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TMI Blog2019 (12) TMI 1262X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in applying the judgment of the Supreme Court in the case of HCL Comnet Systems and Services Ltd. especially when the amendment to explanation (1) to Section 115JB was brought by Finance (No.2) Act, 2009 with retrospective effect from 01.04.2001? 3.Whether the reasoning of the Tribunal is proper by setting aside the impugned order especially when there was proper material to show that the income had escaped assessment and it was not a change of opinion? 3. The learned Counsel for the Revenue Mr.T.Ravi Kumar submitted that the learned Income Tax Appellate Tribunal has erred in holding that reassessment made by the Assessing Officer for the Assessment Year 2003-04 was not justified on the ground that amendment of Section 115JB of the Act was brought by the Finance Act, 2009 with retrospective effect from 1 April 2001, by amendment to Explanation-1 to Section 115JB of the Act, which disallowed the "Provision for Bad and Doubtful Debt" for the purpose of computing Book Profits under section 115JB of the Act for imposition of tax. He submitted that though reassessment notice under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , with retrospective effect from 1 April 2001, it would not ipso facto be justified for issuance of reassessment notice under Section 147/148 of the Act on 31 March 2008. He further submitted that the learned Income Tax Appellate Tribunal was justified in holding that the reassessment in the present case was not justified. 7. Having heard the learned counsel for the parties, we are satisfied that there is no merit in the present appeal filed by the Revenue for the following reasons :- (a) The Hon'ble Supreme Court in HCL Comnet Systems & Services Ltd., supra had held as under:- Company - book profit under Section 115JA - Provision for doubtful debts - provision for bad and doubtful debts can be added back to the net profit only if item (c) of the Explanation to Section 115JA stands attrackted - Item (c) deals with amount set aside as provision made for meeting liabilities other than ascertained liabilities - Provision for bad and doubtful debts is made to cover up the probable diminution in the value of asset i.e. Debt receivable by the assessee - such a provision cannot be said to be a provision for liability - therefore, item (c) of the explanation is not attracted and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Cl.(c). 8. The aforesaid position of law declared by the Hon'ble Supreme Court made it clear that the "Provision for Bad and Doubtful Debt" was clearly a deductible amount for the purpose of Section 115JA of the Act. This position of law was undone only by the Finance Amendment Act, 2009 with retrospective effect from 1 April 2001. But the fact remains that the said amendment in law was effected in the year 2009 and it was not available on the date when the reassessment notice was issued in the present case on 31 March 2008. 9. Similar issue was dealt with by the Division Bench of the Bombay High Court in the case of Rallis India Ltd. and the Division Bench held that subsequent to the decision of the Hon'ble Supreme Court in HCL Comnet Systems & Services Ltd., the Parliament stepped in to amend Explanation (1) to Section 115JB by the Finance Act, 2009. But that amendment would not be available for the Assessing Authority to exercise the power to reopen the assessment. The Bombay High Court decided Rallis India Ltd. case on 16 April 2008. The relevant paragraphs 17 and 18 of the said judgment are also quoted below for ready reference. 17. Subsequent to the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the subsequent amendment in 2005 of the provisions of Section 80HHC, even though retrospective, would not attract the provisions of Section 263, particularly when the Court would have to take into account the position of law as it stood on the date when the Commissioner passed his order in purported exercise of his powers under Section 263. (d) The allowability of the "Provision for Bad and Doubtful Debt" for the purpose of Section 36(1)(vii) of the Act was dealt with by the Hon'ble Supreme Court in the case of Vijaya Bank vs. CID (2010) 323 ITR 166, in the following manner. "7. One point needs to be clarified. According to Shri Bishwajit Bhattacharya, learned Additional Solicitor General appearing for the Department, the view expressed by the Gujarat High Court in the case of Vithaldas H. Dhanjibhai Bardanwala [supra] was prior to the insertion of the Explanation vide Finance Act, 2001, with effect from 1st April, 1989, hence, that law is no more a good law. According to the learned counsel, in view of the insertion of the said Explanation in Section 36(1)(vii) with effect from 1st April, 1989, a mere debit of the impugned amount of bad debt to the Profit and Loss Account w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion, we may reiterate that it is not in dispute that Section 36(1)(vii) of 1961 Act applies both to Banking and Non-Banking businesses. The manner in which the write off is to be carried out has been explained hereinabove. It is important to note that the assessee-Bank has not only been debiting the Profit and Loss Account to the extent of the impugned bad debt, it is simultaneously reducing the amount of loans and advances or the debtors at the year-end, as stated hereinabove. In other words, the amount of loans and advances or the debtors at the year-end in the balance-sheet is shown as net of the provisions for impugned debt. However, what is being insisted upon by the Assessing Officer is that mere reduction of the amount of loans and advances or the debtors at the year-end would not suffice and, in the interest of transparency, it would be desirable for the assessee-Bank to close each and every individual account of loans and advances or debtors as a pre-condition for claiming deduction under Section 36(1)(vii) of 1961 Act. This view has been taken by the Assessing Officer because the Assessing Officer apprehended that the assessee-Bank might be taking the benefit of deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be held justified retrospectively in issuing the reassessment notice on 31 March 2008. It is well settled legal position that even otherwise, reassessment cannot be initiated on a mere change of opinion. The relevant particulars and details on the basis of which such claim was made by the Assessing authority for the assessment year 2003-04 were very much available at the time of original assessement order passed by the Assessing Authority on 10 March 2006. Therefore, on 31 March 2008, the learned Assessing Authority could not have issued the imgpuned reassessment notice. Therefore, in our opinion, the learned Income Tax Appellate Tribunal was justified in holding that the reassessment in the present case was without any reason and therefore, it is liable to be quashed and set aside. 12. It is not the case of the Revenue that reassessment proceedings were initiated after the amendment of law. They were admittedly initiated on 31 March 2008, and as on that date, the judgment of the Supreme Court in the case of HCL Comnet Systems & Services Ltd., which was delivered on 23 September 2008, was holding the field. 13. Therefore, in our opinion, the Questions of Law framed above des ..... X X X X Extracts X X X X X X X X Extracts X X X X
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