TaxTMI 
TaxTMI 
2012 (2) TMI 193
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.... writ petition may be noticed. The petitioner is an investment company registered with the Reserve Bank of India as a non-banking finance company. It deals in shares and securities and also makes investments. On 11.11.2003 it filed a return of income for the assessment year 2003-04 declaring Rs.Nil as its total income computed under the provisions of the Act. The return was accompanied by the computation of the income, the report of the chartered accountants in Form No.29-B and the annexures thereto as well as the annual financial accounts. The schedules forming part of the balance sheet as on 31.3.2003 were also filed along with the annual accounts. It is relevant to mention that Note 3 of the Schedule H read as follows : "3. The market value of the certain quoted investments (as reflected in schedule E) is lower than the cost. Considering the strategic and the long term nature of the Investments and the asset base of the investee companies, such decline, in the opinion of the management has been considered to be of a temporary nature and hence not considered while valuing the same. As regard unquoted investments, in view of a permanent diminution in the value of certain cases, a....
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....oticed that the assessee has debited an amount of Rs.15,33,22,500/- in the Profit and Loss a/c on account of provision for diminution in value of investment to arrive at net profit. This provision was added back by the assessee for computing the income under normal provisions. However, while arriving at the book profits u/s 115JB, the same was not added back by the assessee. This being unascertained liability according to sub section (c) to section 115JB should have been added back while computing the book profits u/s 115JB. The same is to be added to the book profits." 4. On 18.8.2009, the petitioner wrote a letter to respondent No.1 objecting to the issue of notice under Section 148 and the reopening of the assessment proceedings. It was submitted in the objections that the provision of Rs.15,33,00,500/- debited to the profit and loss account for diminution in the value of investments was an ascertained liability and therefore while computing the book profit under Section 115JB of the Act, no adjustment was made since it was not postulated/mandated specifically by any of the adjustments stipulated by the Section, that the entry was separately and independently reflected i....
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....present writ petition. 7. The contention of the petitioner is that there was no failure on its part to furnish full and true particulars necessary for its assessment and therefore, the reopening is invalid, the notice having been issued after a period of 4 years from the end of the relevant assessment year. In our opinion, the contention is well founded. We have already referred to the particulars submitted by the petitioner along with the return of income. In addition to the profit and loss account and the balance sheet as on 31.3.2003 along with the Schedules, the petitioner had submitted the audit report in Form No.29B. It is not denied on behalf of the respondents that the assessee submitted the above particulars along with the return of income. It is relevant to note that in Note No.3 to Schedule H to the balance sheet, pointed attention of the Assessing Officer had been drawn to the fact that the market value of certain quoted investments (as reflected in Schedule E) is lower than the cost and that in the opinion of the management and considering the strategic and long term nature of the investments and the asset base of the companies in which the petitioner had invested, th....
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....s account as net loss after debiting the provision for diminution in the value of the unquoted investments. Thus, at the time of completing the original assessment under Section 143(3), the Assessing Officer had before him not only the profit and loss account and the balance sheet along with the Schedules and notes on account, but also had before him, the statement of total income filed by the petitioner, which contained the normal computation of total income as per the Act as also the computation of the book profit in Annexure A to the audit report in Form No.29-B furnished under Rule 40B of the Income Tax Rules for the purposes of Section 115JB. There was thus no failure on the part of the assessee to furnish full and true particulars necessary for its assessment. 8. The Assessing Officer has stated in the reasons recorded for reopening the assessment that the provision for diminution in the value of the unquoted investments was an unascertained liability and therefore, the assessee ought to have added it back to the net profit as shown in the profit and loss account in terms of Clause (c) of Explanation 1 to Section 115JB. Under this provision the amount or amounts set a....
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....l not be open to the assessee to say, for example-"I have produced the account books and the documents: You, the assessing officer, examine them, and find out the facts necessary for your purpose: My duty is done with disclosing these account books and the documents." His omission to bring to the assessing authority's attention those particular items in the account books, or the particular portions of the documents, which are relevant, will amount to "omission to disclose fully and truly all material facts necessary for his assessment." Nor will he be able to contend successfully that by disclosing certain evidence, he should be deemed to have disclosed other evidence, which might have been discovered by the assessing authority if he had pursued investigation on the basis of what has been disclosed. The Explanation to the section gives a quietus to all such contentions; and the position remains that so far as primary facts are concerned, it is the assessee's duty to disclose all of them-including particular entries in account books, particular portions documents, and documents and other evidence which could have on discovered by the assessing authority, from the documents and other....
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....hould have been discovered and unearthed by the Assessing Officer, with due diligence from the books of accounts or other evidence, does not amount to disclosure. The assessee cannot plead and defend that he had produced all the books of accounts and other evidence before the Assessing Officer. It is note-worthy that the Supreme Court, in the aforesaid judgment, has pointed out that the Explanation has nothing to do with the "inferences" which the Assessing Officer is required to draw from the primary facts disclosed by the assessee. 9. In the present case, as the facts narrated hereinabove would show the petitioner has disclosed the fact that the profit and loss account contains a debit towards the provision for diminution in the value of unquoted investments. It is not a case where the entry was imbedded in the account books and required some more diligence than a cursory look at the accounts to find it out. Pointed attention of the Assessing Officer had been drawn to the Note No.3 of Schedule H appended to the balance sheet. The note clearly explained the entry made in the profit and loss account. There was no ambiguity or doubt. A copy of the profit and loss account is placed ....
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....09 with retrospective fact from 1.4.2001. The assessee cannot be said to have omitted to inform the Assessing Officer of the existence of this clause because at the time when the assessment was made under Section 143(3), this Clause which specifically covered the provision for diminution in the value of the asset was not in existence in the Section. The assessee cannot be expected to anticipate statutory amendments made later and this is the view taken by a Division Bench of this Court in CIT Vs. SIL Investments Ltd. in ITA Nos.700 & 701 of 2010, dated 7th May, 2010. The Division Bench approved of the tribunal‟s view that the law cannot contemplate the performance of an impossible act and therefore, it was not expected of the assessee to foresee or forecast a future amendment which was to be brought into effect retrospectively. A similar view has been expressed by the Bombay High Court in WP(C) 2514 of 2009 in the case of Rallis India Ltd. Vs. ACIT and Anr. In the absence of any specific provision in Section 115JB at the time when the original assessment was made and having regard to the debatable nature of the issue as to whether Clause (c) of Explanation 1 to Section 115JB ....
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....of the Act and called upon the petitioner to submit a return of income. The petitioner filed a return of income in response to the notice and it is not in dispute that the return of income was the same as was filed originally on 20.10.2006. The petitioner also requested the Assessing Officer (respondent No.1) to furnish a copy of the reasons recorded for reopening the assessment. The Assessing Officer under cover of letter dated 17.7.2009 informed the petitioner of the reasons which are reproduced below : "It is noticed that provision for doubtful debts amounting to Rs.3,11,865/- and other provisions amounting to Rs.8,99,15,732/- have not been added back while computing to the Book Profits u/s 115JB of the Act. The samer (sic) is to be added to the book profits for computation of income u/s 115JB of the Act. Therefore, you are required to comply with notice u/s 142(1) of /he (sic) Act." 3. The petitioner filed objections to the reasons recorded by the Assessing Officer and submitted that the Assessing Officer did not properly assume jurisdiction to reopen the assessment, that the issue of notice under Section 148 was not in accordance with law, that the provision for non-performi....
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....ieve" refers to the prima facie or tentative belief which the Assessing Officer is required to form at the time of recording the reasons and issuing the notice under Section 148. The belief should not be mere pretence or sham. It should not amount to a mere suspicion or surmise. Under Clause (c) of Explanation 1 to Section 115 JB, any provision made or amount set aside for meeting unascertained liabilities has to be added back to the book profit shown in the profit and loss account. Whether or not under this provision the Assessing Officer should add back the provision in question to the book profit is something which has not been adverted to and examined by him as there was no occasion for him to do so since the return was merely processed under Section 143(1)(a) of the Act, there being no scrutiny assessment under Section 143(3). In the reasons recorded for reopening the assessment, the Assessing Officer has referred to the statutory provision which in his view is applicable. It may be that the issue whether the provisions in question should be added back in terms of the relevant clause in the Explanation-1 below Section 115JB is debatable but the fact remains that it could not b....