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TMI Blog2015 (6) TMI 807X X X X Extracts X X X X X X X X Extracts X X X X ..... er alia, for the reason that the reassessment proceedings in question had been initiated by the Assessing Officer by means of a Notice u/s. 148 which was itself issued without jurisdiction. 2.1 In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in failing to appreciate: (a) that vide Ground No. 2.1 of its appeal before him, the appellant had challenged the very levy of Minimum Alternate Tax u/s. 115JB. (b) that it was only vide Ground No. 2.2 of its appeal before him that the appellant had contested (and that too, without prejudice to its challenge to the very levy of the Minimum Alternate Tax vide Ground No. 2.1) the adjustment by way of addition of Rs. 21,80,58,244 debited to the appellant's Profit and Loss Account on account of Provision For Doubtful Debts, in computing the appellant's book profit u/s. 115JB. 2.2 The learned CIT(A) has accordingly grossly erred in proceeding as if the appellant's dispute related merely to the quantum of the book profit and in accordingly omitting to render his decision on the appellant's challenge to the very levy of the Minimum Alternate Tax u/s. 115JB considering also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossly erred, even while recording his appreciation that adjustment of the impugned nature cannot be made under clause (c) of the Explanation below sub-section (2) of Section 115JB, by categorically observing as under on page 9 of the Appellate Order, in upholding a part of the adjustment to the extent of Rs. 1,64,38,413 (aggregate of two items of Rs. 48,12,701 and Rs. 1,16,25,712), instead of ordering for the deletion of the entire adjustment of Rs. 21,80,58,244 made by the Assessing Officer (emphasis supplied): "2.7 My observation and finding in this respect is as under: (A) .......................... Since the quantum of amounts payable by GEB are reduced, obviously the same cannot be said to be income accruing to the appellant company and cannot be taken as liability as referred in 115JB(2) clause (c).... ... " 5.1 In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in deciding Ground No. 3.1 of the appellant's appeal before him reading as under, against the appellant: "3.1 In law and in the facts and circumstances of the appellant's case, the learned Assessing Officer has grossly erred in considering deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation of the appellant's total income under the normal provisions of the Income-tax Act, 1961. 8. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in failing to appreciate that vide Ground No. 8 of its appeal before him the appellant had challenged the very levy of interest amounting to Rs. 2,27,573 u/s. 234A in the peculiar facts and circumstances of its case, and in not ordering for its deletion and instead, in observing that the remedy in the appellant's present case lay in making a waiver petition. 9.1 In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in dismissing Grounds No. 9.1 and 9.2 of its appeal before him reading as under: "9.1 In law and in the facts and circumstances of the appellant's case, the learned Assessing Officer has grossly erred in levying interest amounting to Rs. 3,18,60,034 u/s.234B even though that provision was not at all attracted to the appellant's present case. 9.2 Without prejudice to the foregoing, in law and in the facts and circumstances of the appellant's case, there was no warrant / justification for levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of depreciation though not claimed by the assessee. The ld.CIT(A) deleted the addition on account of wealth-tax of Rs. 5,19,600/- made on account of wealth-tax and also confirmed the addition made on account of disallowance of earth-quake relief expenses of Rs. 1,52,000/- and allowed the deduction claimed u/s.80G of the Act. However, the ld.CIT(A) in respect of levy of interest u/s.234-A, 234-B & 234-C of the Act, rejected the grounds of the assessee. Against the order of the ld.CIT(A), now both the Assessee and the Revenue are in crossappeals before us. The assessee has filed a chart containing six grounds. 4. First ground (as per chart filed by the assessee during the course of hearing) is against the validity of reopening of the assessment by invoking the provision of section 147 of the Act. The ld.counsel for the assessee submitted that before the ld.CIT(A), one of the grounds was that the notice u/s.148 had been issued before the expiry of four years from the end of the relevant assessment year and that this was not a case of mere change of opinion and also suffered from consideration of irrelevant issues at the cost of relevant issues. It is submitted that the statement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment within the purview of Section 147/148 of the Act. In this connection, we may profitably refer to the following observations made by the Supreme Court in the case of CIT v. Kelvirator of India Lid. [2010] 320 1TR 5617 187 Taxman 312. where the Court made the following observation on the scope of Section 147 of the Act: "5. On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under the above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the assessing officer to make a back assessment, but in Section 147 of the Act (with effect from 1-4-1989), they are given a go-by and only one condition has remained viz. that where the assessing officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post--1- 4-1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to the assessing officer to reopen assessments on the basis of "mere change ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same." (emphasis supplied) 9. For the aforestated reasons, we see no merit in these civil appeals filed by the Department, hence, dismissed with no order as to costs." (Emphasis supplied). 18. After applying the aforesaid principle to the facts of the present case, we are convinced that this is a case where the Assessing Officer has reopened the proceeding merely on the ground that from the material available, the view earlier adopted by him was erroneous one. Thus, such fact cannot be a ground for reassessment." 5.1. Further reliance is placed on the judgement of Hon'ble Gujarat High Court rendered in the case of Parixit Industries (P.)Ltd. vs. ACIT reported at (2012) 20 taxmann.com 750 (Guj.), wherein the Hon'ble Jurisdictional High Court has held as under:- "25, It is now a settled law that if an explanation is added to a section of a statute for the removal of doubts, the implication is that the law was the same from the very beginning and the same is further explained by way of addition of the Explanation. Thus, it is not a case of introduction of new provision of law by retrospective operation. We have found that the petitioner had disclosed all the materials regarding i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of two assessment years viz. 1995-96 and 1996-97, assessment has been completed against which appeals have been filed. Notices relating to the other five assessment years viz. 1992- 93, 1993-94, 1994-95, 1997-98 and 1998-99, are now the subject-matter of these appeals. 5. We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under Section 148 of the Income Tax Act is issued, the proper course of action for the notice is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years. 6. Insofar as the appeals filed against the order of assessment before the Commissioner (Appeals), we direct the App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standards while interpreting the words "reason to believe" visa- vis Section 143(1) and Section 143(3). We are unable to appreciate what permits the Revenue to assume that somehow the same rigorous standards which are applicable in the interpretation of the expression when it is applied to the reopening of an assessment earlier made under Section 143(3) cannot apply where only an intimation was issued earlier under Section 143(1). It would in effect place an assessee in whose case the return was processed under Section 143(1) in a more vulnerable position than an assessee in whose case there was a full-fledged scrutiny assessment made under Section 143(3). Whether the return is put to scrutiny or is accepted without demur is not a matter which is within the control of assessee; he has no choice in the matter. The other consequence, which is somewhat graver, would be that the entire rigorous procedure involved in reopening an assessment and the burden of proving valid reasons to believe could be circumvented by first accepting the return under Section 143(1) and thereafter issue notices to reopen the assessment. An interpretation which makes a distinction between the meaning and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In other words, the expression "reason to believe" cannot have two different standards or sets of meaning, one applicable where the assessment was earlier made under section 143(3) and another applicable where an intimation was earlier issued under section 143(1). It follows that it is open to the assessee to contend that notwithstanding that the argument of "change of opinion" is not available to him, it would still be open to him to contest the reopening on the ground that there was either no reason to believe or that the alleged reason to believe is not relevant for the formation of the belief that income chargeable to tax has escaped assessment. In doing so, it is further open to the assessee to challenge the reasons recorded under section 148(2) on the ground that they do not meet the standards set in the various judicial pronouncements."" 11. For the above reasons, the writ petition is allowed and the impugned notices dated 26.03.2012 and 09.08.2012 are hereby set aside." 5.3. The ld.counsel for the assessee also placed reliance on the judgement of Hon'ble Bombay High Court rendered in the case of Rallis India Ltd. vs. ACIT and The Union of India in Writ Petition No.2514 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of DCIT vs. Beardsell Ltd. reported at (2000) 244 ITR 256(Mad.). Further, the AO noted the reliance made on the decisions of the Tribunal and proceeded not to consider the same. This Act of the AO is not justified, he ought to have considered the decisions relied upon by the assessee and, in case, the decisions as relied upon by the assessee were not applicable, he ought to have recorded so. It is not permissible under law that the decisions of Higher Forum is not considered on the whims and fancies of the lower authorities. Under these facts, in our considered view, the AO was not justified in re-opening the assessment, reassessment so framed is not valid. Thus, this ground of assessee's appeal is allowed. 6. Ground No.2 (as per chart) is against the confirmation of disallowances of Rs. 48,12,701/- on account of operational and maintenance expenses and Rs. 1,16,25,712/- on account of excess interest charged to GEB amount debited to P&L account of provision for doubtful debts to book profit u/s.115JB of the Act. The ld.counsel for the assessee submitted that the ld.CIT(A) was not justified in confirming the disallowances. The ld.counsel for the assessee placed reliance on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the book profit u/s.115JB. (B) This relates to an item of Rs. 48,17,701/-. This relates to operational and maintenance expenses disputed by GEB for the months of June 2000 to September,2000. The appellant company has submitted detailed account in this respect and submitted that the appellant company has been raising debit notes to GEB for various expenses operating under this head incurred by the appellant company and claimed from GEB. It is submitted that the amounts of debit notes raised till May, 2000 have been accepted by GEB while those for later months have been received as on 31.03.2001. Therefore having regard to the fact that the amounts debited are being received from GEB there cannot be any reason that the amounts for the months of June to Sept.2000 are also not receivable by the appellant company. The same is therefore held to be a provision which is not ascertained liability falling under explanation(c) to section 115JB(2) and the action of the AO in adding the same to the book profit is upheld. (C) This relates to an item of provision relating to excess interest charged to GEB of Rs. 1,16,25,712/-. The appellant's representative Shri Nitin Parekh was not able to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there is a dichotomy between actual write off on the one hand and provision for bad and doubtful debt on the other. A mere debit to the profit and loss account would constitute a bad and doubtful debt, but it would not constitute actual write off and that was the very reason why the explanation stood inserted. Prior to the Finance Act, 2001 many assessees used to take the benefit of deduction under Section 36(l)(vii) of the 1961 Act by merely debiting the impugned bad debt to the profit and loss account and, therefore, the Parliament stepped in by way of Explanation to say that a mere reduction of profits by debiting the amount to the profit and loss account per se would not constitute actual write off The Apex Court accepted the said legal position. However it was clarified that besides debiting the profit and loss account and creating a provision for bad and doubtful debt, the assessee correspondingly/simultaneously obliterated the said provision from its accounts by reducing the corresponding amount from loans and advances/debtors on the assets side of the balance sheet and, consequentially, at the end of the year, the figure in the loans and advances or the debtors on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT v. Jupiter Bio-Science Ltd. [2013] 352 ITR 113/[2011] 202 Taxman 80/13 taxmann.com 161 (Kar.) has held the assessee is 1kble to pay advance tax as per the amended provisions of Section 115JB of the Act for the relevant period. However, he is not liable to pay interest on the amount due as per the amended provisions. However, he has not paid the advance tax as per the provisions existing prior to the amendment. Hence, he is liable to pay interest on the said amount deducting the difference of the tax paid. The Apex Court in the case of Bharat Earth Movers v. CIT [2000] 245 ITR 428/112 Taxman 61 (SC) has held that an assessee who is maintaining the accounts on mercantile system, a liability already accrued, though to be discharged at a future date, would be a proper deduction while working out the profits and gains of his business, regard being had to the accepted principles of commercial practice and accountancy. It is not as if such deduction is permissible only in case of amounts actually expended or paid. The liability would be an accrued liability and would not convert into a conditional one merely because the liability was to be discharged at a future date. Therefore for tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g amount so that, at the end of the year, the amount of debtors is shown as net of the provision for the impugned bad debt. In the absence of the same therefore, respectfully following the ratio laid down by the Hon'ble Karnataka High Court in the case(s) of CIT vs. Yokogawa India Ltd. and CIT vs. Kirloskar Systems Ltd.(supra) and also following the decision of Coordinate Bench in the case of ACIT vs. Vodafone Essar Gujarat Ltd.(supra), we hereby set aside the order of the ld.CIT(A) on this issue and direct the AO to delete the disallowances. Thus, this ground of assessee's appeal is allowed. 8. Ground No.3 (as per chart) is against confirming the action of AO in granting depreciation although not claimed by the assessee. The ld.counsel for the assessee submitted that the issue is now squarely covered in favour of assessee by the judgement of Hon'ble Jurisdictional High Court rendered in the case of DCIT vs. Sun Pharmaceuticals Ind.Ltd. in Tax Appeal No.93 of 2000, dated 17/12/2014. The ld.counsel for the assessee submitted that earlier the Hon'ble Bombay High Court in the case of Plastiblends India Ltd. vs. Addl.CIT and Others reported at (2009) 318 ITR 352 (Bom)[FB], dated 16/10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellate Tribunal is right in law and on facts in allowing the deduction u/s. 80HHC and 80IA on gross total income inclusive of income from other sources. As far as newly added question is concerned, there also we hold that the the Appellate Tribunal is right in law and on facts in holding that depreciation not claimed for by the assessee, cannot be allowed as a deduction despite the introduction of the concept of block assets. The questions are answered in favour of assessee and against the Revenue. The Tax Appeal stands dismissed." 9.3. Respectfully following the aforesaid binding precedent of the Hon'ble Jurisdictional High Court, we hereby set aside the order of the ld.CIT(A) and delete the addition made by the AO. Thus, ground No.3 of assessee's appeal is allowed. 10. Ground No.4 (as per chart) is not pressed by the ld.counsel for the assessee. Therefore, the same is rejected as such. 11. Ground Nos.5 & 6 (as per chart) are against confirming the levy of interest u/s.234-A, 234-B & 234-C of the Act. The ld.counsel for the assessee submitted that the authorities below were not justified in charging the interest and confirming the same u/s.234-A, 234-B & 234-C of the Act. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this order and the details enclosed as per Annexure-A. 2.8. My observation and finding in this respect is as under: (D) The provision includes the quantum of invoices received by GEB which are disputed without referring to the rebate discount for prompt payment. This was test checked for one month i.e. November in which the difference was Rs. 44,67,973/- referred as Rs. 44,47,015/- in the said provision. Other differences are on account of rebate discount as per PPA. Since the quantum of amounts payable by GEB are reduced, obviously the same cannot be said to be income accruing to the appellant company and cannot be taken as liability as referred in 115JB(2) clause(c). I would therefore hold that items of such nature are based on actual accounting practice followed by the appellant company and also with reference to the PPA for discount for prompt payment are not covered in clause(c) of Explanation to 115JB(2). Accordingly, such items considered in the above amount of Rs. 21.80 crores cannot be added back to the book profit u/s.115JB. (E) This relates to an item of Rs. 48,17,701/-. This relates to operational and maintenance expenses disputed by GEB for the months of June 2000 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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