by the learned DR are distinguishable and not applicable to the facts of the present case. In case of Piaggio Vehicles Ltd Vs. DCIT (Supra) the assessee in the return of income for assessment year 1999-2000 had claimed that though the goodwill had been acquired under the agreement dated 30th March 1998, the goodwill was effectively acquired on 1.4.1998 and transferred on 25.6.1998. Accordingly in the assessment depreciation on the goodwill which had been acquired after 31.4.1998, the depreciation had been allowed. However, subsequently it was found from the audit report that goodwill has been shown as pending stock in the block of assets in assessment year 1999-2000 and, therefore, it was obvious that it had been acquired prior to 1.4.1998. Thus the assessee had not truly stated the facts regarding acquisition of goodwill in the return of income and, therefore, reopening of assessment had been upheld. The said case is obviously not app ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
