2015 (10) TMI 1621 - AT - Income Tax

ITAT Upholds Addition for Bad Debt in Book Profit Computation

The ITAT dismissed the Revenue's appeal challenging the addition of a provision for bad and doubtful debt in the computation of book profit under section ... Reopening of assessment - reopening on basis of audit objection - Mat computation - Addition for bad and doubtful debt in computation of book profit u/s 115JB - CIT(A) deleted the addition - Held that:- Respectfully following the case of Raajratna Metal Industries Ltd. vs. ACIT [2014 (8) TMI 598 - GUJARAT HIGH COURT] hold that the assessment for the year under consideration was not validly reopened u/s 147. Be that as it may be, the assessee has not filed any appeal or cross-objection against the order of the CIT(A). Under rule 27, the respondent may support the order appealed against on any of the grounds decided against him. Therefore, under Rule 27, the maximum relief assessee can get is the sustenance of the order of the CIT(A). In view of above, we, relying upon the decision of the Hon’ble jurisdictional High Court in the case of Raajratna Metal Industries Ltd (supra) and considering Rule 27 of the ITAT Rules, uphold the order of the CIT(A) and dismiss the appeal filed by the Revenue. - Decided against revenue. Issues:1. Validity of addition of provision for bad and doubtful debt in computation of book profit u/s 115JB of the I.T. Act, 1961.Analysis:The appeal filed by the Revenue challenged the order of the Ld. Commissioner of Income-tax(Appeals)-XXI, Ahmedabad regarding the addition of a provision for bad and doubtful debt in the computation of book profit u/s 115JB of the I.T. Act, 1961 for Assessment Year 2003-04. The assessee, while not appealing against the CIT(A)'s decision, chose to support it under Rule 27 of the ITAT Rules. The assessee contended that the assessment was invalid as it was reopened solely based on an audit objection, citing a decision by the jurisdictional High Court. The Revenue, however, relied on a different decision from the Hon'ble Delhi High Court. The ITAT, following the jurisdictional High Court's decision, held that the assessment was not validly reopened under section 147. Since the assessee did not file any appeal or cross-objection against the CIT(A)'s order, the relief granted under Rule 27 was limited to sustaining the CIT(A)'s decision. Consequently, the ITAT upheld the CIT(A)'s order and dismissed the Revenue's appeal.This case primarily revolved around the validity of the addition of a provision for bad and doubtful debt in the computation of book profit under section 115JB of the I.T. Act, 1961 for the relevant assessment year. The key issue was whether the assessment was validly reopened under section 147, as the Revenue had based the reopening solely on an audit objection. The assessee, while not challenging the CIT(A)'s decision, sought to support it under Rule 27 of the ITAT Rules. The ITAT, being bound by the decision of the jurisdictional High Court, held that the assessment was not validly reopened under section 147 due to the reliance on an audit objection. Since the assessee did not file any appeal or cross-objection against the CIT(A)'s order, the relief granted under Rule 27 was limited to upholding the CIT(A)'s decision. Consequently, the ITAT dismissed the Revenue's appeal, affirming the CIT(A)'s order regarding the addition of the provision for bad and doubtful debt in the computation of book profit.