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2016 (5) TMI 624 - ITAT DELHI

2016 (5) TMI 624 - ITAT DELHI - TMI - Reopening of assessment - non explanation of working of the book profit - Held that:- We are of the considered view that assuming of jurisdiction by the AO in this case is bad in law for the reasons inter alia that when the assessee had specifically placed on record profit and loss account and books of account, audited balance sheets, tax audit report and certificate in Form No.29B in response to the query raised by the AO during the assessment proceedings t .....

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d by CIT is not sustainable. Where Commissioner approved suggestions made by the audit party, such approval could not be seen as substantial compliance of section 151 where notice for reopening was issued after a period of four years from end of the assessment year. Judgment of Vijay Rameshbhai Gupta vs. ACIT (2013 (5) TMI 157 - GUJARAT HIGH COURT ) is applicable to the facts and circumstances of this case. Moreover, all the three adjustments on account of provision of diminution of value of a .....

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r Kuldip Singh, Judicial Member : Appellant, M/s. R. Systems International Ltd. (hereinafter referred to as the assessee ), by filing the present appeal sought to set aside the impugned order dated 01.02.2013 passed by the Commissioner of Income-tax (Appeals)-XVIII, New Delhi qua the assessment year 2004-05 on the grounds inter alia that :- 1) Under the circumstances and facts of the case, whether the authorities below were justified in assuming jurisdiction u/s 148 of the Act; after lapse of mo .....

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ore than four years, merely on change of opinion after completion of regular assessment u/s 143(3) of the Act on the strength of revenue audit objection pointing out the mistake of law and in the absence of any fresh material held on record. The unlawful and unjustified action of the AO is urged and liable to be set aside/cancelled. 3) Under the circumstances, the learned AO grossly erred in law and on facts in calculating the book profit u/s 115JB of the Act; at ₹ 2,28,70,485/- with her o .....

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Expln.[1](ii) It is prayed that the apparent adjustment as provided under Expln.[1](f) as in item no. 3(b) and [1](ii) to sub-sec. 2 of Sec.115JB of the Act as in item no. 3(c) hereinabove; may kindly directed to be made while computing book profit u/s. 115JB of the Act, in case action of assuming jurisdiction under the provision of sec.148 of the Act is legally found to be justified under the law. 4) The CIT(A) also erred in law and on facts in upholding the action of charging Interest u/s 234B .....

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ly stated the facts of the case are : assessment of the assessee was completed for the assessment year 2004-05 declaring net loss of ₹ 47,53,665/- under section 143 (3) of the Income-tax Act, 1961 (for short the Act ) in December 2006 and thereafter notice u/s 148 of the Act along with reasons for reopening of assessment was served upon the assessee on 30.03.2011 and consequently, Shri Narender Nath, CA put appearance and pleaded that the return originally filed by the assessee may be trea .....

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profit & loss account, the assessee has shown ₹ 1,67,74,508/- as provision for diminution of the value of the investment, which is added back as per clause (i) of Explanation 1 of section 115JB of the Act for calculating the book profit. The AO also noticed that the income/expenditure relating to any income to which section 10B applies has not been adjusted in the book profit of the assessee, who has shown a loss of ₹ 56,47,764/- on account of business eligible for claim of deduc .....

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ies to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case. 6. The ld. AR for the assessee challenging the impugned order contended inter alia that there has not been any failure on the part of the assessee to disclose the full and true material facts at the time of filing the return on account of omission to compute book profit at ₹ 1,36,64,830/-; that the AO has erred in reopening th .....

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by the AO as well as ld. CIT (A). 7. Undisputedly, assessment of the assessee was completed u/s 143(3) at a loss of ₹ 47,53,665/- for the assessment year 2004-05 in December 2006 and assessment was reopened vide notice dated 30.03.2011 u/s 148 of the Act i.e. after a period of four years from the end of the assessment year. It is also not disputed that reassessment has been made vide impugned order on the basis of retrospective amendment of section 115JB. 8. The first question arises for .....

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ords, it is seen that the assessee had tax liability under section 115JB on the book profit of ₹ 1,36,64,830/-, however, the tax under the said provision was not charged…………………………………………………………….. Thus, the assessee has failed to disclose all material facts truly and fully that were necessary for assessment………&he .....

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ion for diminution in the value of investment is to be added back by invoking the provisions contained under clause (i) of Explanation 1 of section 115JB of the Act while calculating the book profit. Secondly, the AO noticed that the assessee has shown a loss of ₹ 56,47,764/- on account of business eligible for claim of deduction u/s 10B of the Act and held that the same is not to be adjusted in the book profit of the assessee. Thirdly, the AO noticed that as per profit & loss account, .....

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ets ( Para 3.2) Rs.1,67,74,508/- 4) Loss u/s 10B of IT Act (para 3.3) ₹ 56,47,764/- 5) Provision for doubtful debts and advances ₹ 37,57,891/- Less : 1) Provision for Income Tax Written ₹ 17,45,233/- 2) Provision for deferred tax (asset) ₹ 22,06,189/- Book Profit Rs.2,28,70,485/- 11. A bare perusal of the reasons recorded by the AO for reopening of the findings returned in the assessment order goes to prove that this is not a case of failure on the part of the assessee to .....

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material facts . 12. Hon ble Jurisdictional High Court in judgment cited as Atma Ram Properties Pvt. Ltd. vs. DCIT - 343 ITR 141 and Swarovski India (P.) Ltd. vs. DCIT - (2014) 368 ITR 601 (Del.) held that mere recording of reason for reopening that the assessee has failed to disclose full and true facts, is not sufficient for reopening the assessment in a case covered by First Proviso to section 147 of the Act unless AO explains as to why and how the assessee had failed to make full and true di .....

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part of the assessee to disclose full and true material facts sufficient to reopen the case under First Proviso to section 147 of the Act. 13. Now, the next question arises for determination is, as to whether the assessment can be reopened after the expiry of four years from expiry of assessment year on the basis of the retrospective amendment ? 14. Ld. AR for the assessee by relying upon the judgment cited as DIL Ltd. vs. ACIT - (2012) 343 ITR 296 (Bom.) contended that the AO is not empowered .....

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Assessing Officer reopened said assessment on 8- 3-2011 - Reasons for reopening assessment were to effect that while computing book profit (i) amount set aside as provision for diminution in value of investment, (ii) amounts set aside to provisions made for meeting gratuity and superannuation liabilities, and (iii) amount of business development expenditure, had not been added back to book profit - Whether since reasons recorded by Assessing Officer, in fact, merely indicated a reason to believ .....

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t of assessee u/s 143(3) by computing the book profit u/s 115JB at Rs.(-)1,42,73,435/- but reopened the assessment after the expiry of four years by merely recording that, on verifying the records, it is seen that the assessee had tax liability u/s 115JB on book profit to fRs.1,36,64,830/-, however, tax under the said provision was not charged….. The omission resulted in short levy of ₹ 10.71 lakh. 17. Hon ble jurisdictional High Court in judgment cited as CIT vs. Sil Investments Lt .....

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was allowed - After expiry of four years from end of relevant assessment year an amendment to section 80HHC was brought about by way of Taxation Laws (Amendment) Act, 2005 with retrospective effect from 1.4.1998 - In terms of said amendment, certain conditions were to be fulfilled for allowability of deduction under section 80HHC in respect of Duty Entitlement Pass Book Scheme where turnover of assessee was more than ₹ 10 crores. - It was an admitted position that those conditions were no .....

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nd that it could not be said that at time when assessee filed return, he had failed to disclose fully and truly all material facts necessary for assessment because amendment which was introduced retrospectively was not there at all - Accordingly, reassessment proceedings were set aside - Whether, on facts, Tribunal had rightly concluded that proviso to section 147 could not be invoked merely because there was an amendment in future which was introduced retrospectively and covered period in quest .....

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o whether AO can reopen the assessment on the basis of mere change of opinion ? 20. As we have already discussed in the preceding paras that the assessment of the assessee was duly accepted by the AO u/s 143(3) and again after expiry of four years, assumed jurisdiction to reopen the assessment under amended provisions contained u/s 115JB which is not permissible under law. Identical issue has been decided by the Hon ble Jurisdictional High Court in case of Madhukar Khosla vs. ACIT - 354 ITR 356 .....

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be subjected to Section 147 proceedings, for, that section covers only an "assessment" and we wonder if the revenue would be prepared to concede that position. It is nobody's case that an "intimation" cannot be subjected to Section 147 proceedings; all that is contended by the assessee, and quite rightly, is that if the revenue wants to invoke Section 147 it should play by the rules of that section and cannot bog down. In other words, the expression "reason to believ .....

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eged 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." 21. Following the law laid down by the Hon ble jurisdictional High Court in the judgment, Madhukar Khosla vs. ACIT (supra) discussed above, we are of the considered view th .....

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