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TMI Blog2019 (12) TMI 901X X X X Extracts X X X X X X X X Extracts X X X X ..... when the total income of the assessee was computed under the normal provisions of the Act. Therefore, it cannot be said that there was any failure on the part of the assessee to fully and truly disclose all material facts necessary for his assessment. There was no failure on the part of the assessee to fully and truly disclose material facts, the reopening of the assessment u/s 147 beyond the period of 4 years is not valid. Consequently the order of re-assessment u/s 147 of the Act is liable to be annulled on this ground and is hereby annulled. In view of the decision on the aforesaid ground on the validity of initiation of proceedings u/s 147 of the Act, the issues on merits of the appeal of the assessee are not being considered. - ITA No.798/BANG/2019 (Assessment year : 2010-11) - - - Dated:- 6-9-2019 - SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER Appellant by: Shri H.N Khincha, C.A Assessee by: Shri S.T Seshadri, JCIT ORDER PER SHRI N.V. VASUDEVAN, VICE-PRESIDENT: This is an appeal by the assessee against the order dated 1/3/2019 of CIT-IV, Bengaluru relating to asst. year 2010-11. 2. In this appeal by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to various reasons HSBC Slovakia invoked the bank guarantee given to it by MPP Holdings Ltd., amounting to 6,00,000/- Euros. Conseqently, the value of investments held by the Assessee in MPP Holdings Ltd., eroded considerably and the Assessee wrote of the diminution in value of investments in the profit and loss account and claimed the same as allowable expenditure, incidental to its business. According to the Assessee as per Memorandum of Association of the company, one of the objectives of the assessee was giving bank guarantee to its subsidiary companies. 6. The AO did not allow the claim of the assessee for the reason that the expenditure in question was in the nature of capital investment and any diminution in the value of such investment has to be reduced from capital and cannot be claimed as a deductible Revenue expenditure. 7. Similarly the assessee had claimed as deduction a sum of ₹ 47 lakhs in the profit and loss account on account of provision for obsolete machinery. The AO held that the expenditure was not an actual expenditure and was only a nature of provision and hence cannot be allowed as a deduction. Ultimately the AO computed the total income of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under MAT provisions. The return was processed on 31-8-2011 and scrutiny assessment was completed on 26.2. 2013 taking mat provisions for computation of tax. It is seen from the assessment records that assessee debited ₹ 10,29,59,360/towards investment written off This expenditure was disallowed in scrutiny assessment while computing income under normal provisions by stating that the investment made in the subsidiary company shares namely MPP holding in turn in mpp Slovakia is clearly of capital investment and any diminution on the value of investment has to be reduced from capital and cannot be claimed in p and L account hence assessee company ought to have added the entire amount written off as investment while arriving at the total income. Since the same has not been done, this amount of Rs.lO,2959,360/- shown as investment written off is added back to the return income of the assessee. On perusal of records it is noticed that you assessee has not sold out any investment and is merely providing for the diminution in value of the investment as per notes on accounts. As the provisions of diminution of value in investment are to be added to the book profit, the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 18/9/2017 disposed of the aforesaid objections and has taken the view that the sufficiency or correctness of the material is not a matter to be considered at the time of initiation of reassessment proceedings. Ultimately the AO passed an order u/s 143(3) r.w.s c 147 of the Act in which he took the view that provision for diminution in value of investment and provision for obsolete machinery were contingent in nature and therefore while computing book profit u/s 115JB of the Act they have to be added to the profit as per the profit and loss account for arriving at book profit u/s.115JB of the Act. Accordingly the book profit was computed by the AO as follows:- Computation of Income as per MAT provison Income Returned u/s 115JB 3,82,83,820 Add Diminution of value in investment (investment written off) 10,29,59,360 Provision made is disallowed 47,00,000 10,76,59,360 Income Assessed under MAT provision ..... X X X X Extracts X X X X X X X X Extracts X X X X
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