9911796707
TMI Blog2017 (5) TMI 1092X X X X Extracts X X X X X X X X Extracts X X X X ..... se the book profit in respect of provisions towards unascertained liabilities. It is apparent that bad debts reserves is not on account of any provision towards any liability far less unascertained liabilities. The provision, as pleaded by the assessee, is in the nature of amounts set aside for diminution in the value of sundry debtors which is an asset rather than a liability. Therefore, the entire basis for the formation of belief to invoke section 147 is a damp squib. As a Corollary, the reasons recorded are not in sync with section 147 of the Act and are marred by wrong application of law and therefore cannot be sustained. - Decided in favour of assessee. - ITA No. 416, 424, 425, 426/Ahd/2014 2006-07 - - - Dated:- 23-1-2017 - Shri S.S. Godara, Judicial Member And Shri Pradip Kumar Kedia, Accountant Member Assessee by : Shri K.P. Shah, AR Revenue by : Shri James Kurian, Sr.DR ORDER Per Pradip Kumar Kedia, AM The above captioned appeals involves Assessment Years (AYs) 2006-07, 2007-08 2008-09 pertaining to same assessee. For the AY 2006-07, the assessee as well as the Revenue are in cross-appeals against the order of the CIT(A)-6, Ahmedabad dated 05/12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e carried forward. The section governing the carry forward of unabsorbed depreciation is section 32(2) of the Income Tax Act 1961 which has been amended w.e.f.1.04.2002. The erstwhile section 32(2) permitted the carry forward of unabsorbed depreciation for eight AYs only. These erstwhile provisions would be applicable to the unabsorbed depreciation of AY 98-99. Accordingly the unabsorbed depreciation for AY 98- 99 should not be allowed to be carried forward beyond AY 2006-07. ii) While arriving at Book Profit u/s.115JB(2), the company has not added back Bad debt reserve of ₹ 3,40,855/- which was debited to the Profit Loss account. As per explanation 1(c) to section 115JB such a provision which is debited to the P L account ought to have been added to the Net Profit for the purpose of calculating the Book Profit. In view of the above facts, I have reason to believe that income of ₹ 61,75,207/- has escaped assessment due to the twin reasons of undue allowance of carry forward of unabsorbed depreciation and faulty calculation of book Profit. These issues necessitate further verification. Accordingly, the assessment for A.Y. 2006-07 is required to be reopened ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed u/s.250 on 05/12/2013 for A.Y. 2006-07 by CIT(A)-VI, Ahmedabad, confirming the reopening of the assessment u/s.147 of the I.T.Act, 1961 by AO is wholly illegal, unlawful and against the principles of natural justice. 2. i. That in the facts and circumstances of the case as well as in law, the learned CIT(A) erred in not declaring the order u/s.144 r.w.s. 147 of the I.T.Act, 1961 s illegal in law and on facts. ii. The learned CIT(A) has grievously erred in law and on facts in confirming reopening of the assessment u/s.147 of the I.T.Act, 1961 for A.Y. 2006-07 by Assessing Officer, on the basis of the change of opinion. iii. The learned CIT(A) has grievously erred in law and on facts in not declaring the order u/s.144 r.w.s. 147 of the act without jurisdiction and an illegal, even though the written submissions of the appellant dt. 13/07/2013 were considered vide para 4.1 of the order. iv. The learned CIT(A) has grievously erred in law and on facts in ignoring the fact that there was no escapement of income which is Sine qua non for reopening of assessment. [Asian Silok Mills V. DCIT (2013) 29 taxmann.Com 246 (Guj)] Revenue s Appeal in ITA No.424/Ahd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the action of the AO is founded upon Explaantion-1(c) of section 115JB for forming requisite reason to belief as contemplated under section 147 of the Act. He thereafter adverted our attention to Explanation-1(c) to section 115JB and submitted that aforesaid clause seeks to increase the book profit on account of amount set aside to provisions made for meeting liabilities other than the ascertained liabilities. The Ld.AR submitted that the bad debts reserves sought to be adjusted to the book profit is not in the nature of provision made for meeting liabilities at all. In contrast, the provision towards bad debts reserves is on account of diminution in the value of sundry debtors. Thus, the very premise for invoking the jurisdiction itself is wrong and untenable. The jurisdiction under section 147 of the Act thus could not have been assumed based on such wrongful application of provision of the Act. On merits, the Ld.AR relied upon the judgment of Hon ble Apex Court in the case of CIT vs. HCL Comnet Systems Services Ltd. reported at (2008) 174 Taxman 118 (SC) rendered in the context of section 115JA of the Act. 11. The Ld.DR Mr.James Kurian for Revenue relied upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he carry forward of unabsorbed depreciation is section 32(2) of the Income Tax Act 1961 which has been amended w.e.f. 1.04.2002. The erstwhile section 32(2) permitted the carry forward of unabsorbed depreciation for eight AYs only. These erstwhile provisions would be applicable to the unabsorbed depreciation of AY 98-99. Accordingly the unabsorbed depreciation for AY 98-99 should not be allowed to be carried forward beyond AY 2006-07. ii) While arriving at Book Profit u/s.115JB(2), the company has not added back Bad debt reserve of ₹ 3,40,855/- which was debited to the Profit loss account. As per explanation 1(c) to section 115JB such a provision which is debited to the P L account ought to have been added to the Net Profit for the purpose of calculating the Book Profit. In view of the above facts, I have reason to believe that income of ₹ 61,75,207/- has escaped assessment due to the twin reasons of undue allowance of carry forward of unabsorbed depreciation and faulty calculation of Book Profit. These issues necessitate further verification. Accordingly, the assessment for A.Y. 2006- 07 is required to be reopened u/s.147 of the Income Tax Act 1961. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been quashed, the appeal of the Revenue based on such reassessment order does not survive. Consequently, appeal of the Revenue stands dismissed. 16. In the result, Assessee s appeal for AY 2006-07 is allowed, whereas Revenue s appeal for AY 2006-07 is dismissed. ITA No.425/Ahd/2014 for AY 2007-08 ITA No.426/Ahd/2014 for AY 2008-09 17. The ground raised for AY 2007-08 by the Revenue read as under:- The CIT(A) has erred in law on facts by allowing set off/carry forward of unabsorbed depreciation of ₹ 58.34 lacs pertaining to A.Y. 1998-99 without appreciating the observations of the AO in the order u/s.155(4) of the Act. 18. The ground raised for AY 2008-09 by the Revenue read as under:- The CIT(A) has erred in law and on facts by allowing set off/carry forward of unabsorbed depreciation of ₹ 58.34 lacs pertaining to A.Y. 1998-99 without appreciating the observations of the AO in the order u/s.155(4) of the Act. 19. Since grounds raised by the Revenue in both the years are identical, both the appeals are disposed of together. 20. The AO challenged action of the CIT(A) in reversing its order passed under section 155(4) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
