TMI Blog2023 (8) TMI 727X X X X Extracts X X X X X X X X Extracts X X X X ..... sed to the Respondents all the material facts in respect of Bad Debts Written Off. Therefore, the reason given by Respondent No. 1 in the said letter dated 23rd July 2021 for reopening the reassessment in respect of Bad Debts Writing Off cannot be a reason to reopen the Assessment under Section 148 of the Act. Computation of MAT liability under Section 115JB - A perusal of the reasons given clearly show that there is no failure on the part of the Petitioner to disclose any material fact. In fact, Respondent No. 1 records that the incorrect application of provisions of the Act by the Department resulted in under assessment of income of Rs. 50,99,00,000/- with a consequent short levy of tax of Rs. 10,68,77,590/- . This itself shows that there is merely a change of opinion on the part of Respondent No. 1 and no failure to disclose any material fact on the part of the Petitioner. In letter in response to specific queries raised during the assessment proceedings, the Petitioner had given the computation in respect of of MAT liability. This once again shows, that the Petitioner had disclosed all material facts in respect of computation of MAT liability and there was no failure on i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Petitioner. 4. The Petitioner e-filed its revised Return of Income for the Assessment Year 2014-15 on 29th March 2016, once again declaring NIL Income. 5. Further notices and questionnaires were also issued to the Petitioner. A Notice dated 4th July 2016 under Section 142(1) of the Act, along with a questionnaire, was issued to the Petitioner. In the questionnaire, details regarding computation of MAT liability, Bad Debts Written Off and the provisions made in the account and deduction claimed under Section 14A of the Act, with detailed computation, were called for by the Assessing Officer. 6. By its letter dated 27th July 2016, the Petitioner submitted (i) the computation of MAT liability, (ii) explanation regarding the deduction claimed under Section 14Aof the Act and (iii) the details of the Bad Detbs. By its letter dated 11th August 2016, the Petitioner once again furnished the computation of MAT liability and details of Bad Debts. By a letter dated 16th September 2016, the Petitioner again submitted the working of the MAT liability. Further, by a letter dated 18th November 2016, the Petitioner specifically gave complete explanation and details regarding the disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction of unabsorbed depreciation by its letter dated 11th August 2016. The details of the Petitioner s claim of unabsorbed depreciation, along with the working of the same, were examined and allowed by the Assessing Officer. Further, the Petitioner stated that, during the assessment proceedings under Section 143 (3), as requested by the Assessing Officer, the Petitioner had submitted a reply dated 27th July 2016 in response to the specific query raised by the Assessing Officer regarding justifying allowability of Section 14A of the Act in the case of the Petitioner. As requested by the Assessing Officer, the Petitioner had submitted details of Section 14A disallowance by its letter dated 18th November 2016. The Petitioner had disallowed expenses related to exempt income under Section 14A of the Act, read with Rule 8D of the Rules, amounting to Rs. 5,57,92,968/- in the original Income Tax Return filed on 27th November 2014. Thereafter, considering the judgment of this Court in the case of HDFC Bank (383 ITR 529), the Petitioner had filed revised Income Tax Returns on 27th July 2016 and disallowed expenses relating to exempt income amounting to Rs. 7,24,194 (1% of exempt inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated in the said letters, the Assessment of the Petitioner could not be reopened under the provisions of Section 148 of the Act. On the other hand, Mr. Suresh Kumar, the learned Counsel for the Respondents, supported the said Order dated 13th January 2022 and submitted that, for all the reasons given in the said Order, the reopening of assessment had been initiated on valid grounds and the Assessment Officer had sufficient reasons to believe that the Petitioner had not disclosed fully and truly the material facts necessary for Assessment in its case. 16. In the present case, it is an admitted position that the said Notice dated 24th March 2021 had been issued after the expiry of four years from the end of the relevant Assessment Year, i.e., Assessment Year 2014-15. Therefore, the first proviso to Section 147 of the Act (prior to its substitution by the Finance Act, 2021 w.e.f. 1st April 2021) is applicable and reads as under:- Provided that where an assessment under sub-section (3) of Secion 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the reasons for reopening, except stating in paragraph 3 that a sum of Rs. 7,66,66,663/- which was chargeable to tax has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary, there is nothing else in the reasons. In an unreported judgment of this Court in First Source Solutions Limited V/s. Asst. CIT[WP No. 2762 of 2019, dated 31-8-2021], relied upon by Mr. Pardiwalla, the Court held that a general statement that the escapement of income is by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment is not enough. The Assessing Officer should indicate what was the material fact that was not truly and fully disclosed to him. In the affidavit in reply, it is stated that the reassessment proceedings was based on audit objections. In another unreported judgment of this Court in Jainam Investments V/s. Asst. CIT[WP No. 2760 of 2019, dated 24-8-2021] relied upon by Mr. Pardiwalla, it is held that the reasons for reopening an assessment should be that of the Assessing Officer alone who is issuing the notice and he cannot act merely on the dic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the Assessment. The first reason given in the said letter dated 23rd July 2021 for reopening the Assessment is in respect of the Bad Debts Written Off to the tune of Rs. 1,24,96,27,594/- claimed as deduction. The said reasons are found in paragraph 2.1 of the said letter which read as under:- 2.1 On verification of records it is observed that the assessee claimed and was allowed a deduction of Rs. 1249627594 towards bad debts written off. In its justification, the assessee had submitted the details. It was seen from the details submitted that there was a technical write off of Rs. 124,96,27,594/- by the assessee which was treated by it as provision for bad debts. Against this provision, there were actual write off of Rs. 95,74,20,093/-. The difference of Rs. 29,22,07,502/- between these two was taken to the P L as provision for bad and doubtful debts which was added back by the assessee in the computation of income. The assessee, however, instead, claimed a deduction of Rs. 124,96,27,594/- towards bad debts written off which amounted to patently wrong claim. This resulted in underassessment of income by Rs. 124,96,27,594/- with a short levy of tax of Rs. 42,47,48,419/- (p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the assessee. It was seen from the records that the figure for book depreciation or book loss was Nil for the assessee for the current year. Incorrect application of provisions of the Act by the Department resulted in underassessment of income of Rs. 50,99,00,000 with a consequent short levy of tax of Rs. 10,68,77,590. 22. Again a perusal of the said reasons given clearly show that there is no failure on the part of the Petitioner to disclose any material fact. In fact, in paragraph 2.2 itself, Respondent No. 1 records that the incorrect application of provisions of the Act by the Department resulted in under assessment of income of Rs. 50,99,00,000/- with a consequent short levy of tax of Rs. 10,68,77,590/- . This itself shows that there is merely a change of opinion on the part of Respondent No. 1 and no failure to disclose any material fact on the part of the Petitioner. Further, in paragraph 1 of its letter dated 27th July 2016 and in paragraph 3 of its letter dated 16th September 2016 in response to specific queries raised during the assessment proceedings, the Petitioner had given the computation in respect of of MAT liability. This once again shows, that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elating to exempt income. Thus, the said Assessment Order and the said letters once again clearly show that there is no failure on the part of the Petitioner to disclose any material fact even in respect of the issue of disallowance under Section 14A of the Act. 25. In the impugned Order dated 13th January 2022, Respondent No. 1 has only held that the Assessment of the Petitioner could be reopened as there was tangible material on record to believe that income chargeable to tax had escaped assessment. Respondent No. 1 has not given any reason in the said Order as to why, according to him, as required by the first proviso to Section 147 of the Act, the Petitioner had failed to disclose any material fact. The said Order dated 13th January 2022 does not deal with the specific objections of the Petitioner that there was no failure on its part to disclose any material fact and therefore its assessment cannot be reopened under the provisions of Section 148 of the Act. In our view, without arriving at a finding that the Petitioner had failed to disclose any material fact, it was not open to Respondent No. 1 to reopen the Assessment of the Petitioner. The same is a sine qua non for reop ..... X X X X Extracts X X X X X X X X Extracts X X X X
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