2018 (6) TMI 32

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....a notice under section 148 of the Act, as he was of the opinion that the taxable income had escaped assessment. The reasons recorded for reopening read as under :- "The assessee is engaged in catering and house-keeping business filed the return of income on 27/10/2004 declaring nil income after adjusting carry forward losses of Rs. 15, 77, 522/- and paid tax on book profit of Rs. 10, 48, 904/-. The assessee had received Rs. 4, 61, 946/- on interest from bank deposit and Rs. 450/- as interest accrued from long term investment and Rs. 10, 24, 435/- as interest. There was not actual business activity during the relevant previous year. But the assessee has shown the "interest income" as "business income" and claimed set off from carried forward business loss. The interest income needs to be assessed under the head "Income from other sources" and set off should not be allowed from carried forward business loss to "Income from other sources" and set off should not be allowed from carried forward business loss to "Income from other sources". Therefore, there is an escapement of taxation to the income of Rs. 10, 24, 436/-. Further, the assessee has not added prov....

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....t same were not effective for the year under appeal. He relied upon the cases of Indo Swiss Jewels Ltd(284ITR389);Paramount Premises(P. )Ltd. (260ITR259);Tarak L Gandhi (27 SOT72);Rallis India Ltd. (323ITR54). HCL Comnet Systems and Service Ltd. ( 305 ITR 409). 5. We have heard the rival submissions and perused the material before us. We find that the AO had issued the notice u/s. 148 of the Act(Pg. 8 of the PB. ), after recording reasons, as mentioned in the earlier part of the order. A perusal of the reasons recorded prove that reopening was initiated by the AO on two counts i). offering interest income under the head business income as against the income from other sources and ii). not adding provisions for doubtful debts of Rs. 5. 04 lakhs in the MAT working. 5. 1. We find that while passing an order u/s. 143(3)of the Act for the AY. s. 1997-98, 1998-99 and 2002-03(Pg. s 40-45 of the PB. ), the AO. s have assessed the interest income under the head business income for those AY. s. It is a fact that intimation u/s. 143(1)was issued for the year under consideration. But, it would not mean that the issue of computing the interest income under a particular h....

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....terest income was never assessed as income from other sources. So, in our opinion, there was no justification for changing the head of interest income for the year under appeal. We hold that re-assessment proceedings should not have been initiated in the matter under considera - tion. Reassessment is a serious step and cannot and should not be taken lightly, as it unsettles a settled position. Here, we would like to refer to the case of Rallis(supra)delivered by the Hon'ble Supreme Court. In that matter the petitioner had filed its return of income for the AY. 2004-05 on 29/10/2004, and had declared a loss of Rs. 52. 87 crores. While computing this loss, it claimed a deduction of bad debts amounting to Rs. 12, 00, 43, 394/-. It also computed a book loss of Rs. 42. 14 crores u/s. 115JB. The return of income was revised on 31/03/2006, so as to declare a loss of Rs. 53. 20 crores. The return was selected for scrutiny assessment by a notice u/s. 143(2)of the Act. The AO issued two questionnaires during the course of the assessment proceedings, one of them being on 29/09/2006. A specific query was raised in regard to the allowability of the bad debts claimed by the petitioner u/s. 36(1)....

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....record facts proving that provision were for unascertained liability. At the time of filing of return of income the stand taken by the assessee was supported by the judgments/orders of the Hon'ble Court/ Tribunal. The effect of amendment to the section 115JB that are effective from 01/04/2001, has been deliberated upon by the Hon'ble Bombay High Court in the matter of Rallis India Ltd. (supra) as under: "For the computation of book profits under section 115JB, the Assessing Officer has to accept the authenticity of the accounts maintained in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956, which are certified by the auditors and passed by the company in its general meeting. The Assessing Officer does not have jurisdiction to go beyond the net profits as shown in the profit and loss account, save and except to the extent which is provided for in the Explanation. Under Explanation (1)(c) the increase shall be of the amount or amounts set aside for meeting liabilities other than ascertained liabilities. In order that clause (c) should apply, there must be a provision ; the provision must be for meeting a liability and the liability....