TMI Blog2013 (4) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... ancelling reassessment proceedings initiated by the Assessing Officer beyond a period of four years from the end of the relevant assessment year. The assessment was sought to be reopened as a result of a retrospective amendment to section 80HHC introduced by the Taxation Laws (Amendment) Act, 2005, with effect from April 1, 1998. - Decided in favor of assessee. - WRIT PETITION NO. 312 OF 2012 - - - Dated:- 15-2-2012 - CHANDRACHUD DR. D. Y. and SANKLECHA M. S. JJ. Judgment: Dr. D. Y. Chandrachud J.- The assessee seeks to challenge the validity of a notice issued on March 30, 2011, seeking to reopen an assessment for the assessment year 2004-05. The reopening of the assessment is beyond a period of four years. 2. The reasons which have been communicated to the assessee for reopen-ing the assessment are as follows : "In this case, the order dated December 16, 2009, giving effect to the Income-tax Appellate Tribunal's order dated July 10, 2009, for the assessment year 2004-05 was passed recomputing the income under section 115JB at Rs. 59,54,59,577. In this order set off of brought forward unabsorbed depreciation of the assessment year 1994-95 of Rs.25,81,11,415 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Finance (No. 2) Act, 2009, with retrospective effect from the assessment year 2001-02. Therefore, owing to the abovementioned reasonings there is underassessment of income to the tune of Rs. 25,81,11,415 and Rs.12,45,22,625, respectively, on the abovementioned issues. Therefore, I have reason to believe and I am satisfied that the income of the assessee chargeable to tax, has escaped assessment for the assessment year 2004-05. Proceedings under section 147 of the Act are, therefore, required to be initiated." 3. The assessee submitted its objections to the reasons communicated by the Assessing Officer. The objections have been disposed of by an order dated November 15, 2011. From the order passed by the Assessing Officer on the objections raised by the assessee, the basis for reopening the assessment is confined to two issues. The first issue is that the assessee set off the unabsorbed depreciation for the assessment year 1994-95 amounting to Rs.25.81 crores in the assessment year 2004-05. In a judgment of its Special Bench in Deputy CIT v. Times Guaranty Ltd. I. T. A. No. 4917 and 4918/Mum/2008 delivered on June 30, 2010-since reported in [2010] 4 ITR (Trib) 210 (Mum) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at matter a subsequent legislative amendment cannot ipso facto result in an inference of a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Since the reopening has taken place beyond a period of four years, the validity of the reopening of the assessment depends upon the fulfilment of the requirement that there must be a failure on the part of the assessee to fully and truly disclose the material facts which is absent in the present case. 5. On the other hand, counsel appearing on behalf of the Revenue sub-mitted that the Assessing Officer was within his jurisdiction, even beyond a period of four years in having due regard to the subsequent decision of the Special bench of the Tribunal and to the legislative amendment brought about by the Finance (No. 2) Act, 2009 though this was after the order of assessment. 6. Before we deal with the rival submissions, it would be necessary to advert to the material on the record. By a letter dated October 26, 2005, the assessee while enclosing its return of income for the assessment year 2004-05 forwarded, inter alia, (i) the report of its auditor under section 115JB(4) in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment pertain to events which have taken place after the order of assessment was passed. The first of those is the judgment of the Special Bench of the Tribunal which was delivered on June 30, 2010, according to which unabsorbed depreciation for the period up to 1996-97 could be carried forward and set off against the income under any head for a maximum period of eight assessment years. Consequently, according to the Assessing Officer, unabsorbed depreciation pertaining to the assessment year 1994-95 could not have been set off against the income for the assessment year 2004-05. The second of those events is a legislative amendment brought about by the Finance (No. 2) Act, 2009 with retrospective effect from April 1, 2001. According to the Assessing Officer, income was computed under section 115JB without any addition being made on account of provision for diminution in the value of investment and provision for doubtful debts and advances. Both the reasons which have been indicated by the Assessing Officer may be reflective of the fact that there is an escapement of income. But that in itself is not sufficient to validate the reopening of assessment beyond a period of four ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Taxation Laws (Amendment) Act, 2005, with effect from April 1, 1998. The Division held that if the Legislature amends the provisions of the Act with retrospective effect, it cannot be said that there was a failure on the part of the assessee to disclose fully and truly all material facts relevant for the purposes of assessment. A similar view was taken by the Division Bench in its recent judgment dated January 24, 2012, in DIL Ltd. v. Asst. CIT (Writ Petition (Lodg.) No. 2786 of 2011) (since reported in [2012] 343 ITR 296 (Bom)) dealing with the retrospective amendment of section 115JB by the Finance (No. 2) Act, 2009 with effect from April 1, 2001. The Division Bench noted that clause (i) of Explanation 1 was introduced to include the amount or amounts set aside as provision for diminution in the value of investment. In view of the retrospective amendment of law by Parliament, the court held that the Assessing Officer may have reason to believe that income has escaped assessment. But that in itself was not held to be sufficient for reopening an assessment beyond a period of four years unless there was a failure on the part of the assessee to fully and truly disclose all m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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