2019 (7) TMI 531 - AT - Income Tax

Reopening of assessment u/s 147 - within 4 years from the end of relevant assessment year - HELD THAT - We concur with this submission provided the issue was already examined by Ld. AO in the regular assessment proceedings. To reiterate the settled position of law, review of orders by revenue authorities is not permissible under law and review in the garb of reassessment is not permissible. Further, as settled by numerous judicial pronouncements, the reassessment proceedings could not be triggered merely on the basis of change of opinion. In contrast, when no opinion was formed by Ld. AO on any issue during original assessment proceedings and the same was altogether skipped, there would be no bar to reach the requisite satisfaction on the basis of findings in subsequent assessment year. In such a case, deeming fiction of Explanation-2 would come into play and the income shall be deemed to have escaped assessment in cases wherein (i) income chargeable 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 while triggering reassessment proceedings against the assessee and assessment proceedings was nothing but mere change of opinion. - 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. Unpaid bonus remained to be added back - HELD THAT - There was no bar under law to resort to reassessment proceedings in such cases of omissions. Rather, Explanation-2 creates a deeming fiction of escapement of income wherein there was an underassessment of income. Secondly, as evident from recorded reasons, this was not the only reason to trigger reassessment proceedings against the assessee. Thirdly, it was not a mere plain computational error rather an omission of such a nature which could not be termed as mistake apparent from record - no such adjustment was made by the assessee in its computation of income and Ld. AO had no occasion to consider the same and the said omission could not be said to be a fault on the part of Ld. AO. For the same reasons, the decision in Hindustan Unilever Ltd. V/s DCIT 2010 (4) TMI 206 - BOMBAY HIGH COURT as relied upon by Ld. AR, would be distinguishable and not applicable to the facts of the case. Resultantly, we uphold the validity of reassessment proceedings on this issue. The issue, on merits, as already stated, would require no indulgence since the said additions have already been accepted by the assessee in view of the fact that deduction of the same has already been allowed in subsequent AY 2005-06 on payment basis. Deduction u/s 35DDA disallowed - Under assessment of income on account of Excess Deduction u/s 35DDA towards VRS payment - HELD THAT - 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. (supra) 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. Assessee is entitled to amortize VRS expenditure only to the extent of 1/5th of the amount paid in connection 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 grounds, is subsequently reversed by any higher judicial authority. Deduction of Bad Debts u/s 36 (1)(vii) - HELD THAT - The perusal of working / computations would reveal that the issue of disallowance of bad debts was extensively examined by AO during regular assessment proceedings with due application of mind. 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 where requisite documents / evidences were not furnished by the assessee. This is further fortified by the fact that Ld. AO, while computing the income of the assessee specifically computed the figure of bad debts of ₹ 492.25 Crores as allowable to the assessee. Therefore, the allegation of the revenue that the issue of bad debts of balance amount of ₹ 492.25 Crores remained to be examined / verified in regular assessment proceedings, would not have any sound basis. Secondly, no new tangible material came into the possession of AO and further disallowance was made on same sets of facts. Thirdly, the issue of bad-debts was already pending before CIT(A) on the date when notice u/s 148 was issued to the assessee - There could be no estoppel against law and any limitation imposed by law on the powers of AO could not be overcome by acquiescence of the assessee. In view of our finding that the matter was thoroughly examined by AO in regular assessment proceedings and assessee s appeal against the same was pending, the observation of Hon ble Bombay High Court in assessee s Writ Petition (for AY 2003-04 2011 (11) TMI 304 - BOMBAY HIGH COURT would squarely apply to the facts of the case. To trigger the reassessment proceedings for re-examination of the same would be nothing but a review of the order, which is impermissible. Therefore, reopening could not be upheld on this issue on account of change of opinion as well as on account of doctrine of merger. Exemption u/s 10(23G) - exemption 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 - HELD THAT - Assessee during regular proceedings, had filed along with its computation of income, complete details of income eligible for exemption u/s 10(23G). By way of 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 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 hold that Ld. AO had no jurisdiction to invoke reassessment proceedings on this issue. As far as the merits of the case are concerned, it is admitted position that the issue stood squarely covered in assessee s favor by the decision of this Tribunal in assessee s own case for AY 2005-0 2017 (11) TMI 1839 - ITAT MUMBAI wherein co-ordinate bench at para-71 has held that the assessee was eligible to claim exemption u/s 10(23G).

Summary

Issues Involved:
1. Deduction under Section 35DDA
2. Deduction of Bad Debts under Section 36(1)(vii)
3. Exemption under Section 10(23G)
4. Validity of Reassessment Proceedings

Detailed Analysis:

1. Deduction under Section 35DDA:
The issue revolved around whether the assessee was entitled to claim 100% deduction for payments made under the Early Retirement Option Scheme (ERO Scheme) or only 1/5th as stipulated under Section 35DDA. The assessee claimed full deduction for leave encashment, gratuity, and pension, arguing these were statutory payments not connected to the ERO Scheme. The Assessing Officer (AO) disallowed this, allowing only 1/5th of the total payments. The Tribunal held that the entire payment was part of the ERO Scheme and only 1/5th was deductible under Section 35DDA. The Tribunal reversed the Commissioner of Income-Tax (Appeals) [CIT(A)] decision allowing full deduction.

2. Deduction of Bad Debts under Section 36(1)(vii):
The AO disallowed ?492.26 Crores of bad debts, questioning the lack of documentary evidence. The CIT(A) allowed the deduction, noting the AO had previously examined and allowed part of the bad debts. The Tribunal found that the issue was extensively examined during the regular assessment, and reopening the assessment on the same facts amounted to a change of opinion, which is impermissible. The Tribunal restored the matter back to the AO for re-adjudication in line with the Supreme Court's guidelines in TRF Ltd. and Vijaya Bank Ltd.

3. Exemption under Section 10(23G):
The AO denied the exemption under Section 10(23G), arguing the assessee was neither an infrastructure capital company nor an infrastructure capital fund. The CIT(A) allowed the exemption, following the Tribunal's decision in the assessee's case for earlier years. The Tribunal upheld the CIT(A)'s decision, noting the issue was already examined and allowed in earlier years, and the rule of consistency should apply.

4. Validity of Reassessment Proceedings:
The Tribunal examined whether the reassessment proceedings were valid. The reassessment was triggered on multiple grounds, including audit objections and findings from subsequent assessment years. The Tribunal held that reassessment based on audit objections without independent application of mind by the AO was invalid. It also found that reopening on issues already examined during regular assessment amounted to a change of opinion and was impermissible. Additionally, the Tribunal noted that reassessment on matters pending appeal before the CIT(A) violated the second proviso to Section 147.

Conclusion:
The Tribunal allowed the revenue's appeal on the deduction under Section 35DDA but dismissed it on other grounds. The assessee's cross-objections were partly allowed, with the Tribunal holding the reassessment proceedings invalid on several grounds. The Tribunal's decision emphasized the importance of independent application of mind by the AO and the impermissibility of reassessment based on a change of opinion or matters pending appeal.