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TMI Blog2015 (8) TMI 668X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 115 JA of the Act. Consequent to the aforesaid decision of the Apex Court, the Parliament has amended Explanation both under Section 115JA as well as 115JB of the Act in 2009 by adding clause (g) and (i) with retrospective effect from 1 April 1998 and 1 April 2001 respectively. This Court held that though the amendment was made with retrospective effect, the critical date is the date on which the Assessing Officer exercises jurisdiction under Section 148 of the Act and the subsequent amendment could not have been and is in fact not a ground on which the Assessing Officer sought to reopen the assessment. Thus the above decision would apply to the facts of the present case. Accordingly on the above ground of absence of reason to believe that income chargeable to tax has escaped assessment, the impugned notice is not sustainable. - Decided in favour of assessee. - Writ Petition No. 2664 of 2007 - - - Dated:- 21-7-2015 - M. S. Sanklecha And N. M. Jamdar, JJ. For the Petitioner : Mr Farrokh Irani a/w Jitendra Jain and Atul Jasani For the Respondent : Mr A R Malhotra a/w N A Kazi ORDER P. C. This petition under Article 226 of the Constitution of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation on the revalued portion debited the net amount of depreciation to the Profit and Loss Account. In fact the depreciation debited is the correct depreciation that can be debited. Deduction of depreciation on revalued portion of the assets is only for the purpose of presentation and accretion to reserves did not increase book profit. Therefore, there is no justification in reducing the net profit by the amount of revaluation reserve. In view of the above, I have reason to believe that income chargeable to tax of A.Y. 2000-01 has escaped assessment for failure on the part of the assessee company to disclose fully and truly all the material facts requiring for assessment for A.Y. 2000-01. 5. The petitioner by reply dated 2 November 2007, filed its objections to the reasons in support of the impugned notice. In particular, the petitioner submitted that the impugned notice was beyond the period of four years from the end of the relevant assessment year and the reason in support do not indicate any failure on the part of the petitioner to disclose fully and truly all material facts necessary for assessment. Besides, in respect of all the three grounds recorded as reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned notice on above account was on account of mere change of opinion. Besides there was a full disclosure during the assessment proceedings; (e) Provision for bad and doubtful debts and provision for depletion of long term investment have been fully disclosed in the petitioner's Balance Sheet and Profit and Loss Account filed along with its Return of Income Tax. Besides the same has also been disclosed while computing the profit under the normal provisions of the Act. Moreover, at the relevant time i.e. during the assessment proceedings as well as at the time of issue of the impugned notice, the provision for bad and doubtful debts and depletion of long term investment were not items that could not added back to arrive at MAT profits under Section 115JA of the Act as they are not liabilities. Thus there could be no reason to believe that income chargeable to tax has escaped assessment. Besides the issue was dealt with by the Assessing Officer while passing the order, consequently the impugned notice is merely on change of opinion; and (f) So far as deduction of revaluation reserves from book profit is concerned, it is pointed out that there was a full disclosure in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issuing the impugned notice as prior to the amendment the position was not clear; and (e) Reliance was placed upon the decision of this Court in Dr. Amin's Pathalogy Laboratory(supra) to contend that failure to notice an item during the regular assessment proceedings will entitle the Assessing Officer to issue a reopening notice even beyond a period of four years. It was further held in the above case that mere filing of Balance Sheet, Profit and Loss Accounts will not amount disclosure under the proviso to Section 147 of the Act. 9. We have considered the rival submissions. The law with regard to reopening of assessment is fairly settled. An assessment can be reopened under Section 147 and 148 of the Act only on the jurisdictional requirement for reopening of an assessment being strictly satisfied. This is for the reason that a reopening of an assessment would disturb an settled position by reopening a completed proceeding. Normally, the jurisdictional requirements to be satisfied for issuing of an reopening notice are as under: (a) The Assessing Officer must record his reasons /grounds for issuing a reopening notice before issuing the same; (b) The Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... broad parameters in view we shall now examine the petitioner's challenge to the impugned notice dated 29 March 2007 seeking to reopen the assessment for the Assessment Year 2000-01. Although three grounds were indicated in the reasons recorded in support of the impugned notice. The revenue has pegged its defence of the impugned notice only on the second ground/reason recorded in the reasons in support of the impugned notice i.e. The assessee company had debited the amount of ₹ 3.82crores towards provision for doubtful debts and ₹ 5.47 crores on account of provision for depletion in long term investment to the Profit and Loss Account. These being unascertained liabilities are required to be added back to the net profit for arriving at book profit. This addition is sought in terms of of Explanation to Section 115JA of the Act as otherwise the Assesssing Officer cannot make any change and /or tinker with the accounts maintained in accordance with the provisions of the Companies Act, certified by the auditors and passed by the company in a general meeting of shareholders as laid down in the Apex Court decision in Appollo Tyres v. CIT 255 ITR 273. Thus the impugned not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c) of the Explanation to Section 115JA of the Act. 14. The revenue contends that at the time of issuing of the impugned notice on 29 March 2007 the position was not clear. The position became clear only when the Parliament introduced/added clause (g) to the Explanation to Section 115JA of the Act with retrospective effect from 1 April 1998 and which reads as under: (g) the amount or amounts set aside as provision for diminution in the value of any asset. Thus submits the revenue that the impugned notice is sustainable on the above clause (g) of the Explanation to Section 115JA of the Act. However the reasons as recorded by the Assessing Officer for issuing the impugned notice is that provisions for bad and doubtful debts and for depletion/diminution of value of long term investment are unascertained liabilities. Thus the subsequent introduction of Clause (g) in the Explanation to Section 115JA of the Act cannot be relied upon by the revenue. It would have been a different matter if the reasons for the impugned notice had indicated the reasonable belief that income chargeable to tax has escaped assessment on the ground that provision for doubtful debts and diminution of v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the validity of a reopening notice of Assessing Officer is to be determined with reference to the reasons which are recorded in support of thereof and nothing else. Mr. Malhotra, the learned Counsel for revenue sought to distinguish the aforesaid decision on the ground that in the facts of that case, the Assessing Officer had taken a view during the regular assessment proceedings and the reopening notice was on account of change of opinion. Be that as it may, the observations made by this Court in Rallis India Ltd. (supra) with regard to the position in law in respect of reopening notices being judged by the reasons recorded on the date of its issue and that the retrospective amendment by introduction of Clause (i) in Explanation to Section 115JB of the Act similar to Clause (g) in which Explanation to Section 115JA of the Act in the present facts would have no application. Further even if Mr. Malhotra is right that there was a issue of change of opinion on the part of the Assessing Officer in the case of Rallis India Ltd.,(supra) the reopening notice has been set aside not only on account of change of opinion but also on account of the fact that the retrospective amendment a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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