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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 ..... inimum Alternative Tax (MAT) income of Rs. 15.81 crores being 30% of such book profit under Section 115JA of the Act. The return of income filed by the petitioner was scrutinized under Section 143(3) of the Act and by order dated 28 January 2003, income under Section 115JA of the Act was enhanced from 15.81 crores to Rs. 16.82 crores by the Assessing Officer. 4. Thereafter, the impugned notice dated 29 March 2007 was issued by the Assessing Officer seeking to reopen the assessment for the Assessment Year 2000-01. The reasons in support of the impugned notice as forwarded to the petitioner, reads as under: "On verification of the case records, it is seen that the then A.O. determined the interest element on the exempted dividend of Rs. 7,74,04,508/- u/ s.10(33) of the Act at Rs. 38,70,000/-. In appeal, CIT(A) revised the element of interest for earning the exempted dividend at Rs. 34,81,740/-. These expenses should have been added back to the net profit while arriving at book profit, according to the provisions of section 115JA of the Act. The assessee company has debited an amount of Rs. 3,82,85,000/- towards provision for Doubtful Debts and Rs. 5,47,32,000/- on account of Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax has escaped assessment. Further reliance was placed upon the decision of this Court in Dr. Amin's Pathalogy Laboratory Vs. P.N. Prasad 252 ITR 673 to conclude that there was no change of opinion. 7. On the passing of the order dated 13 November 2007 disposing of the petitioner's objections that the impugned notice has been challenged before this Court. Mr. Irani, the learned Counsel in support of the petition submits as under: (a) Impugned notice admittedly issued beyond the period of four years from the end of the relevant assessment year without alleging failure on the part of the petitioners to disclose truly and fully all material facts necessary for assessment. In fact, the reasons itself indicate that the impugned notice is issued on verification of records; (b) At the time when the impugned notice was issued there was no reason to believe that income chargeable to tax has escaped assessment. The amounts brought to tax during the regular assessment proceedings were in accordance with law; (c) All the three issues which form the basis of the reopening notice, were a subject matter of consideration during the regular assessment proceedings leading to order d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in long term investment and in support submits as under: (a) The depth of examination by the Court in a challenge to a reopening notice is only to examine whether there is a prima facie satisfaction of the Assessing Officer that income chargeable to tax has escaped assessment. At this stage, the Assessing Officer is not required to establish the revenue's case beyond doubt; (b) This issue was not a subject matter of discussion in the order of assessment dated 28 January 2003 nor any question raised on it during the assessment proceedings which would indicate application of mind. Consequently, there could be no change of opinion on the issue as no opinion was formed; (c) The provision for doubtful debts and for depletion in long term investment has not been truly and fully disclosed during the assessment proceedings. This had been added to the net profit in the computation of income under the normal provisions of the Act. However, while computing the total income under MAT provisions i.e. Section 115JA of the Act, no disclosure about the provision for doubtful debts and for depletion in long term investment has been made. Both of which according to the revenue had to be add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e material and the reason to believe that income chargeable to tax has escaped assessment; (f) In case of assessments sought to be reopened are beyond a period of four years from the end of the relevant assessment year then there should have been a failure on the part of the assessee to truly and fully disclose all material facts necessary for assessment; and (g) Sanction of a superior Officer to the reasons recorded, where required, in terms of Section 151 of the Act, should have been obtained before issuing of the impugned notice; All the above jurisdictional requirements have to be satisfied cumulatively, wherever applicable. Therefore even if one the numerous jurisdictional requirements necessary for the issue of reopening notice is not satisfied, the reopening of an assessment fails. The sustainability of the reopening notice would be tested only on the basis of the reason recorded at the time of issuing the notice. 10. Therefore, the reasons recorded at the time of issuing notice is the only evidence of the Assessing Officer's reason to believe that income chargeable to tax has escaped assessment. These reasons cannot be added to, deleted from or supplemented. Besides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment? It is only in case the petitioner fails on the above challenge that the other grounds of challenge taken by the Petitioner would be examined in the context of the revenue's response to it. 13. The reason to believe of the Assessing Officer that income chargeable to tax has escaped assessment is on the ground that the provision for doubtful debts and provision for depletion of long term investment to the Profit and Loss Account are unascertained liabilities. Therefore, it is the Revenue's case that in terms of clause (c) of the Explanation to Section 115JA of the Act i.e. provision for bad debts and depletion of long term assets are required to be added back to the net profit for arriving at MAT profit. It is undisputed that the provision for doubtful debts and for depletion of long term investment are not liabilities. These provisions are made to take care/cover the likely fall in the value of assets. In fact this was so held by the Apex Court in CIT Vs. HCL Comnet Systems and Services Ltd. 305 ITR 409 wherein the Court held that Item (c) of the Explanation to Section 115JA of the Act would have no application to provision made for bad and doubtful debts. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s belief at the time of issue of the notice that determines the validity of the notice. No subsequent event could put life into the Assessing Officer's reason to believe that income chargeable to tax has escaped assessment when the reasons as originally recorded are still born. 15. In fact an identical issue had come up before this Court in Rallis India Ltd. (supra) wherein a reopening notice was inter alia issued on the ground that the book profits have to be increased in view of the Explanation to Section 115JB of the Act (similar to Section 115JA of the Act) after adding provision made doubtful debts and for diminution in the value of investment. This Court in the above case recorded the fact that Apex Court in HCL Comnet Systems and Services Ltd.(supra) has held that the provision for doubtful debts is a provision made for diminution in the value of assets and is not a liability. Thus it would not fall under clause (c) of the Explanation to 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 effec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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