TMI Blog2014 (9) TMI 270X X X X Extracts X X X X X X X X Extracts X X X X ..... acts necessary for assessment - The knowledge of the failure on the part of the Petitioner Bank is evident in its affidavit in rejoinder. The Petitioner Bank had made a claim for bad debts in its Return of Income without having taken into account the orders passed on 2nd March 1998 u/s 154 of the Act for the AY 1995-96 as the same, was subject to change in view of the further appeal - There is no merit in the submission that there was no full and true disclosure about the equipments being put to use - The equipment in question was windmill - Karnataka Electricity Board had issued a certificate that the windmill was connected to the grid on 31st March 1998 - Once the windmill was connected to the grid, it started contributing to the production of electricity- A windmill is put to use when it connected to the grid - The confirmation of Karnataka State Electricity Board is clear - there is no failure to make a full and true disclosure by the Petitioner - the certificate of Karnataka State Electricity Board was before the Assessing Officer while making the assessment under Section 143(3) of the Act and forming an opinion that the equipments were put to use on 31st March, 1998 - the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .94 Crores and allowed the claim for deduction on account of bad debts of ₹ 10.12 Crores (as claimed) and the claim for depreciation at ₹ 4.50 Crores on the Equipments leased to RESL. 5. On 23rd March 2005, the Assessing Officer issued the impugned notice, seeking to reopen the assessment for the Assessment Year 1998-99. The reasons furnished to the PetitionerBank for reopening of the assessment were as under: REASONS RECORDED FOR REOPENING OF Assessment Return of Income was filed on 30-11-1998 determining total income of ₹ 57,52,24,190/-. Assessment u/s.143(3) was completed vide order dated 28-02-2001 determining total income at ₹ 60,94,73,991/-. (1) It is seen from the records that the assessee has claimed deduction u/s. 36(1)(vii) in respect of bad debts written off of ₹ 12,21,51,941/-. The assessee has reduced ₹ 2,08,55,805/being credit balance in accounts u/s.36(1)(vii) and has claimed the balance amount of ₹ 10,12,96,136/u/ s. 36(1)(viia) of the I.T. Act. The assessee has reduced only ₹ 2,08,55,805/whereas as per records, the assessee is having credit balance of ₹ 7,15,06,898/- (which is inclusive of deduction al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bad debts for a bank by its very nature is fluid/uncertain as it is dependent upon the provisions made for bad debts which in turn is dependent upon total income under Section 36 (viia) of the Act,. The determination of total income is subject to variation in appeal proceedings. In view of the above, the Petitioner's claim for bad debts cannot be said to be failure to disclose truly and full material facts for assessment. Besides the Assessing Officer has allowed the claim on consideration of all facts and therefore, the reopening notice is based on mere change of opinion; (c) Without prejudice to and in the alternative to the above, it is submitted that there can be no failure on the part of the PetitionerBank to disclose truly and fully facts necessary for assessment when the facts not disclosed are within the knowledge of Respondent-Revenue. In particular, failure to disclose is of the orders passed by the Assessing Officer. There can be no failure to disclose orders to the knowledge of the Assessing Officer as they emanate from the office of the Respondent-Revenue; (d) In any view of the matter, if there is any error/ omission in passing the Assessment Order then suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice dated 23rd March 2005 does satisfy the jurisdictional requirement under the proviso to Section 147 of the Act in respect of notices issued beyond the period of four years from the end of the relevant Assessment Year; (b) So far as bad debts is concerned, it is submitted that the PetitionerBank had claimed more bad debts then it was entitled to on application of Section 36 (viia) of the Act. At the time when the PetitionerBank filed its Return of Income as well as during the Assessment proceeding, the PetitionerBank was aware that the provisions for bad debts made by them had undergone change due to rectification and/or appellate orders for the earlier Assessment Years yet the same was ignored by the PetitionerBank. The consequence of the orders passed for the earlier Assessment Year would have a direct bearing on determining the claim for bad debts allowable during subject Assessment Year 1998-99. Thus, there was a was a failure to disclose truly and fully all facts necessary for assessment not only at the time of filing its Return of Income but also during the Assessment proceedings, when a specific query was raised with regard to the accumulated provisions under Section 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on which it is proposed to reopen the assessment has been subject of consideration earlier while passing an Assessment Order then on the same facts, a different view cannot be taken for the purposes of reopening an assessment. The Court held that the Assessing Officer has power under the Act only to reassess and not to review a concluded assessment. Besides, while examining the challenge to jurisdiction, we are not sitting in appeal over the grounds in support of the impugned notice. Thus the PetitionerBank would have to demonstrate that ex facie, the grounds in support of the impugned notice are without jurisdiction. It is settled position that at the stage of the reopening notice, the Assessing Officer has only to reach a primafacie view and not a conclusive view of income having escaped assessment. Thus we would quash a notice for reopening of an assessment only when the same is without jurisdiction i.e. in no way can it even be alleged on the facts that income chargeable to tax has escaped assessment or where the notice is on the basis of mere change of opinion or in case where reopening notice is issued beyond a period of four years from the end of the relevant Assessment Year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e time the Petitioner filed its Return of Income for the relevant year on 30th 1998, while the rectification order dated 2/3/1998 for the Assessment year 1995-96 was available with the Petitioner, the Petitioner had not received the Assessment orders for the remaining 2 Assessment years 1996-97 and 1997-98 which were passed subsequently on 23/3/1999 and 31.1.2000 respectively. Accordingly the working of the claim under sect. 36 (1)(viia) was based on the deduction claimed by the Petitioner for the Asst. Years 1996-97 and 1997-98. Since the deduction allowable under Sec. 36 (1)(viia) for asst. Years 1995-96 was liable to change consequent to relief allowed in appellate proceedings and the quantum of deduction for Asst. Years 1996-97 and 1997-98 were not available the Assessment orders for the said years not having been passed, the Petitioner worked out its claim under sec.36(1)(viia) for the relevant year on the basis of the quantum of deduction originally allowed and/or claimed in the returns of income for the Assessment years 1996-97 and 1997-98. Accordingly, the Petitioner has neither concealed the facts relating to its claim for deduction under Sec. 36(1)(viia) nor has the Petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions for bad and doubtful debts. In terms of Section 36 (1)(viia) of the Act, the PetitionerBank can make provisions for bad and doubtful debts of an amount not exceeding 5% of the total income. In the above context, it was submitted that the provisions for bad and doubtful debts would be a varying figures as the amount of provisions would be dependent upon the total income which is arrived at by the Assessing Officer as modified in appeal proceedings. Thus, it was in the above circumstances, the PetitionerBank had made a claim for bad debts in its Return of Income without having taken into account the orders passed on 2nd March 1998 under Section 154 of the Act for the Assessment Year 1995-96 as the same, according to the Petitioner, was subject to change in view of the further appeals. Similarly, the Orders of Assessment passed for Assessment Years 1996-97 and 1997-98 on 23 March 1999 and 31 January 2000 respectively, were not brought to the notice of the Assessing Officer during the assessment proceedings for Assessment Year 1998-99 as the same was subject to change in the Appellate proceedings. The obligation of the assesee is to make a full and complete disclosure o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank was aware of the orders passed for the Assessment Years 1995-96, 1996-97 and 1997-98. However, in its reply dated 25th September, 2000, the PetitionerBank did not bring to the notice of the Assessing Officer the change in the quantum of provisions created under Section 36(1) (vii a) of the Act and continued to claim the old figure of ₹ 2.08 Crores instead of ₹ 7.15 Crores as provisions for bad debts. Therefore, there is a failure on the part of the PetitionerBank to truly and fully disclose all material facts necessary for assessment not only at the time when the Return of Income was filed on 30th November 1998 but also during the assessment proceeding leading to the order dated 28th February 2001. 15. It was also contended that this issue/ground of bad debts in the impugned notice is a change of opinion in as much as the same was a subject matter of consideration during assessment proceedings is not acceptable. This is particularly so as there is a failure on the part of the PetitionerBank to disclose truly and fully the material facts necessary for assessment. Consequently as the application of mind was on facts not fully and truly disclosed there can be no opi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, even if one accepts that there is an error, the same has arisen on account of failure on the part of the PetitionerBank to disclose fully and truly all material facts necessary for assessment. Moreover in the present case, the issue whether or not the incorrect taking of provision leading to a higher claim of bad debts is not a mere computational error could be a debatable issue, as is evident from the fact that the PetitionerBank during the course of the submissions relied upon Instruction of the CBDT dated 26 November 2008 to contend that the credit balance of the provision to be taken is the opening balance of the relevant accounting year and not the closing balance. Therefore in our view, the decision of the Hindustan Unilever Ltd (supra) is not applicable to the present facts. In any case the period to four years to reopen an assessment has already expired when the impugned notice was issued. So far as giving effect to the orders of the Appellate Authorities are concerned, the same would be given independently by the Assessing Officer and its impact, if any, could be considered during the reassessment proceedings. 17. During the course of hearing, Ms. Vissanji, learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y certificate issued by Karnataka Electricity Board, which records that the Equipments were connected to Karnataka State Electricity Board grid and commissioned on 31st March, 1998. (b) Depreciation on the equipments was not being claimed by RESL as evidenced by the certificate of the leasee's Chartered Accountant that no depreciation was claimed by the RESL on the equipments; and (c) The possession of the leased equipments was taken from RESL in March/April 1999 due to failure to pay the installments. There is no merit in the submission that there was no full and true disclosure about the equipments being put to use. The equipment in question was windmill. Karnataka Electricity Board had issued a certificate that the windmill was connected to the grid on 31st March 1998. Once the windmill was connected to the grid, it started contributing to the production of electricity. A windmill is put to use when it connected to the grid. Therefore, in this case, we are not called upon to examine the distinction if any, between 'commissioning' and 'putting it to use', considering the nature of the equipment. It may be pointed out that the Revenue did not point out ..... X X X X Extracts X X X X X X X X Extracts X X X X
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