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2015 (10) TMI 2297 - ITAT MUMBAI

2015 (10) TMI 2297 - ITAT MUMBAI - TMI - Reopening of assessment - condonation of delay - Held that:- In the matter of condonation of delay, no doubt lenient view has to be taken while interpreting the sufficient cause of delay however, this does not mean that the litigant has a free license to approach the court on its will. Therefore, in the absence of any satisfactory or cogent explanation, the inordinate delay in filing the CO remains unexplained with sufficient or reasonable cause. Accordin .....

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ondent. Thus, the scope of raising a plea against the maintainability of the appeal without filing the appeal is limited under rule 27 of the ITAT Rules. In other words, if the respondent succeeds on the plea raised under rule 27, then the impugned order of the CIT(A) would stand and will have full effect insofar as it is against the revenue. Thus if the plea raised by the assessee is accepted as regards the validity of the assessment order then the effect of the same would be only to the extent .....

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, for the assessment year 2003-04. 2. Since the assessee has challenged the validity of the reopening of the assessment in the cross-objection which goes to the root of the matter, therefore, we propose to first take up the cross-objection filed by the assessee. 3. There is a delay of 803 days in filing of the cross objection by the assessee. The assessee has filed an application for condonation of delay along with an affidavit of Executive Director/CEO of the assessee-company. 4. We have heard .....

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n 1/8/2014and during the course of conference held on 7/8/2014, the assessee was advised that it needs to file CO against the department s appeal by challenging the jurisdiction of the AO to reopen the assessment under section 147. Accordingly, assessee filed the CO belatedly by 803 days. Thus it was pleaded that the delay in filing CO was neither willful nor deliberate but was caused by misunderstanding of the correct legal position when the CIT(A) allowed the appeal of the assessee on merits a .....

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om 375. He has also relied upon the decision of the Madras High Court in the case of CIT vs. Beardsell Ltd., 244 ITR 256 and Usha Martin Industries Ltd. 104 ITD 249 (Special Bench). Thus the learned Departmental Representative has submitted that the CO filed by the assessee deserves to be dismissed in limine being barred by limitation. 6. We have considered the rival submissions as well as the relevant material on record. The assessee has stated in the affidavit that the notice of appeal filed b .....

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in filing the CO by the assessee after receiving the notice of the revenue s appeal on 2/5/2012. The reason for delay has been explained and stated by the assessee in the affidavit that since the appeal of the assessee was decided on merits by the CIT(A) in favour of the assessee therefore, the assessee was under the bonafide impression that nothing further remains to be done on the part of the assessee. The assessee has stated that only on the change of the authorized representative, assessee w .....

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the assessee on merits, therefore, nothing more was required to be done on the part of the assessee. Once the assessee decided to accept the impugned order of the CIT(A), then such an inordinate delay is required to be explained with some reasonable cause and to the satisfaction of the Tribunal. It is not the case of the assessee that the earlier AR/counsel of the assessee has given wrong advice for not filing CO or appeal against the impugned order, but the assessee has accepted the order of th .....

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with sufficient or reasonable cause. Accordingly, we decline to condone the delay of 803 days in filing the CO and consequently the CO filed by the assessee is dismissed being barred by limitation. 6.1 The learned authorised representative of the assessee has also raised an alternative plea that this issue can be raised under rule 27 of the ITAT Rules even without filing CO or appeal against the impugned order. He has submitted that the issue of validity of re-opening was raised before the CIT(A .....

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hat the assessment was completed under section 143(3) on 22/3/2006. Subsequently, AO reopened the assessment by issuing notice under section 148 on 27/3/2008 on two grounds i.e. site restoration cost and provision for doubtful advances are required to be added back to book profit under section 115JB considering both the provisions are not ascertainable liabilities. The learned authorised representative of the assessee has pointed out that the CIT(A) has deleted the addition made by the AO regard .....

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sion for doubtful advances was decided in favour of the assessee by the Hon'ble Supreme Court in the case of CIT vs. HCL Comnet Systems & Services (305 ITR 409) as well as by the decision of the Hon'ble jurisdictional High Court in the case of Rallies India vs. ACIT (323 ITR 54). Thus, at the time of framing original assessment as well as at the time of reopening of the assessment, the issue was settled in favour of the assessee and the reopening is based on the change of opinion. Le .....

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IT vs. Bearhell Ltd. (244 ITR 256) as well as the Special Bench decision in the case of JCIT vs. Usha Martin Industries Ltd. (104 ITD 249) whereby the issue of adjustment on account of provision for doubtful debts has been decided in favour of the revenue. He has supported the order of the AO. 7. We have considered the rival submissions as well as the relevant material on record. As per rule 27 of the ITAT Rules, 1963, the respondent even without filing an appeal can support the order of the CIT .....

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ment order then the effect of the same would be only to the extent that the appeal filed by the revenue will be defeated. The scope of rule 27 of the ITAT Rules has been discussed by the Hon'ble jurisdictional High Court in the case of B.R.Bamasi vs. CIT reported in 83 ITR 223 as under: But even if the assessee had not made such a statement, the above judgment shows that the assessee would be entitled to raise a new ground, provided it is a ground of law and does not necessitate any other ev .....

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ed. The ground would serve only as a weapon of defence against the appeal. If the respondent has not himself taken any proceedings to challenge the order in appeal, the Tribunal cannot set aside the order appealed against. That order would stand and would have full effect in so far as it is against the respondent. The Tribunal refused to allow the assessee to take up this ground under an incorrect impression of law that if the point was allowed to be urged and succeeded, the Tribunal would have .....

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CIT(A) s order as under: 7. The first additional ground questioning the re-opening of the assessment as based on change of opinion needs no adjudication since relief has been allowed to the appellant on substantive additions. Thus the assessee can raise the plea of validity of reopening of assessment as the same was not decided by the CIT(A) but the effect of the said plea raised by the assessee under rule 27 is only to the extent of defence against the appeal filed by the revenue and if the ass .....

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115JB since both the provisions are not ascertained liabilities. In view of the above, I am satisfied and have reason to believe that the income to the extent of ₹ 1,64,28,338/- chargeable to tax has escaped assessment within the meaning of the provision of sec.147 of the IT Act. It is clear from the reasons recorded by the AO that it is only on the perusal of the record available with the AO, he has formed an opinion or belief that income assessable to tax has escaped the assessment beca .....

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ration of the record already available with him. As regards the issue of cost of site restoration, the CIT(A) has given the finding that the site restoration expenses are scientifically estimated by an independent agency viz. Institute of Oil and Gas Production Technology. The provision has been made as per the requirement under the production sharing contract and the assessee is liable to contribute this amount to the site restoration fund in each year. Therefore, the CIT(A) has given the findi .....

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of opinion which is not permissible under the provisions of the Act. 10. The second ground for reopening is regarding provisions for doubtful advances. It is pertinent to note that as per the Explanation to sec.115JB existed at relevant point of time, adjustment can be made while computing the book profit if there is a provision on account of unascertained liability. The provision for doubtful debts is not in the nature of provision for unascertained liability but it is the asset of the assesse .....

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L Comnet Systems & Services Ltd.(supra), the Hon'ble jurisdictional High Court in the case of Rallies India Ltd. (supra) has held as under: 17. Subsequent to the decision of the Supreme Court in HCL (2008) 305 ITR 409(SC), Parliament stepped in to amend Explanation (1) to Section 115JB by the Finance Act of 2009. As a result of the amendment, clause (i) came to be inserted in Explanation (1) so as to provide for the amount or amounts set aside as provision for diminution in the value of .....

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ive effect has been held not to justify a recourse to the revisional power of the Commissioner under Section 263 of the Income Tax Act in Commissioner of Income Tax V/s. Max India Limited. Counsel for the Revenue sought to distinguish the judgment in Max India (supra) on the ground that it dealt with Section 80HHC and one of the grounds which weighed with the Supreme Court was that the Section had been amended several times. The judgment of the Supreme Court cannot be distinguished for the reaso .....

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ve been urged was that the retrospective amendment to the statutory provision in question would not have a bearing on the correctness of the recourse to Section 263 since on the date on which the power was exercised by the Commissioner, the legislative amendment had not been brought into force. The judgment of the Supreme Court notes firstly that on the date on which the Commissioner passed his order, two views on the word profit under Section 80HHC were possible and the provision itself had bee .....

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laid down by the Supreme Court in Max India (supra) would be attracted. On the date on which the Assessing Officer purported to exercise his power to reopen the assessment under Section 147, the legislative amendment by the insertion of clause (i) to Explanation (1) to Section 115JB had not been brought into force on the statute book. Obviously, therefore, the subsequent amendment could not have been and is not a ground which has been taken by the Assessing Officer, while reopening the assessmen .....

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Max India (supra) would be attracted to the present case. Consequently, it is evident that the order of the Assessing Officer with reference to the computation of book profits under Section 115JB was at the least a probable view and as a matter of fact the correct view to take in view of the decision of the Supreme Court in HCL (2008) 305 ITR 409.. It is well settled that the law laid down by the Supreme Court is declaratory of the position as it always stood. In any event, as we have noted, the .....

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