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TMI Blog2019 (7) TMI 531X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax has been under assessed ; or (ii) such income has been assessed at too low a rate ; or ( iii ) such income has been made the subject of excessive relief under this Act ; or ( iv ) excessive loss or depreciation allowance or any other allowance under this Act has been computed; The plea of Ld. Counsel for revenue is acceptable to that extent. Keeping in mind the factual matrix of the case and above legal propositions, we hereinafter proceed to adjudicate each of the issues, on legal grounds as well as on merits. Deduction allowed u/s 36(1)(viia) not adjusted while computing bad debts u/s 36(1)(vii) - HELD THAT:- Factual matrix would lead us to conclude that an opinion was already formed by Ld. AO during regular assessment proceedings and the reassessment proceedings were triggered merely on the basis of Revenue Audit objections. The reopening was done on the same set of facts as available during original assessment proceedings. The ratio of decision of Hon ble Bombay High Court rendered in ICICI Home Finance Co. Ltd. [ 2012 (8) TMI 312 - BOMBAY HIGH COURT] would squarely apply to this issue. Therefore, we hold that that there was no independent application of mind by Ld. AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n with voluntary retirement scheme. The balance would be allowable in equal installments of each of the 4 succeeding years. A combined reading of the above facts would lead us to a conclusion the only provisions under which the said deduction has been claimed as well as allowed to the assessee is Section 35DDA which provides for deduction only to the extent of 1/5th in the first year. The provisions of statute being expressly crystal clear, we hold that the assessee was entitled to claim deduction only to the extent of 1/5th only during impugned AY against aggregate payment of 191 Crores. The decision of Hon ble Bombay High Court rendered in Bhor Industries Limited [ 2003 (2) TMI 20 - BOMBAY HIGH COURT] , in our considered opinion, would not apply-firstly because admittedly the said decision is prior to introduction of Section 35DDA and secondly, no such disallowance u/s 43B was there and therefore, the said case is factually distinguishable. Therefore, we reverse the stand of Ld. first appellate authority, in this regard and restore the stand of Ld. AO. However, it is made very clear that our adjudication of the issue, on merits, would come into play only if our stand, on legal gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... early spelt out by the assessee. A specific query, in this regard, was raised by AO vide notice dated 17/10/2005 question no. 4 asking assessee to file the complete details / evidences in support of the said claim. The assessee, vide submissions dated 17/07/2006 submitted the requisite details as asked for by AO. Thereafter, the assessee s eligibility to claim the same was exhaustively dealt with by AO vide paragraph-5 (page nos. 2 to 7) while framing assessment order u/s 143(3) on 29/12/2006. In fact, an addition of 64.69 Crores was made by AO in the regular assessment proceedings which was subject matter of further appeal before first appellate authority. Therefore, the reconsideration of the stated issue on same set of facts would be nothing but mere change of opinion which is impermissible under law. This issue was duly considered by Ld. AO during regular assessment proceedings and therefore, the ratio of decision of Hon ble Apex Court rendered in CIT Vs. Kelvinator of India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT] would apply to the facts of the case. Secondly, the argument of doctrine of merger as advanced by Ld. AR would also be applicable to the factual matrix. Therefore, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [CIT(A)] erred in upholding the order of the Assessing Officer passed under section 143(3) r.w.s. 147 of the Act on the ground that the Assessing Officer had reasons to believe that the income chargeable to tax had escaped assessment. [2] The CIT(A) failed to appreciate that the claim of deduction of bad debts under section 36(1)(vii), exemption under section 10(23G), deduction under section 35DDA had been considered in the assessment order passed under section 143(3) dated December 29, 2006 and section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceedings upon a mere change of opinion as has been held by the Delhi High Court (FB) in the case of CIT v. Kelvinator of India (256 ITR 1) and affirmed by the Supreme Court in 320 ITR 561. 2.1 Facts in brief are that the assessee being resident corporate assessee stated to be engaged in the business of Banking and Finance was subjected to re-assessment proceedings u/s. 143(3) read with Section 147 of the Income Tax Act, 1961 for the impugned AY vide order dated 25/02/2009 wherein the income of the assessee was determined at ₹ 1908.20 Crores under normal provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g on 31/03/2004 amounting to ₹ 25.60 Crores was charged in the Profit & Loss Account. However, in the computation of income, the assessee claimed deduction of ₹ 49,27,20,000/- as allowable deduction u/s 35DDA which was computed as 20% of Total (A) as tabulated above plus full amount of ₹ 13.84 Crores as tabulated above as Total (B). In other words, the amount paid on account of Leave encashment, gratuity and pension was claimed in full during impugned AY only. The reasoning given to claim the aforesaid amount in full was the fact that the payments on account of Leave encashment, gratuity and pension were not payments in connection with ERO Scheme as any employee who resigns / retires even in ordinary course would be entitled for the same and therefore, full deduction of the same was allowable in the year of payment. These payments were stated to be statutory benefits available to each and every employee on termination of employment whether on resignation or retirement. However, rejecting the assessee's plea and treating the entire payment as part of ERO Scheme itself, Ld. AO opined that only 1/5th of the entire payment would be allowable to assessee as deduction d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilizing resources for financing infrastructure within the meaning of Finance (No.2) Bill, 1996 and CBDT Circular No.762 dated 18/02/1998. Although the assessee defended its stand in support of exemption, however, the same could not find favor with Ld. AO. Resultantly, the aforesaid exemption of ₹ 45.92 Crores was denied to the assessee. 2.4 Apart from above additions, the assessee has been saddled with disallowance u/s 43B on account of unpaid bonus for ₹ 1.97 Crores since the deduction of the same was allowed to the assessee in subsequent AY 2005-06 on payment basis. However, the said adjustment is not under challenge before us. The same would be relevant from the point of view of testing the validity of reassessment proceedings as discussed by us in the later part of this order. Incorporating the above additions, the assessment was framed u/s 143(3) r.w.s. 147 on 25/02/2009 which was subjected to challenge before Ld. CIT(A). 2.5 An office note has been appended by Ld. AO with assessment order u/s 143(3) r.w.s. 147 dated 25/02/2009 wherein it has been stated that the figures of bad debts u/s 36(1)(vii) for ₹ 1649.92 Crores has been arrived at after reducing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing provisions of section 10(23G). Further the AO has also noted that the provision of section 10(23G) is applicable to all assessees in the country and not the Appellant alone. Thus, the action of the AO on this issue seems erroneous, however as per provisions of section 147 if the AO has reason to believe that any income has escaped assessment which comes to his notice subsequently in the course of proceedings u/s.147, the same can be re-assessed by him. Though the Appellant has made a reference to its own Tribunal case for the A.Y. 1994-95 and other cases of the Bombay High Court and other Courts, I find that the said cases are distinguishable from the present case as in the instant case there is no change of opinion. Even without taking up the other issues recorded in the reasons for reopening, I find that the AO is justified in issuing notice u/s.148 of IT Act. This ground is decided against the Appellant. 3.2 However, on merits, the Ld. first appellate authority concurred with assessee's submissions with respect to claim of deduction u/s 35DDA and deleted the additions by observing as under: - 3.8 I have considered the facts of the case and the submissions on record. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 Crores as disallowed in reassessment proceedings deserve to be deleted. The operative portion of the appellate order, for ease of reference, could be extracted in the following manner: - 4.10 I have gone through the facts and submissions of the Appellant. I find that the contention of the Appellant that the issue of bad debts has been considered by the A.O. in length in the original assessment order dated 26-12-2006 is acceptable. In the original assessment it was open to the A.O to examine the entire claim of bad debts. As such the allowability of the entire bad debt has been examined by the A.O and the A.O after such examination of facts had disallowed bad debts aggregating ₹ 11,57,66,77,475/-. That shows the AO had accepted bad debts to the extent of ₹ 4,92,25,70,772/-. Thus, there is no justification for disallowing the debts which have been allowed by him earlier. Further, the legal position regarding the allowability of bad debts has considerably changed after the amendment of section 36(1)(vii) w.e.f. 1-04- 1989 wherein if a debt has been written off as irrecoverable in the accounts of the assessee, it will suffice for claiming it as bad debt. Further this i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same were computed only after adjusting the bad debts provisions u/s 36(1)(viia) for ₹ 21.80 Crores claimed for AY 2003-04 and therefore, the reasons for reopening were factually erroneous. Another plea raised is the fact the reopening has been triggered merely on the basis of revenue audit objections without independent application of mind by Ld. AO. It has further been submitted that no new tangible material came to the possession of Ld. AO which would justify reassessment proceedings against the assessee on this issue. Reliance has been placed on the decision of Hon'ble Bombay High Court rendered in ICICI Home Finance Co. Ltd. [210 Taxman 67] & the decision of Hon'ble Delhi High Court rendered in Carlton Overseas (P) Ltd. [319 ITR 295] relied upon in FIS Global Business Solutions India (P.) Ltd. vs. ACIT [102 Taxmann.com 471] for the submissions that assessment could not be reopened merely on audit objections. 4.1.2 Regarding unpaid bonus disallowable u/s 43B, it has been submitted that the said amount was duly reflected as unpaid liability in the Tax Audit Report and the same had remained to be added back inadvertently. The omission to disallow the same was mere comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the facts. 4.1.5 Another pertinent argument raised by Ld. AR is the fact that the assessee's appeal, on this issue, was pending before Ld. CIT(A) at the time of issuance of notice u/s 148. Therefore, in view of 2nd proviso (as it stood at relevant point of time i.e. issuance of notice u/s 148 dated 26/06/2008) to Section 147 by virtue of which Ld. AO was barred from reassessing income involving matters which were the subject matter of further appeal. This was because the Ld. CIT(A) was vested with the powers of enhancement and could assess income relating to the subject matter of appeal that may have escaped assessment. Our attention is drawn to the decision of Hon'ble Bombay High Court in assessee's own case for AY 2003-04 in Writ Petition No. 1765 of 2011 [242 CTR 292] wherein Hon'ble Court held that Ld. AO could not have reopened the assessment on the matters which form subject matter of appeal before Ld. CIT(A). 4.1.6 Regarding eligibility to claim exemption u/s 10(23G), it has been submitted that stated issue was already examined in depth by Ld. AO during regular assessment proceedings u/s 143(3). The mere fact that the aforesaid exemption is denied to the assessee in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h establish that the assessee was following consistent policy of writing-off the bad debts. The observation of Ld. AO in reassessment order that no information was available is also erroneous and without any basis which is evident from the details filed by the assessee during original assessment proceedings. This is further fortified by the fact that Ld. AO categorized the bad debts claimed by the assessee and chose to disallow those bad debts, in respect of which details were not available on record. In contrast, the sum of ₹ 492.26 Crores has consciously been allowed by Ld. AO. Reliance has been placed on decision of Hon'ble Supreme Court rendered in TRF Limited [323 ITR 397] and Vijaya Bank [323 ITR 166] for the submissions that now there is no requirement to prove that the debts have actually become bad. 4.2.3 For assessee's eligibility to claim deduction u/s 10(23G), our attention is drawn to the fact that stated issue stood squarely covered in assessee's favor by the decision of this Tribunal rendered in assessee's own case for AY 2005-06 vide ITA Nos.5276,3841/Mum/2013 order dated 03/11/2017 as well as by the decision of Delhi Tribunal in ACIT V/s Oriental Bank of Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7", page nos. 11166 and 11167] wherein, in the light of certain case laws, it been explained by the learned author that in cases where action under Section 154 could have been taken, the Revenue is not barred from reopening the assessment under section 147. It has further been submitted that Ld. AO had not formed any opinion on the issue of disallowance u/s 43B during regular assessment proceedings and hence, there could be no occasion to treat the same as mere change of opinion. 5.2.5. Reliance has been placed on the following judicial pronouncements for the arguments of change of opinion, reassessment proceedings based on revenue audit objections etc.: - No. Case Law Judicial Authority Citation 1. ACIT V/s Rajesh Jhaveri Stock Brokers Pvt. Ltd. Hon'ble Supreme Court 291 ITR 500 2. Export Credit Guarantee Corporation of India Ltd. vs. Addl. CIT & Ors. Hon'ble Bombay High Court 2013 350 ITR 651 3. ITO & Ors. vs. Biju Patnaik Hon'ble Supreme Court [1991] 188 ITR 247 4. A.L.A. Firm vs. CIT Hon'ble Supreme Court [1991] 189 ITR 285 5. M/s. Eleganza Jewellery Limited vs. CIT Hon'ble Bombay High Court W.P.No.2763 of 2013 D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laims to the extent of ₹ 1157.66 Crores thereby implying that the balance bad debts of ₹ 492.26 Crores were allowed. However, no details have been brought on record for the balance bad debts as allowed to the assessee. Even basic details like name of the parties against whom the debts are shown as bad debts and amounts of such bad debts etc. have not been furnished by the assessee. On this ground, the Ld. AO had reason to believe that income of ₹ 492.26 Crores escaped assessment. The Ld. Sr. Counsel countered the argument of Ld. AR that the issue was extensively dealt with by Ld. AO in regular assessment, by submitting that Ld. AO omitted to deal with balance bad debts claim of ₹ 492.26 Crores which is evident from the fact that no such details were ever furnished by the assessee. The arguments have been made to submit that the assessee furnished details of bad debts above ₹ 5 Crores only. 5.2.8 The Ld. Sr. Counsel has drawn our attention to the computation of bad debts for ₹ 1157.66 Crores as disallowed by Ld. AO in the regular assessment order passed u/s 143(3) to submit that although Ld. AO disallowed bad debts for ₹ 1157.66 Crores, ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debts was ₹ 1441 Crores. The assessee provided full details through several submissions. The Assessing Officer considered these submissions, disallowed the claim of bad debts to the extent of ₹ 769.75 Crores and allowed the claim to the extent of ₹ 672 crores. The CIT(A) partly allowed the appeal of the assessee. The Assessing Officer sought to reopen the assessment on the issue of the same bad debts examined by the AO against which appeal had been filed before CIT(A) and considered by the CIT(A) while passing the appellate order. On this basis the Hon'ble High Court quashed the reopening of the assessment. However, in the present case, the facts are completely different. The total claim of bad debt was ₹ 1649.92 crores. The Assessing Officer, in a detailed order exhaustively dealt with amount of claim of ₹ 1157.66 crores and disallowed the same. He was silent on the balance amount of claim of ₹ 492.26 crores. As in the above case decided by the Hon'ble Bombay High Court discussed in the preceding paragraph, the Assessing Officer did not affirmatively allow deduction of bad debt claim of ₹ 492.26 Crores by applying his mind. In fact, had h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he subject matter of consideration before the CIT(A). Hence, the judgment of the Hon'ble Bombay High Court in Writ Petition No. 1765 of 2011(supra) is not applicable to this case. That decision was confined to the facts of that case. It simply applied the 2nd proviso to section 147. In our case, the assessee did not file any writ petition against the reopening of the assessment and came through the regular channel of appeal. Since that writ petition was filed by the assessee only and the decision was in its favor, it could have filed a writ petition here also which it did not do, apparently knowing that facts are distinguishable. Our attention is drawn to 2nd proviso to Section 147 which reads as under: "Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matter of any appeal, reference or revision, which is chargeable to tax and has escaped assessment." The Ld. Sr. Counsel submitted that the implication of this provision as discussed by the learned author in "Kanga and Palkhivala's The Law and Practice of Income Tax [10th Edition, Volume II", Page No. 2193] would be as under: - "29. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted claim of bad debts was not the subject matter of appeal before the CIT(A). Therefore, when the Assessing Officer passed the reassessment order dated 25/02/2009 the CIT(A) had already passed the appellate order dated 31/07/2018. That order did not deal with the claim of balance bad debt of ₹ 492.26 Crores. Hence the re-assessment order did not reassess any income which was subject matter of appeal before the CIT(A) and hence, would not violate the 2nd proviso to Section 147 of the Act. 5.2.13 On the issue that whether Ld. AO could issue the notice u/s 148 on 26/06/2008 when the appeal was pending before Ld.CIT(A), it was submitted that appellate order was passed on 31/07/2008. The 2nd proviso to Sec.147 speaks only that the Assessing Officer cannot pass any reassessment order on matter covered by the order of the CIT(A). The relevant point of time was the date of passing the reassessment order. At that time only it was to be seen whether the Assessing Officer contravened the provisions of the 2nd proviso to section 147. The time of mere issue of notice u/s 148 was not relevant. After issue of notice u/s 148, the assessee would be provided with the reasons and after consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reopening is valid on all the reasons. However, even if reopening is held to be valid even on one reason, the whole reopening would be valid. This has been explained, on the basis of case laws, by the learned author in Chaturvedi & Pithisaria's Income Tax Law [6th Edition,2015, Volume 6, page 8989]. The relevant extracts are reproduced below: "Existence of even one of the reasons taken is sufficient to sustain valid initiation.- Though all the reasons given by the Assessing Officer for reopening an assessment may not be tenable, if at least one of the grounds is such as to lead to a prima facie reasonable belief that income has escaped etc., the jurisdiction of the officer to initiate reassessment proceedings cannot be successfully questioned. [Thanthi Trust v. ITO (1973), 91 ITR 261(Mad.) If a notice is issued on more than one ground and one of the grounds is sufficient to uphold the validity of the notice, then even if the other grounds are not sustainable, it will not make the notice bad. [Jameson & Magrudar Co. Pr.Ltd. v. ITO (1987), 167 ITR 77,82 (Cal.). Also see Thanthi Trust v. ITO (1989), 177 ITR 307, 316(Mad). Thus, it is not for the High Court to examine the vali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which may not be applicable for this voluntary retirement scheme, which is a package. Hence it would be wrong to break this package into separate items and treat each item separately. This would leave the field wide open to consider other items also separately under certain other laws. Such a bifurcation is not permissible when the matter is covered under section 35DDA. Therefore, the interpretation of Section 35DDA as proposed by Ld. AR, would require amendment in Section 35DDA. A casus omissus cannot be supplied by the Court. The omission in a statute cannot be supplied by construction. It is the function of the legislators to fill the gaps or omissions. It has further been submitted that Section 35DDA is a special provision which would override the general provisions. 5.3.3 Regarding bad debts claim of ₹ 492.26 Crores, it has been submitted that even basic information of these debts is not available and the assessee should be directed to provide the complete details and demonstrate fulfilment of conditions as stipulated in Section 36(2). The Ld. Sr. Counsel would submit that the matter may be remanded back to Ld. AO for re-adjudication in accordance with guidelines laid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .1 We have given thoughtful consideration to the rival submissions, written synopsis filed by respective counsels and deliberated on judicial decisions as cited before us. The undisputed position that emerges is that fact the regular assessment was framed u/s 143(3) on 29/12/2006. The case has been reopened by issuance of notice u/s 148 on 26/06/2008 which is within a period of 4 years from the end of relevant assessment years. The statutory requirement to reopen the assessment, in such case, as contained in Section 147 (as it stood at the relevant point of time i.e. on the date of issue of notice u/s 148) would be as follows: - Income escaping assessment. 147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereaf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148.] 6.1.2 The perusal of above provisions would reveal that Ld. Assessing Officer is empowered to reopen the assessment provided he has reasons to believe that certain income escaped assessment in the hands of the assessee. The Ld. AO is empowered not only to assess / reassess those income which has escaped assessment but also those income which comes to his notice subsequently in the course of proceedings. The first proviso puts an embargo on the power of Ld. AO to reopen the assessment in cases where the assessment was already completed u/s 143(3) and the reopening was sought to be done beyond a period of 4 years. However, the said proviso is not relevant / applicable here since the reopening, in the present case, has admittedly been done within a period of 4 years from the end of relevant assessment year. For the same reason, Explanation-1 would not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s claimed the above referred bonus as deduction on payment basis. Omission to do so had resulted in under assessment of income of ₹ 1,97,18,380/- with short levy of tax of ₹ 70,73,969/- and interest u/s.2348 of ₹ 23,34,410/-. Therefore, I have reason to believe that amount of ₹ 1,97,18,380/- has escaped assessment. 3. Assessee had paid an amount of ₹ 1,91,00,00,000/- towards VRS payment. As per section 35DDA, the deduction admissible would be ₹ 38,20,00,000/-. The assesseehowever bifurcated the total amount to two parts and claimed 100% deduction of ₹ 13,84,00,000/- and on the balance amount of ₹ 1,77,16,00,000/- applied the provisions of Section 35DDA. The deduction claimed thus comes to ₹ 4,92,70,000/- which is not correct as the assessee is entitled to a deduction of ₹ 38,20,00,000/- being l/5th of ₹ 1,91,00,00,000/-. Since the deduction allowed is ₹ 49,27,00,000/-, there is an under assessed income of ₹ 11,07,00,000/-. The short levy of tax on this account works out to ₹ 3,97,13,625 + interest u/s.234B of ₹ 1,31,05,496/-. Therefore, I have reason to believe that an amount of ₹ 11.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awn and included in the income works out to ₹ 45.92 crores. " Therefore, I have reason to believe that an amount of ₹ 45.92 crores has escaped assessment. It is discernible from the recorded reasons that reassessment proceedings have been initiated on account of following reasons: - (i) Deduction allowed u/s 36(1)(viia) amounting to ₹ 12912.50 Lacs not adjusted while computing bad debts u/s 36(1)(vii) (ii) Unpaid bonus of ₹ 197.18 Lacs remained to be added back whereas deduction of the same was allowed to the assessee on payment basis. (iii) Under assessment of income to the extent ₹ 11.07 Crores on account of Excess Deduction of ₹ 11.07 Crores u/s 35DDA towards VRS payment (iv) Bad Debts of ₹ 492.26 Crores allowed without any documentary evidences. (v) Exemption u/s 10(23G) not allowable as the bank was neither infrastructure capital company nor infrastructure fund established for mobilizing resources as found while scrutinizing the return for AY 2005-06. 6.3 The Ld. counsel for assessee has drawn our attention to the fact that the reassessment proceedings have been triggered merely on revenue audit objection. To ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessment year 2006-2007 is sought to be reopened by communication dated 12.10.2011 are identical to the objection of the audit authority dated 29.12.2009. The reasons do not rely upon any tangible material in the audit report but merely upon an opinion and the existing material already on record. This itself indicates that there was no independent application of mind by the Assessing Officer before he issued the impugned notice. On this ground alone, the assumption of jurisdiction by the Assessing Officer can be faulted. 7. However, as submissions were made on other issues also we are examining them also. It is a settled position in law that where assessment sought to be reopened is before the expiry of four years from the end of the relevant assessment year, then in such cases the power to reopen an assessment is very wide. However, even though such a power is very wide yet such a power would not justify a review of the assessment order already passed. The Supreme Court in the matter of the CIT v. Kelvinator India Ltd. [2010] 320 ITR 561/ 187 Taxman 312 has observed that the power to reassess is conceptually different from a power to review. The Assessing Officer und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losed in the notes to account filed with the return of Income but also in response to specific queries raised during the assessment proceeding. It was reiterated at the hearing that on the aforesaid account of provision, the tax had already been paid in the earlier years and the amounts were merely written back in this year to the extent they were in excess of the provisions required. So far as, failure to deduct TDS on advertisement and sales promotion are concerned leading to disallowance of the entire amount of ₹ 22.48 crores under Section 40(a)(ia) the same was also subject to scrutiny by the Assessing Officer during the assessment proceedings. In fact, the clause 17(f) of the tax audit report submitted alongwith return of income clearly brings out the fact that where tax has not been deducted, then the entire amount of payment has been offered for disallowance under Section 40(a)(ia). In fact, by letters dated 10.11.2008 and 26.12.2008 in response to specific queries of the Assessing Officer during assessment proceedings the petitioner had pointed out alongwith details the expenses in respect of which the tax had not been deducted and which were offered to tax. So far as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been under assessed ; or (ii) such income has been assessed at too low a rate ; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed; The plea of Ld. Counsel for revenue is acceptable to that extent. The decision of Hon'ble Apex Court in Raymond Woollen Mills Ltd. v. ITO [236 ITR 34], Hon'ble Bombay High Court in Rabo India Finance Ltd. v. DCIT 356 ITR 200 & Multi Screen Media Private Ltd. v. UOI and Anr. 324 ITR 54 support the proposition that as long as there was satisfaction of Ld. AO qua reopening the assessment, the material gathered in the course of assessment proceedings of another year could become the basis for reopening of the assessment. 6.6 The Hon'ble Supreme Court in the case of CIT Vs. Kelvinator of India Ltd. [320 ITR 561] has clearly settled the legal position that Ld.AO was not empowered to review the already concluded issues u/s 143(3) and review in the garb of reassessment was not permissible under the law. Further, mere reasons to suspect could not substitute reasons to believe. The Hon'ble Apex Court in the cited case ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the assessment merely because there is change of opinion. The Full Bench of the Delhi High Court in its judgment in the case of Kelvinator [2002] 256 ITR 1 referred to above, has taken a clear view that reopening of assessment under Section 147 merely because there is a change of opinion cannot be allowed. In our opinion, therefore, in the present case also, it was not permissible for respondent No. 1 to issue notice under Section 148. Similar is the observation of Hon'ble Bombay High Court in the case of Plus Paper Food Pac Ltd. V/s ITO [374 ITR 485] & Pr.CIT V/s Century Textiles and Industries Ltd. [412 ITR 228]. 6.7 Enumerating the term "reasons to believe", Hon'ble Supreme Court in the case of ACIT V/s Rajesh Jhaveri Stock Brokers Pvt. Ltd. 291 ITR 500 held as under: - 16. Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word "reason" in the phrase "reason to believe" would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be fulfilled on the formation of a reason to believe that income has escaped assessment. The reopening of the assessment within a period of four years is in these circumstances within jurisdiction. 6.9 The other judicial decisions as cited by both the learned counsels and not specifically referred to in the preceding paragraphs, also broadly lay down the more or less same legal propositions. 6.9 Keeping in mind the factual matrix of the case and above legal propositions, we hereinafter proceed to adjudicate each of the issues, on legal grounds as well as on merits, in succeeding paragraphs. 7.1.1 Deduction allowed u/s 36(1)(viia) amounting to ₹ 12912.50 Lacs not adjusted while computing bad debts u/s 36(1)(vii) On legal grounds, the Ld. AR has submitted that Ld. AO allowed the deduction of bad debts u/s 36(1)(vii) after due consideration during regular assessment and to revisit the same in reassessment proceedings would amount to change of opinion. Our attention is drawn to the fact that bad debts u/s 36(1)(vii) were allowable only after adjusting the opening credit balance of provision for bad and doubtful debts made u/s 36(1)(viia). The attention has further be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings were triggered merely on the basis of Revenue Audit objections. The reopening was done on the same set of facts as available during original assessment proceedings. The ratio of decision of Hon'ble Bombay High Court rendered in ICICI Home Finance Co. Ltd. [210 Taxman 67] would squarely apply to this issue. Therefore, we hold that that there was no independent application of mind by Ld. AO while triggering reassessment proceedings against the assessee and assessment proceedings was nothing but mere change of opinion. No material facts were brought on record while recording the reasons to establish that there was possible escapement of income in the hands of the assessee and no prima-facie case was made out by Ld. AO to trigger reassessment proceedings against the assessee. This being so, we have no hesitation in holding that the stated issue could not be a valid reason to invoke reassessment proceedings against the assessee. The issue, on merits, would require no indulgence since no adjustment / additions have been made in the quantum assessment order on this account. 7.2.1 Unpaid bonus of ₹ 197.18 Lacs remained to be added back The undisputed fact that emerge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reopening has been done merely at the behest of Revenue Audit objections which merely expresses an opinion of the audit party. Our attention is also drawn to the fact that deduction was allowed in full during regular assessment proceedings whereas the same was restricted to 20% in reassessment proceedings on same set of facts which would be nothing but review of the order. The plea of Ld. Counsel for Revenue revolved around the fact that matter escaped attention of Ld. AO in the regular assessment proceedings and no opinion was formed on this issue in the original order. 7.3.2 We have considered the same. Upon careful consideration of page no. 4 of assessee's paper-book, it is evident that item-wise break up of Voluntary Retirement Expenditure was placed on record by the assessee during regular assessment proceedings and the extent to which deduction was claimed against each and every item of the expenditure was also bifurcated. The Ld. AO, on the course of original assessment proceedings, vide notice dated 17/10/2005 raised a specific query vide question no. 39 and asked the assessee to file brief note on VRS expenditure of ₹ 49.27 Crores claimed u/s 35DDA. The assessee, v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 191 Crores includes not only the 3 components viz. leave encashment, gratuity and pension but also all the other components of VRS expenditure. Hence, the amortization of ₹ 25.60 Crores include all the components of VRS expenditure. Therefore, the argument that the 3 components were statutory payments in contrast to other components, would not be a correct proposition. 7.3.5 The only provisions under which the said deduction has been claimed as well as allowed is Section 35DDA. The relevant provisions of Section 35DDA read as under: - Amortisation of expenditure incurred under voluntary retirement scheme. 35DDA. (1) Where an assessee incurs any expenditure in any previous year by way of payment of any sum to an employee in connection with his voluntary retirement, in accordance with any scheme or schemes of voluntary retirement, one-fifth of the amount so paid shall be deducted in computing the profits and gains of the business for that previous year, and the balance shall be deducted in equal instalments for each of the four immediately succeeding previous years. A perusal of the same would establish that the assessee is entitled to amortize VRS expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court in assessee's writ Petition No. 1765 of 2011 dated 09/11/2011 was sought to be distinguished on factual matrix. 7.4.3 Upon careful consideration of material on record, we find that the assessee had filed statement of bad debts along with its computation of income during regular assessment proceedings. The perusal of the same would reveal that the assessee worked out bad debts for ₹ 1683.96 Crores and after adjusting the provisions / write-off, claimed net bad-debts of ₹ 1659.17 Crores during impugned AY. The same is also evident from note no.3(a) forming part of computation of income. The Ld. AO, vide notice dated 17/10/2005 question no.2 directed the assessee to file the requisite details in respect of this claim. The assessee was, inter-alia, directed to furnish the details of bad debts indicating the name and complete address of the parties, amounts advanced, duration of the debts outstanding, steps taken to recover the bad etc. in respect of bad debts exceeding ₹ 50,000/. The assessee, vide submissions dated 09/11/2006, inter-alia, submitted that the bad debts were allowable u/s 36(1)(vii) and the write-off fulfilled the conditions laid down u/s 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reasons discussed above, penalty proceedings are initiated u/s 271(1)(c) of the I.T.Act read with Explanation thereto for furnishing inaccurate particulars income of the assessee bank's income and concealment of income (Addiiton ₹ 1157,66,77,475/-). 12. Deduction u/s 36(1)(vii) 12.1 In view of the above disallowances / additions in respect of bad / doubtful debts written off, the allowable deduction u/s 36(1)(vii) is worked out as under: - 1. Total Amount Written off as bad debts ₹ 1683,69,54,466 Less : 1.Amounts disallowed in A.Y.2003-04 (subject to revision) ₹ 31,01,59,219 2. Write off through specific provision ₹ 2,71,47,000 ₹ 33,77,06,219 The amount restricted as per proviso to Section 36(1)(vii) before the disallowance of ₹ 1157,66,77,475/- ₹ 1649,92,48,247 The perusal of above working / computations would reveal that the issue of disallowance of bad debts was extensively examined by Ld. AO during regular assessment proceedings with due application of mind. The Ld. AO not only identified the bad debts under each category but also revised the gross figures of Bad-debts. Specific additions were made in cases wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer cannot purport to re-open the assessment in respect of a matter which squarely formed the subject matter of the Appeal before the CIT(Appeals). Under Section 251, the powers of the CIT(Appeals) are wide. The CIT(Appeals) is entitled while disposing of an Appeal against an order of assessment to confirm, reduce, enhance or annul the assessment. Consequently, it was open to the Revenue in the Appeal before the Appellate Authority to urge that the claim to a write off under Section 36(1)(vii) ought to have been dis-allowed to the extent to which income had been claimed to be exempt under Section 10(23G). The object and purpose underlying the second proviso to Section 147 is that upon an assessment being re-opened, the Assessing Officer is entitled to assess or re-assess such income which is chargeable to tax which has escaped assessment. However, matters which are the subject matter of an Appeal, Reference or Revision, are excepted from the jurisdiction of the Assessing Officer. In the present case, the exercise of the power to re-open the assessment on the first and third ground, both of which relates to the write off of bad debts under Section 36(1)(vii) is in e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note no. 11(b) attached to and forming part of computation of income, this fact was clearly spelt out by the assessee. A specific query, in this regard, was raised by Ld. AO vide notice dated 17/10/2005 question no. 4 asking assessee to file the complete details / evidences in support of the said claim. The assessee, vide submissions dated 17/07/2006 submitted the requisite details as asked for by Ld. AO. Thereafter, the assessee's eligibility to claim the same was exhaustively dealt with by Ld. AO vide paragraph-5 (page nos. 2 to 7) while framing assessment order u/s 143(3) on 29/12/2006. In fact, an addition of ₹ 64.69 Crores was made by Ld. AO in the regular assessment proceedings which was subject matter of further appeal before first appellate authority. Therefore, the reconsideration of the stated issue on same set of facts would be nothing but mere change of opinion which is impermissible under law. This issue was duly considered by Ld. AO during regular assessment proceedings and therefore, the ratio of decision of Hon'ble Apex Court rendered in CIT Vs. Kelvinator of India Ltd. [320 ITR 561] would apply to the facts of the case. Secondly, the argument of doctrine of m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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