9911796707
TMI Blog2015 (6) TMI 807X X X X Extracts X X X X X X X X Extracts X X X X ..... not given any finding that the assessee has not reduced the debtors from the asset side of the balance sheet to the extent to the corresponding amount so that, at the end of the year, the amount of debtors is shown as net of the provision for the impugned bad debt. In the absence of the same therefore, respectfully following the ratio laid down in the case(s) of CIT vs. Yokogawa India Ltd. [2011 (8) TMI 766 - KARNATAKA HIGH COURT ] and CIT vs. Kirloskar Systems Ltd.(2013 (12) TMI 9 - KARNATAKA HIGH COURT) and also following the decision of Coordinate Bench in the case of ACIT vs. Vodafone Essar Gujarat Ltd.(2012 (6) TMI 415 - ITAT, Ahmedabad), we hereby set aside the order of the ld.CIT(A) on this issue and direct the AO to delete the disallowances. Thus, this ground of assessee’s appeal is allowed.- Decided in favour of assessee. Granting depreciation although not claimed by the assessee - Held that:- The issue is now squarely covered in favour of assessee by the judgement of Hon’ble Jurisdictional High Court rendered in the case of DCIT vs. Sun Pharmaceuticals Ind.Ltd. [2015 (1) TMI 704 - GUJARAT HIGH COURT] wherein held that depreciation not claimed for by the assessee, canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mum Alternate Tax vide Ground No. 2.1) the adjustment by way of addition of ₹ 21,80,58,244 debited to the appellant's Profit and Loss Account on account of Provision For Doubtful Debts, in computing the appellant's book profit u/s. 115JB. 2.2 The learned CIT(A) has accordingly grossly erred in proceeding as if the appellant's dispute related merely to the quantum of the book profit and in accordingly omitting to render his decision on the appellant's challenge to the very levy of the Minimum Alternate Tax u/s. 115JB considering also the peculiar facts of the appellant's case before him. 3.1 In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in failing to appreciate: (a) that once he had categorically held vide para 2.6 of the Appellate Order that in view of the decision of the Supreme Court in Apollo Tyres' case (255 ITR 273), the only issue to be considered in the appellant's present case was as to whether the adjustment by way of addition of ₹ 21,80,58,244 on account of Provision For Doubtful Debts debited to the Profit and Loss Account could fall under any of the clauses (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) .......................... Since the quantum of amounts payable by GEB are reduced, obviously the same cannot be said to be income accruing to the appellant company and cannot be taken as liability as referred in 115JB(2) clause (c).... ... 5.1 In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in deciding Ground No. 3.1 of the appellant's appeal before him reading as under, against the appellant: 3.1 In law and in the facts and circumstances of the appellant's case, the learned Assessing Officer has grossly erred in considering deduction for depreciation amounting to ₹ 178,83,99,967 in the computation of the appellant's total income under the normal provisions of the Income-tax Act, 1961 even though the appellant had not claimed deduction for the same and categorically stated, by way of a Note appended to its return of income, that it had opted not to claim for depreciation. 5.2 In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has further grossly erred in failing to appreciate that by no stretch of the imagination, the action of allowing deduction fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng a waiver petition. 9.1 In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in dismissing Grounds No. 9.1 and 9.2 of its appeal before him reading as under: 9.1 In law and in the facts and circumstances of the appellant's case, the learned Assessing Officer has grossly erred in levying interest amounting to ₹ 3,18,60,034 u/s.234B even though that provision was not at all attracted to the appellant's present case. 9.2 Without prejudice to the foregoing, in law and in the facts and circumstances of the appellant's case, there was no warrant / justification for levying any interest U/S.234B. 10.1 In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in dismissing the appellant's Ground of Appeal No. 10 reading as under: 10. In law and in the facts and circumstances of the appellant's case, the learned Assessing Officer has grossly erred in levying interest amounting to ₹ 19,53,907 u/s.234C even though interest amounting to only ₹ 2,35,740 was leviable under that provision. 11. The appellant craves leave to add to, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A), now both the Assessee and the Revenue are in crossappeals before us. The assessee has filed a chart containing six grounds. 4. First ground (as per chart filed by the assessee during the course of hearing) is against the validity of reopening of the assessment by invoking the provision of section 147 of the Act. The ld.counsel for the assessee submitted that before the ld.CIT(A), one of the grounds was that the notice u/s.148 had been issued before the expiry of four years from the end of the relevant assessment year and that this was not a case of mere change of opinion and also suffered from consideration of irrelevant issues at the cost of relevant issues. It is submitted that the statement of facts as submitted before the ld.CIT(A) was ignored. In support of the challenge against validity of notice u/s.148 of the Act, the assessee has placed reliance on the decision of Hon ble Bombay High Court rendered in the case of Rallis India Ltd. vs. ACIT Others in Writ Petition No.2514 of 2009. The reliance is also placed on the decision of the Coordinate Bench (ITAT B Bench Ahmedabad) rendered in the case of Intas Exports vs. The ACIT in ITA Nos.1819 1820/Ahd/2008 for AYs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing could be done under the above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the assessing officer to make a back assessment, but in Section 147 of the Act (with effect from 1-4-1989), they are given a go-by and only one condition has remained viz. that where the assessing officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post--1- 4-1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words reason to believe failing which, we are afraid, Section 147 would give arbitrary powers to the assessing officer to reopen assessments on the basis of mere change of opinion , which cannot be per se reason to reopen. 6. We must also keep in mind the conceptual difference between power to review and power to reassess. The assessing officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain precondition and if the concept of change of opinion is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one. Thus, such fact cannot be a ground for reassessment. 5.1. Further reliance is placed on the judgement of Hon ble Gujarat High Court rendered in the case of Parixit Industries (P.)Ltd. vs. ACIT reported at (2012) 20 taxmann.com 750 (Guj.), wherein the Hon ble Jurisdictional High Court has held as under:- 25, It is now a settled law that if an explanation is added to a section of a statute for the removal of doubts, the implication is that the law was the same from the very beginning and the same is further explained by way of addition of the Explanation. Thus, it is not a case of introduction of new provision of law by retrospective operation. We have found that the petitioner had disclosed all the materials regarding its activities and there was no suppression of materials. In spite of such disclosure, the Assessing Officer gave benefit of the provision by considering the then Explanation which was substantially the same and thus, it could not be said that any income escaped assessment in accordance with the then law. We have already pointed out that the Assessing Officer has now given a second thought over the same materials and according to him, as the assesses is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is issued, the proper course of action for the notice is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years. 6. Insofar as the appeals filed against the order of assessment before the Commissioner (Appeals), we direct the Appellate Authority to dispose of the same, expeditiously. 7. With the above observations, the civil appeals are dismissed. 31. The general observations made in paragraph 5 of the judgment, in our opinion, cannot be construed as an absolute proposition of law on the subject. It appears that the said two-judge-bench did not refer to the earlier five-judge-bench or the threejudge- bench or even the two-judge-bench decisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(1). It would in effect place an assessee in whose case the return was processed under Section 143(1) in a more vulnerable position than an assessee in whose case there was a full-fledged scrutiny assessment made under Section 143(3). Whether the return is put to scrutiny or is accepted without demur is not a matter which is within the control of assessee; he has no choice in the matter. The other consequence, which is somewhat graver, would be that the entire rigorous procedure involved in reopening an assessment and the burden of proving valid reasons to believe could be circumvented by first accepting the return under Section 143(1) and thereafter issue notices to reopen the assessment. An interpretation which makes a distinction between the meaning and content of the expression reason to believe in cases where assessments were framed earlier under Section 143(3) and cases where mere intimations were issued earlier under Section 143(l)may well lead to such an unintended mischief. It would be discriminatory too. An interpretation that leads to absurd results or mischief is to be eschewed. 13. Certain observations made in the decision of Rajesh Jhaveri (supra) are sough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e open to him to contest the reopening on the ground that there was either no reason to believe or that the alleged reason to believe is not relevant for the formation of the belief that income chargeable to tax has escaped assessment. In doing so, it is further open to the assessee to challenge the reasons recorded under section 148(2) on the ground that they do not meet the standards set in the various judicial pronouncements. 11. For the above reasons, the writ petition is allowed and the impugned notices dated 26.03.2012 and 09.08.2012 are hereby set aside. 5.3. The ld.counsel for the assessee also placed reliance on the judgement of Hon ble Bombay High Court rendered in the case of Rallis India Ltd. vs. ACIT and The Union of India in Writ Petition No.2514 of 2009, wherein the Hon ble High Court has held as under:- 19. In the present case, the principle of law which has been laid down by the Supreme Court in Max India (supra) would be attracted. On the date on which the Assessing Officer purported to exercise his power to re-open the assessment under Section 147, the legislative amendment by the insertion of clause (i) to Explanation (1) to Section 115JB had not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermissible under law that the decisions of Higher Forum is not considered on the whims and fancies of the lower authorities. Under these facts, in our considered view, the AO was not justified in re-opening the assessment, reassessment so framed is not valid. Thus, this ground of assessee s appeal is allowed. 6. Ground No.2 (as per chart) is against the confirmation of disallowances of ₹ 48,12,701/- on account of operational and maintenance expenses and ₹ 1,16,25,712/- on account of excess interest charged to GEB amount debited to P L account of provision for doubtful debts to book profit u/s.115JB of the Act. The ld.counsel for the assessee submitted that the ld.CIT(A) was not justified in confirming the disallowances. The ld.counsel for the assessee placed reliance on the judgement(s) of Hon ble High Court of Karnataka in the case of CIT vs. Kirloskar System Ltd. reported at (2014) 220 Taxman 1 (Karnataka) and of CIT vs. Yokogawa India Ltd. reported at (2012) 204 Taxman 305(Karnataka). He also placed reliance on the decision of Coordinate Bench (ITAT A Bench Ahmedabad) in the case of ACIT vs. Vodafone Essar Gujarat Ltd. in ITA No.1999/Ahd/2008 for AY 2003-04, dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this head incurred by the appellant company and claimed from GEB. It is submitted that the amounts of debit notes raised till May, 2000 have been accepted by GEB while those for later months have been received as on 31.03.2001. Therefore having regard to the fact that the amounts debited are being received from GEB there cannot be any reason that the amounts for the months of June to Sept.2000 are also not receivable by the appellant company. The same is therefore held to be a provision which is not ascertained liability falling under explanation(c) to section 115JB(2) and the action of the AO in adding the same to the book profit is upheld. (C) This relates to an item of provision relating to excess interest charged to GEB of ₹ 1,16,25,712/-. The appellant s representative Shri Nitin Parekh was not able to give details of the same and in the absence of the same I cannot hold that the provision relates to any ascertained liability and accordingly the action of the AO in adding back this amount as per clause (c) of explanation to section 115JB is therefore justified. 2.8 To summarise, out of ₹ 21,80,58,244/-, the addition in respect of the following amounts are up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2001 many assessees used to take the benefit of deduction under Section 36(l)(vii) of the 1961 Act by merely debiting the impugned bad debt to the profit and loss account and, therefore, the Parliament stepped in by way of Explanation to say that a mere reduction of profits by debiting the amount to the profit and loss account per se would not constitute actual write off The Apex Court accepted the said legal position. However it was clarified that besides debiting the profit and loss account and creating a provision for bad and doubtful debt, the assessee correspondingly/simultaneously obliterated the said provision from its accounts by reducing the corresponding amount from loans and advances/debtors on the assets side of the balance sheet and, consequentially, at the end of the year, the figure in the loans and advances or the debtors on the assets side of the balance sheet was shown as net of the provision for the impugned bad debt. Then the said amount representing bad debt or doubtful debt cannot be added in order to compute book profit. Therefore, after the Explanation the assessee is now required not only to debit the profit and loss account but simultaneously also red ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not paid the advance tax as per the provisions existing prior to the amendment. Hence, he is liable to pay interest on the said amount deducting the difference of the tax paid. The Apex Court in the case of Bharat Earth Movers v. CIT [2000] 245 ITR 428/112 Taxman 61 (SC) has held that an assessee who is maintaining the accounts on mercantile system, a liability already accrued, though to be discharged at a future date, would be a proper deduction while working out the profits and gains of his business, regard being had to the accepted principles of commercial practice and accountancy. It is not as if such deduction is permissible only in case of amounts actually expended or paid. The liability would be an accrued liability and would not convert into a conditional one merely because the liability was to be discharged at a future date. Therefore for that, reason it was held that the gratuity payable and encashment of earned leave is not a contingent liability and pro vision thereof is deducted. In the light of the settled principles laid down by the Apex Court, no substantial questions of law arise for consideration in this appeal. Accordingly, the appeal is dismissed. 7.3. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upra) and also following the decision of Coordinate Bench in the case of ACIT vs. Vodafone Essar Gujarat Ltd.(supra), we hereby set aside the order of the ld.CIT(A) on this issue and direct the AO to delete the disallowances. Thus, this ground of assessee s appeal is allowed. 8. Ground No.3 (as per chart) is against confirming the action of AO in granting depreciation although not claimed by the assessee. The ld.counsel for the assessee submitted that the issue is now squarely covered in favour of assessee by the judgement of Hon ble Jurisdictional High Court rendered in the case of DCIT vs. Sun Pharmaceuticals Ind.Ltd. in Tax Appeal No.93 of 2000, dated 17/12/2014. The ld.counsel for the assessee submitted that earlier the Hon ble Bombay High Court in the case of Plastiblends India Ltd. vs. Addl.CIT and Others reported at (2009) 318 ITR 352 (Bom)[FB], dated 16/10/2009, the issue was decided against the assessee and now the issue has been decided in favour of assessee by the Hon ble Jurisdictional High Court in the case of Dy.CIT vs. Sun Pharmaceuticals Ind.Ltd.(supra). Therefore, the order of the ld.CIT(A) deserves to be set aside. 8.1. On the contrary, ld.CIT-DR supported t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not claimed for by the assessee, cannot be allowed as a deduction despite the introduction of the concept of block assets. The questions are answered in favour of assessee and against the Revenue. The Tax Appeal stands dismissed. 9.3. Respectfully following the aforesaid binding precedent of the Hon ble Jurisdictional High Court, we hereby set aside the order of the ld.CIT(A) and delete the addition made by the AO. Thus, ground No.3 of assessee s appeal is allowed. 10. Ground No.4 (as per chart) is not pressed by the ld.counsel for the assessee. Therefore, the same is rejected as such. 11. Ground Nos.5 6 (as per chart) are against confirming the levy of interest u/s.234-A, 234-B 234-C of the Act. The ld.counsel for the assessee submitted that the authorities below were not justified in charging the interest and confirming the same u/s.234-A, 234-B 234-C of the Act. The ld.counsel for the assessee placed reliance on the following judgements:- 1. Emami Ltd. vs. CIT reported at (2011)337 ITR 470 (Cal.). 2. Prime Securities Ltd. vs. ACIT reported at (2011) 333 ITR 464 (Bom). 3. ITAT B Ahmedabad decision in the case of Intas Exports vs. ACIT in ITA Nos.1819 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This was test checked for one month i.e. November in which the difference was ₹ 44,67,973/- referred as ₹ 44,47,015/- in the said provision. Other differences are on account of rebate discount as per PPA. Since the quantum of amounts payable by GEB are reduced, obviously the same cannot be said to be income accruing to the appellant company and cannot be taken as liability as referred in 115JB(2) clause(c). I would therefore hold that items of such nature are based on actual accounting practice followed by the appellant company and also with reference to the PPA for discount for prompt payment are not covered in clause(c) of Explanation to 115JB(2). Accordingly, such items considered in the above amount of ₹ 21.80 crores cannot be added back to the book profit u/s.115JB. (E) This relates to an item of ₹ 48,17,701/-. This relates to operational and maintenance expenses disputed by GEB for the months of June 2000 to September,2000. The appellant company has submitted detailed account in this respect and submitted that the appellant company has been raising debit notes to GEB for various expenses operating under this head incurred by the appellant company a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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