TMI Blog2012 (8) TMI 935X X X X Extracts X X X X X X X X Extracts X X X X ..... -2008 at an income of ₹ 16,73,26,015/- as against the returned income of ₹ 16,67,22,015/-. Scrutiny of income tax assessment records revealed that in the computation of income the assessee had deducted ₹ 1,87,41,755/- on account of provision for doubtful debts no longer required written back but in P L account this amount was not added to the other income. The mistake resulted in under assessment of income by ₹ 1,87,41,755/- involving tax effect of ₹ 63,08,473/-. 02. In view of the above, I have reasons to believe that the income of ₹ 1,87,41,755/- chargeable to tax has escaped assessment within the meaning of section 147/148 of the Income Tax Act, 1961. 3. Thereafter notice u/s 148 of the Act was issued on 19-1-2010. Thereafter assessee filed letter dated 25-02-2010 requesting the Assessing Officer to treat the return originally filed as return in response to notice u/s 148. During reassessment proceedings, additional reasons were recorded by ld. Assessing Officer, copy of which is placed at page 83 of the paper book, wherein it has been recorded that unabsorbed depreciation should have been set off against long term capital g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 21-112008, copy of which is placed at pages 46 47 of the paper book. It was further submitted that thereafter certain other requirements were asked by the Assessing Officer including detail of bad debt. Assessee has filed the same vide letter dated 25-11-2008, copy of which is placed at pages 55 56 of the paper book. It was further submitted that during the reassessment proceedings itself, the assessee has filed again detailed reply and it was submitted that assessee has not claimed any deduction on account of provision for bad debt and a reconciliation chart was also filed before Assessing Officer . However, Assessing Officer was not satisfied, therefore, he made the addition. 9. Before ld. CIT(A) same details were filed and after considering those details, ld. CIT(A) deleted the addition by observing that assessee has not claimed any deduction on account of provision for bad debt. Accordingly, it was submitted that there was no material before Assessing Officer to arrive at a conclusion that assessee had claimed deduction on account of provision for bad debt. Reliance was placed on the ratio of decisions in the cases of Satnam Overseas Ltd. another Vs. Addl. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tablish as to what was the material on which basis the proceedings u/s 147 have been initiated. As there was no material at all, therefore, the decision reported in 329 ITR 237 is squarely applicable, which is directly on the issue. 12. We have heard rival submissions and considered them carefully, After considering the rival submissions and perusing the material on record along with various case laws, relied upon by both the parties, we find that the assessee deserves to succeed on its legal ground. There is no dispute that original assessment was completed u/s 143(3), copy of which is placed at pages 61 62 of the paper book. A detailed questionnaire was issued by the Assessing Officer , copy of which is placed at pages 46 47 of the paper book. Thereafter various replies were filed by the assessee i.e. 6-2-2008; 118-2008; 4-11-2008; 25-11-2008; 3-12-2008; 19-12-2008; 22-12-2008, copies of these letters are placed at pages 48 to 60 of the paper book. Vide letter dated 25-11-2008 it was informed to Assessing Officer that details of bad debt are also placed and it is mentioned that Annexure 11 in respect of this claim is enclosed and these details are mentioned in sl. No. 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed any such deduction. Even ld. CIT(A) has deleted this addition on merit by giving a finding of fact that assessee had claimed only deduction of ₹ 46.37 lacs and odd. In case of Satnam Overseas Ltd. Another Vs. Addl. CIT 329 ITR 237, the Hon ble Delhi High Court allowed the petition of the assessee that there was no reason on which basis the assessment could be reopened, observing: Held, allowing the petition, that the only reason which had been given seeking reopening of the assessment for the years 1997-98 and 1998-99 was that suppression of sales had taken place on account of the fact that when the average price of the closing stock was multiplied by the quantity of the sales in the year then the value of the sales would be at a higher figure than that declared by the assessee. There was no new material which was alleged to have come to the noticed of the Assessing Officer which had caused him to seek reopening of the assessment . The reasons given for seeking reopening of the assessment contained the expression perusal of the case record reveals clearly showing that it was on the basis of the same assessment record as was filed by the assessee, during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear that section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceedings upon a mere change of opinion. This decision of the Full Bench has been affirmed by the Hon ble Supreme Court in 320 ITR 561. The Hon ble Delhi High Court has also taken into consideration the scope of effect of sec. 147 as substituted w.e.f. 1-4-1989. Further, the Board Circular no. 549 dated 3110-1989 and on perusal of the said Circular it was made clear that the amendments had been carried out only with a view to ally fears that the omission of the expression reason to believe from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on a mere change of opinion. Accordingly, it was found that even according to the CBDT a mere change of opinion cannot form the basis for reopening a completed assessment. 14. In the present case, the assessment has been completed u/s 143(3) originally. The details in respect of bad debts were filed and thereafter the assessment was completed. Therefore, it cannot be said that Assessing Officer has not applied his mind. Even otherwise, as we have discussed above in detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the re-assessment order and the facts on record. The perusal of the details and reconciliation of provision for doubtful debts reveals that a sum of ₹ 2,33,79,569/- has been written off and a sum of ₹ 1,87,41,755/- been written back. Therefore, the Assessing Officer has debited a sum of ₹ 46,37,814/- (Rs. 2,33,79,569/- minus ₹ 1,87,41,755/-) in its Profit and Loss Account as bad debts written off. Regarding the amount of ₹ 2,33,79,569/- on account of bad debts written off, in accordance with the provisions of section 36(2) of the Act that such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year, the details have been furnished showing the years in which the bad debts written off have been shown as income. Therefore, it can be safely concluded that the requirement in terms of the provisions of section 36(1)(vii) read with section 36(2) of the Act have been fulfilled so as to enable the claim of the appellant regarding the deduction of bad debts written off to the extent of ₹ 2,33,79,569/- to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. In view of the provisions of sec. 71 and 72, the Assessing Officer set off the brought forward losses on account of depreciation against long term capital gains at ₹ 14,34,71,150/-. The assessee has offered this long term capital gain for taxation in its computation and Assessing Officer has accepted the contention of the assessee by passing the original assessment that depreciation and other business losses carried forward by assessee can be set off against only business income. Specifically computation has been computed by the Assessing Officer while completing the original assessment . Now after recording additional reasons, the Assessing Officer has set off the brought forward depreciation against long term capital gains. Before CIT(A) it was submitted that the amount of unabsorbed depreciation was ₹ 8,95,84,795/-. The assessee company did not adjust the long term capital gains from unabsorbed deprecation as assessee company had paid the tax on capital gains without claiming deprecation. Therefore there is no loss of revenue. It was further explained that sub-section (2) of section 72 uses the expression may be . Therefore, it was the choice of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciation whereas Special Bench of the Tribunal has considered this aspect in detail in respect of depreciation which is a decision taken in the year of 2012. 21. We have heard rival submissions and considered them carefully. After considering the submissions and perusing the material on record we find that assessee deserves to succeed on this ground on merit. The issue is squarely covered by the decision of the Mumbai Bench in the case of ITL Fabric P. Ltd. (supra), where on identical facts the issue has been decided following the decision of the Special Bench of the ITAT in the case of M/s Nandi Steels Ltd. (supra). Various other decisions of various High Courts have also been considered by the Special Bench. The Mumbai Bench held that CIT(A) was justified in upholding the order of Assessing Officer rejecting the claim of the assessee for set off of short term capital gain against carried forward business loss/ unabsorbed depreciation of earlier years. As stated above, the facts are reverse here as assessee has not claimed any set off on account of brought forward deprecation of earlier year against long term capital gain but department wants to adjust the same. As held by ..... 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