2015 (6) TMI 878 - AT - Income Tax

Tribunal rules reassessment invalid due to change of opinion, no default in disclosure.

The Tribunal upheld the CIT(A)'s decision to delete the addition of the provision for doubtful debt, as the reassessment was deemed to be based on a ... Reopening of assessment - Addition on account of provision for doubtful debt - while calculating income u/s 115JB, total amount of provision for doubtful debt was not added back by the assessee for calculation of its book profit - CIT(A) deleted the addition - Held that:- In the reasons recorded, the AO merely stated that though assessee while computing the income under the normal provisions of the Act, added back the provision for bad and doubtful debts but while computing/ calculating income u/s 115JB did not add back the provisions for bad and doubtful debts and, therefore, the income had escaped assessment. Thus, there is no allegation that there was any default on the part of assessee in disclosing fully and truly all material facts. Admittedly, the AO had raised queries in course of original assessment proceedings which were duly replied by assessee vis a vis the provision of section 115JB and, therefore, this was clearly a case of change of opinion, which is impermissible for initiating proceedings u/s 148. We find that this issue is squarely covered by the decision of Sun Investment Pvt. Ltd. (2012 (2) TMI 193 - DELHI HIGH COURT ), wherein under identical facts the reassessments were held to be without jurisdiction. The Hon’ble Delhi High Court also considered the insertion by Finance (No. 2) Act, 2009 with retrospective effect from 1-4-2001 and after considering the merit of each amendment held that reassessment proceedings were not justified - Decided in favour of assessee. Issues:Reopening of assessment based on provision for doubtful debt under section 115JB.Analysis:The appeal was filed by the revenue against the order of the CIT(A) relating to the assessment year 2004-05. The main issue raised was the deletion of an addition made on account of provision for doubtful debt amounting to Rs. 14,25,38,173. The AO observed that while the assessee added back the provision for bad and doubtful debts in its computation of income under normal provisions, it did not do so while calculating income under section 115JB. Consequently, a notice under section 148 was issued for reassessment. The AO added the provision for bad and doubtful debts for determining the book profits. The assessee contended that the reopening after four years was based on a change of opinion and cited various case laws supporting its position. The CIT(A) agreed with the assessee, emphasizing that the AO had applied his mind during the original assessment and that the reopening was merely a change of opinion. The CIT(A) allowed the appeal based on the principle of change of opinion and relevant case laws.The Tribunal considered the arguments presented by both parties and examined the record of the case. It noted that the reopening was done after four years, triggering the proviso to section 147, which required a failure to disclose all material facts fully and truly by the assessee for justifying reassessment proceedings after the stipulated period. However, the AO's reasons for reopening did not allege any default in disclosing material facts by the assessee. The Tribunal found that the issue was a clear case of change of opinion, which is impermissible for initiating proceedings under section 148. Citing a judgment by the Delhi High Court in a similar case, the Tribunal concluded that the reassessment was without jurisdiction. It also referred to another case where reopening based on a retrospective amendment was deemed unjustified. Consequently, the Tribunal upheld the order of the CIT(A) and dismissed the revenue's appeal.In conclusion, the Tribunal found that the reassessment proceedings were initiated based on a change of opinion rather than a failure to disclose material facts by the assessee. Citing relevant case laws, the Tribunal held that the reassessment was without jurisdiction and upheld the decision of the CIT(A) to delete the addition of the provision for doubtful debt. The revenue's appeal was dismissed, and the order was pronounced on April 29, 2015.