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2016 (6) TMI 490 - GUJARAT HIGH COURT

2016 (6) TMI 490 - GUJARAT HIGH COURT - TMI - Reopening of assessment - Eligibility of claim of provisions for bad and doubtful debts under Section 36(1)(viia) - Held that:- Clearly the issue of the petitioner's claim for provision for bad or doubtful debt came up for discussion during the original assessment proceedings and the assessee made a detailed explanation why such claim should not be disallowed. The Assessing Officer in the scrutiny assessment made no disallowance and thus, accepted th .....

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the assessee to satisfy him with respect to such a claim and thereafter, does not make any addition in the final order of assessment, he can be stated to have formed an opinion whether or not in the final order he gives his reasons for not making the addition

Double claim of brought forward depreciation - Held that:- Assessing Officer made no disallowance on the said claim of unabsorbed depreciation of Tapi Bank of ₹ 8.28 lacs in the original assessment. Quite apart from this, .....

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Additionally we also do not find any failure on part of the petitioner to truly and fully disclose all material facts necessary for assessment, principal condition required to be satisfied for reopening of the assessment beyond the period of four years. On all counts thus, the petition must succeed - SPECIAL CIVIL APPLICATION NO. 16016 of 2015 - Dated:- 7-6-2016 - MR. AKIL KURESHI AND MR. A.J. SHASTRI, JJ. FOR THE PETITIONER : MR B S SOPARKAR, ADVOCATE FOR THE RESPONDENT : MRS MAUNA M BHA .....

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ment under Section 143(3) of the Income Tax Act, 1961 ['the Act' for short] on such revised return on 28.12.2010. To reopen such assessment, the Assessing Officer issued impugned notice. This notice was issued beyond a period of four years from the end of the relevant assessment year. The Assessing Officer supplied to the assessee, the reasons recorded by him for issuing the notice. The reasons read as under: 1. In this case, the assessee has filed Income Tax return for AY 2008-09 on 30/ .....

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/s. 36(1)(viia) is not allowable in view of the CBDT letter No. 17 of 2008 dtd. 26.11.2008 wherein it is mentioned that the deduction for provision of bad and doubtful debt should be restricted to amount to actual provision created in the books of accounts. 3. Further it appears that the assessee has deducted brought forward unabsorbed loss of ₹ 28,56,816/- and unabsorbed brought forward depreciation of ₹ 8,28,666/- in respect of Tap. Co.Op Bank which has been merged with the assesse .....

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e of re-opening the assessment u/s 147 of the IT Act 1961 for A.Y.2008-09. 3. The petitioner under communication dated 22.06.2015 raised several objections to the proceedings for reopening which included the contention that both the claims were examined by the Assessing Officer during the original assessment proceedings and that, therefore, the reopening was not permissible to alter the order of the assessment. The Assessing Officer disposed of such objections by an order dated 08.09.2015, upon .....

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d therefore, the deduction under Section 36(1)(viia) of the Act was not allowable. He relied on the CBDT circular dated 26.11.2008 in which, it is provided that the deduction for provision of bad debt should be restricted to amount of actual provision created in the books of accounts. The second ground pressed in service by the Assessing Officer was that the assessee had claimed deduction of brought forward unabsorbed loss of ₹ 28.56 lacs (rounded off). This was in addition to unabsorbed b .....

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essing Officer, in response to the clarification sought by the Assessing Officer regarding eligibility of claim of provisions for bad and doubtful debts under Section 36(1)(viia) of the Act, the petitioner had stated that: During the previous year under reference your assessee bank had debited ₹ 6,21,75,117/- to NPA Prudential written off a/c and also debited ₹ 12,60,414/- to bad debts Provision A/c. Thus as per the Provisions of Section 36(1) (vii) r.w.s. 36(2)(v), your assessee is .....

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of ₹ 6,34,35,531/- u/s. 36(vii) r.w.s. 36(2)(v) be allowed which your assessee bank is in any case, eligible as per the Provision of the I.T.Act. We rely upon the finding given by the Full Bench of High Court of Kerala in the matter of CIT V. South Indian Bank Ltd. 42 DTR 109 copy of which is appended for your immediate reference. Without prejudice it is also clarified that during the previous year assessee bank had made appropriation of profit as under: (i) Bad Debts Funds A/c ₹ 78, .....

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,909/-. To sum up, since your assessee is eligible for claim of deduction of ₹ 6,34,35,531/- U/s. 36(1)(viia) r.w.s. 36(2)(v) and also of ₹ 2,80,93,909 U/s. 36(1)(viia). Claim made of lesser amount U/s. 36(1)(viia) is legitimate claim which may kindly be allowed. In alternate, as explained hereinabove, claim of deduction of ₹ 6,34,35,531/- being actual write off U/s. 36(1)(vii) r.w.s. 36(2)(v) be allowed and oblige. 6. Thus clearly the issue of the petitioner's claim for pr .....

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Income Tax reported in 350 ITR 266, it was held and observed as under: 42. Bearing in mind these conflicting interests, if we revert back to central issue in debate, it can hardly be disputed that once the Assessing Officer notices a certain claim made by the assessee in the return filed, has some doubt about eligibility of such a claim and therefore, raises queries, extracts response from the assessee, thereafter in what manner such claim should be treated in the final order of assessment, is .....

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nd the control of the assessee. If the Assessing Officer, therefore, after scrutinizing the claim minutely during the assessment proceedings, does not reject such a claim, but chooses not to give any reasons for such a course of action that he adopts, it can hardly be stated that he did not form an opinion on such a claim. It is not unknown that assessments of larger corporations in the modern day, involve large number of complex claims, voluminous material, numerous exemptions and deductions. I .....

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be stated by the revenue that the Assessing Officer can not be seen to have formed any opinion on such a claim. Such a contention, in our opinion, would be devoid of merits. If a claim made by the assessee in the return is not rejected, it stands allowed. If such a claim is scrutinized by the Assessing Officer during assessment, it means he was convinced about the validity of the claim. His formation of opinion is thus complete. Merely because he chooses not to assign his reasons in the assessme .....

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m and thereafter, does not make any addition in the final order of assessment, he can be stated to have formed an opinion whether or not in the final order he gives his reasons for not making the addition. 7. Coming to the second aspect of the matter regarding double claim of ₹ 8.28 lacs of brought forward depreciation of merged Tapi Cooperative Bank, here also the assessee had in a communication dated 30.04.2010 pointed out to the Assessing Officer as under: 4. For verification of (a) Los .....

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f loss for the period up to 10.05.2007 of ₹ 7,98,519/- is made separately whereas the figure of ₹ 28,56,816/- being brought forward business loss is also inclusive of loss for the period up to 10.05.2007 of ₹ 7,98,519/- For this unintentional error your assessee request your Honour to kindly condone and as pointed out by assessee it be added to returned total income for the purpose of framing assessment of total income. 8. Yet again, the Assessing Officer made no disallowance o .....

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which was included in the brought forward loss of ₹ 28.58 lacs and which the assessee upon noticing error surrendered. This issue, the assessee had raised substantially in the objection to the process of reopening as under: (II) Excess claim of Unabsorbed depreciation of ₹ 8,28,666/- of Tapi Co. Op. Bank Ltd. In the reasons recorded it has been contended that claim of unabsorbed depreciation of ₹ 8,28,666/- that of Tapi Co. Op. Bank Ltd. is made excessive and to that extent inc .....

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