TMI Blog2023 (3) TMI 1111X X X X Extracts X X X X X X X X Extracts X X X X ..... also the view taken by the Hon'ble Supreme Court [ 1972 (8) TMI 110 - SUPREME COURT] it would not be open to the Revenue to state that there is failure on the part of the assessee to fully and truly disclose all material particulars. Afortiori there is a legislative affirmation of the view taken by the assessee by way of an amendment introduced to Section 115 JB of the Act with regard to the treatment to bad and doubtful debts whereby the above position of law declared by the Hon'ble Supreme Court was neutralized with retrospective effect from 01.04.2010 We agree with the finding of the learned Single Judge that the condition precedent to invoke extended period of limitation under Section 147 of the Act viz., failure on the part of the respondent /assessee to disclose fully and truly all material particular is absent in the facts of the case. - Honourable Mr.Justice S.Vaidyanathan And Honourable Mr.Justice Mohammed Shaffiq For the Appellant : Mr.Srinivas Babu A.P. For the Respondent : Mr.G.Baskar JUDGMENT This Writ Appeal has been filed by the revenue challenging the order of the learned Single Judge passed in W.P.No.8620 of 2014 dated 24.03.2021 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ''. The respondent-assessee submitted his explanation highlighting the following: ''It is further submitted that the Finance Act, 2008 has made retrospective amendment with effect from 01.04.2001 by inserting Explanation 2 by which income tax shall include tax on distributed profits under section 115O for the purpose of clause (a) of Explanation 1, thus limiting it as income tax for the purposes of section 115 JB only and not for computing income under the normal provisions of the Act.'' (e) The respondent/assessee submitted the following response which is extracted here under: ''Provision for Bad and Doubtful Debts made by the Company does not fall within the adjustments specified in Explanation 1 and, on the other hand, it is required to be made to comply with section 115 JB(2). The profit and loss account has also been certified by the Auditors in Form 29B. Therefore, no further adjustment is required to be made to the book profits in respect of bad and doubtful debts. The ITAT Calcutta Bench has also held that provision for bad and doubtful debts is a diminution in the value of the asset and therefore not a provision to be added ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quested by you, I am providing herewith the reason for re-opening the assessment for the assessment year 2006-07 as under:- ''It is seen from the record that the assessee had debited a sum of Rs.29,35,473/- in the P L A/c. Being provision for bad and doubtful debts. However, the same was not added to the book profit u/s.115 JB based on the Supreme Court in the case of CIT vs. HCL Commet Systems Services Ltd reported in 305 ITR 409) However, based on the latest amendment to the IT Act by the Finance Act, 2008 w.y.e.f. 01.04.01 book profit u/s.115JB requires to be increased by ''the amount or amounts set-asie as provision for doubtful debts to the tune of Rs.29,35,473/- debited in the P L A/c. requires to be added for the purpose of arriving book profit.'' (l) The respondent/assessee submitted his objections inter alia highlighting the following viz., i. The respondent/assessee has debited a sum of Rs. 29,35,473/- in the Profit Loss Account being provision for bad and doubtful debts, however, the same was not added to the book profit under Section 115 JB of the Act based on the Hon'ble Supreme Court in the case of HCL Commet Syste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4A of the I.T. Act. In this case, there is no specific provision provided by the legislature in the Act. 3. The contention that the provision for doubtful debts debited in the Profit Loss Account is meeting the requirements for write off of bad debts by applying the principles laid down by the Hon'ble Supreme Court in the case of Southern Technologies Limited (320 ITR 577) is examined. The Hon'ble Supreme Court had pronounced the order with relate to Non Banking Finance Companies (NFBCs) and other case law relied were also pronounced in Vijaya Bank case (323 ITR 166) . However, the assess company's business is entirely different from banking business and thus, these decisions would not be applicable. 4. It is also specifically brought to the notice of the assessee that the provision for doubtful debts was added back in regular computation. If the assessee company have a belief that ''provision for doubtful debts'' had fulfilled the criteria for bad debts to be written off, then the same should have been shown under bad debts written off and there is no reason to follow different accounting treatment having same status. 5. I understand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a case where the assessee / respondent cannot be held to have failed to truly and fully disclose all the materials facts/information on the basis of a retrospective amendment. b. The amendment to the Section 115JB of the Act is made retrospectively the effect of a retrospective law is to look backwards and would apply to past periods and govern past transactions. c. Any lapse on the part of the assessee to comply with the retrospective law by itself would confer jurisdiction to make re-assessment. Therefore, it would not be open to the assessee to submit that re-assessment cannot be made on the basis of the retrospective amendment. 6. Per contra, it was submitted by the learned counsel for the respondent/assessee that the Writ Appeal must fail for the following reasons: a. Initiation of proceedings by way of change of opinion is impermissible in view of the catena of judgments of the Hon'ble Supreme Court and various High Courts wherein it has been consistently held that power to reassess cannot be examined on change of opinion. b. A reading of Section 147 of the Act would reveal that there are two periods of limitation, with regard to escaped assessment 4 year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s escaped assessment under the following circumstances, viz., a. Failure of the assessee to make a return under Section 139 of the Act. b. Does not make a return in response to a notice issued under Sub-Section (1) to Section 142 or Section 148 of the Act. c. Failure of the assessee to disclose fully and truly all material facts necessary for assessment. 9. In the present case, admittedly the extended period of six years is being invoked not under (a) or (b) set out above but only in view of (c) i.e., failure to disclose fully and truly all material facts necessary for assessment. It is submitted by the learned counsel for the respondent/assessee that while furnishing the reasons for reassessment vide its communication dated 06.01.2014, there is no finding that there was failure on the part of the appellant to fully and truly disclose all material facts necessary for assessment. It is submitted that in the absence of any finding on the above jurisdictional fact, the entire proceeding would be void and a nullity. We find there is merit in the above submission inasmuch as the normal period of limitation for exercising the power of reassessment under Section 147 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdictional fact does not exist, the court, authority or officer cannot act. If a court or authority wrongly assumes the existence of such fact, the order can be questioned by a writ of c ertiorari . The underlying principle is that by erroneously assuming existence of such jurisdictional fact, no authority can confer upon itself jurisdiction which it otherwise does not possess.'' 75. In Halsbury's Laws of England, it has been stated: Where the jurisdiction of a tribunal is dependent on the existence of a particular state of affairs, that state of affairs may be described as preliminary to, or collateral to the merits of, the issue. If, at the inception of an inquiry by an inferior tribunal, a challenge is made to its jurisdiction, the tribunal has to make up its mind whether to act or not and can give a ruling on the preliminary or collateral issue; but that ruling is not conclusive. 76. The existence of jurisdictional fact is thus sine qua non or condition precedent for the exercise of power by a court of limited jurisdiction. (emphasis supplied) 10. The Hon'ble Supreme Court in the case of Arun Kumar, thereafter proceeded to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is settled law that for invoking the extended period of limitation duty should not have been paid, short-levied or short-paid or erroneously refunded because of either fraud, collusion, wilful misstatement, suppression of facts or contravention of any provision or rules. This Court has held that these ingredients postulate a positive act and, therefore, mere failure to pay duty and/or take out a licence which is not due to any fraud, collusion or wilful misstatement or suppression of fact or contravention of any provision is not sufficient to attract the extended period of limitation. 69. The question of limitation involves a question of jurisdiction. The finding of fact on the question of jurisdiction would be a jurisdictional fact. Such a jurisdictional question is to be determined having regard to both fact and law involved therein. The Tribunal, in our opinion, committed a manifest error in not determining the said question, particularly, when in the absence of any finding of fact that such short-levy of excise duty related to any positive act on the part of the appellant by way of fraud, collusion, wilful misstatement or suppression of facts, the extended period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there is a failure on the part of the assessee to disclose fully and truly all material facts. in this case there is no finding that there is failure on the part of the assessee to disclose fully and truly all material facts . (emphasis supplied) c) Commissioner of Income-Tax v. Premier Mills Ltd ., (2008) 296 ITR 157: 6 . In case where the assessment is completed under section 143(3) of the Income-tax Act, the reopening of the assessment under section 148 beyond the period of four years at the end of the relevant assessment year can be sustained only if it is established that there is a failure on the part of the assessee to disclose fully and truly all material facts. In this case there is no finding that there is failure on the part of the assessee to disclose fully and truly all material facts. Further, all the material facts are available at the time of making original assessment. The Tribunal has correctly followed the principles enunciated in the Supreme Court judgment reported in CIT v. Foramer France, [2003] 264 ITR 566, as well as this court judgment reported in the case of CIT v. Elgi Finance Ltd., [2006] 286 ITR 674 and came to the correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is nothing to indicate escapement of income. That, on the said two points, there is nothing to indicate failure on the part of the assessee to disclose fully and truly all material facts. That, on these two points, there is nothing to show as to on what basis the Assessing Officer has formed his belief regarding escapement of income from assessment. It is submitted that on the face of the given reasons, there is a total non-application of mind on the part of the Assessing Officer. (emphasis supplied) 12.1. Secondly, when the view taken by the assessee is also the view taken by the Hon'ble Supreme Court, it would not be open to the Revenue to state that there is failure on the part of the assessee to fully and truly disclose all material particulars. Afortiori there is a legislative affirmation of the view taken by the assessee by way of an amendment introduced to Section 115 JB of the Act with regard to the treatment to bad and doubtful debts whereby the above position of law declared by the Hon'ble Supreme Court was neutralized with retrospective effect from 01.04.2010. In this regard, it may be useful to refer to the following judgments: a. State of Rajasthan ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
