AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (3) TMI 1111
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....s. The respondent maintains regular books of account and is an assessee on the file of the appellant under the Income Tax Act, 1961 (hereinafter referred to as "the Act"). It is stated that the respondent/assessee has been filing returns of income regularly and assessed to tax on the said basis. (b) The present proceedings relates to the assessment year 2006-2007. For the said assessment year, a return of Income Tax was filed by the respondent/assessee on 04.11.2006 declaring a total income of Rs. 1,20,65,500/- under normal computation and Rs. 26,67,21,500/- under Section 115JB of the Act. The assessment was thereafter taken up for scrutiny. Notice under Section 143(2) of the Act was issued on 02.07.2008 calling upon the respondent/assessee to submit particulars that were duly complied with. The respondent/assessee, while computing the income under Section 115JB of the Act excluded the provision created towards bad and doubtful debts from the purview of 'Book Profits'. (c ) During the course of hearing, the Assessing Officer sought for details relating to computation of income under Section 115JB of the Act, including the provisions towards bad and doubtful debts vide....
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....sment dated 10.12.2008 disclosed that the assessment was made after taking into account the provision of bad and doubtful debts to the extent of Rs. 29,35,473/-. The relevant portion of the order is extracted here under: ''Net Profit as per Profit and Loss Account Rs.27,22,80,367 Add: Items not allowable: (i) Provision for Bad and Doubtful debts Rs.29,35,473 (ii) Assets discarded Rs. 1,58,294 Rs. 27,53,74,134 (g) The Hon'ble Supreme Court in the case of CIT vs. HCL Commet Systems & Services Ltd, reported in, 305 ITR 409 had held that bad and doubtful debts cannot be said to be a provision for liability because even if a debt is not recoverable no liability gets fastened upon the assessee. (i) Consequent to the above declaration of the law by the Hon'ble Supreme Court, there was an amendment made to Section 115JB of the Act by which the above judgment was neutralized and as a result, bad and doubtful debts was to be added to the book profits with retrospective effect from 1.4.2001. (j) The said amendment was made in the year 2009 with retrospective effect from 01.04....
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....risdiction in the facts of the case. iv. It was submitted by the respondent/assessee that there was a full and true disclosing of all material facts and therefore, the impugned notice invoking the extended period is bad for want of jurisdiction and barred by limitation. It was further submitted that the assessment under Section 143(3) of the Act was completed on the basis of the law prevailing at the time of assessment proceedings and retrospective amendment of the Act cannot be the basis for re-opening of assessment proceedings. In support of his submissions, reference was made to various judgments. The respondent/assessee requested the Assessing Officer to drop the proposal. The objections filed by the respondent/assessee to the reasons furnished were objected by the appellant herein on the following premise viz., ''The reasons given for re-opening the assessment was that ''based on the latest amendment to the IT Act by the Finance Act 2008 w.e.f. 01.04.01, book profit u/s.115JB requires to be increased by the amount or amounts set-aside as provision for diminution in the value of any asset, and hence, the provision for bad and doubtful debts to ....
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....We find that the learned Judge after setting out the facts has proceeded to hold that the impugned proceeding is without jurisdiction cannot be sustained and it would warrant interference by invoking Article 226 of the Constitution of India for the following reasons: ''14. In the light of the aforesaid judgment of the Hon'ble Supreme Court, provisions of Section 115JB of the IT Act was amended. The amended provision was amended retrospectively and is deemed to have been in force all along during the period commencing from 1st April of 2017. 15. Though the provisions stands amended with retrospective effect, it cannot be said that the petitioner had failed true and full disclosure of all material facts that were required for completing the assessment. The petitioner has taken a bonafide stand that the amount debited in Profit and Loss Account towards provisions of bad and doubtful debts were not be included under Section 115JB of the IT Act. This was scrutinized and the assessment order came to be passed on 10.12.2008. 16. Therefore, even if, the amended provision as it stands amended, vide Finance Act, 2009 in the Income Tax Act, 1961, it cann....
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....s been accepted and applied by various Courts including the Hon'ble Supreme Court. e. That the retrospective amendment cannot be the basis to issue notice imputing motives, thereby invoking the extended period of limitation. 7. Heard both sides and perused the materials available on record. 8. We find that there is no illegality or infirmity in the order of the learned Single Judge warranting interference for the following reasons: a) That the impugned proceeding is admittedly initiated invoking the extended period under Section 147 of the Act. The relevant portion of the said Section is extracted below: ''Provided that where an assessment under sub-section(3) of section 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 year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all....
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....s necessary for assessment. We say this, since it appears to us that the whole idea of furnishing reasons before embarking on a full fledged exercise of reassessment was to ensure that the powers of reassessment are exercised only in circumstances which the statute permit. The above limitation/restriction on the power of reassessment was intended to ensure transparency in the proceeding and to avoid abuse of power. It is trite law that power of reassessment must be exercised with a degree of caution and an element of circumspection and must be strictly in compliance with the procedure and only in circumstances which warrants exercise of that power. In the present case, though admittedly the power to reassess has been exercised by invoking the extended period of limitation in terms of the proviso to Section 147 of the Act, there is no recording of the existence of the circumstances, viz., failure to disclose fully and truly all material particulars which would confer jurisdiction to proceed / initiate reassessment proceeding beyond four years and within six years. In this regard, it may be relevant to refer to the following judgments to appreciate the relevance and importance of exi....
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....mpulsorily for housing of working classes. But it was expressly provided that no land could be acquired which at the date of compulsory purchase formed part of park, garden or pleasure ground. An order of compulsory purchase was made which was challenged by the owner contending that the land was a part of park. The Minister directed public inquiry and on the basis of the report submitted, confirmed the order. 81.Interfering with the finding of the Minister and setting aside the order, the Court of Appeal stated; "The first and the most important matter to bear in mind is that the jurisdiction to make the order is dependent on a finding of fact; for, unless the land can be held not to be part of a park or not to be required for amenity or convenience, there is no jurisdiction in the borough council to make, or in the Minister to confirm, the order. (emphasis supplied) 11. While on the question of existence or otherwise of jurisdictional fact which would enable the authority to invoke the extended period of limitation of six years for reassessment, it may also be relevant to note that the question of limitation has been understood to be one involving jurisdict....
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.... Officer ought to show/ demonstrate the existence of any of the three circumstances set out in the proviso to Section 147 of the Act. In this case, failure on the part of the assessee to fully and truly disclose all material particulars in our view would constitute the "jurisdictional fact" for invoking extended period of limitation and failure to record the existence of the above jurisditional fact while invoking the extended period under the proviso to Section 147 of the Act, would vitiate the entire proceedings. In this regard, it may be relevant to refer the following judgments, wherein it was held that failure to render a finding as to the existence of the above circumstance warranting invocation of the extended period in terms of the proviso to Section 147 of the Act would vitiate the entire proceedings. In this regard, it may be relevant to refer to the following judgements: a) Duli Chand Singhania vs ACIT (269 ITR 192): ...that the reasons recorded for issue of notice showed that the satisfaction recorded therein wes merely about the escapement of income. There was not even a whisper of an allegation that such escapement had occurred by reason of failure o....
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....mer France, [2003] 264 ITR 566 (SC), it was held that if there is no failure to file return or to disclose fully and truly all material facts, issuance of notice beyond the period of four years is barred by limitation. In the case of CIT v. Annamalai Finance Ltd., [2005] 275 ITR 451 (Mad) it was held that section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceedings upon a mere change of opinion. It is incumbent on the Assessing Officer to prove that there was a failure to disclose material facts necessary for the assessment for the issuance of notice beyond the period of four years." e) Caprihans India Ltd. v. Tarun Seem, Deputy Commissioner of Income-Tax, (2004) 266 ITR 566 : "8. The Assessing Officer seeks to reopen the assessment after a period of four years from the end of the assessment year and in view of the judgment of this court in the case of IPCA Laboratories Ltd. v. Gajanand Meena, Deputy CIT (No. 2)[2001] 251 ITR 416, the Assessing Officer cannot act in the matter of reopening of assessment beyond four years, unless he has reason to believe that income has escaped assessment by reason of....
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....st Ltd., vs. ACIT (2013) 33 taxmann.com 67 (Gujarat): "13. The third reason is to be referred only for summary rejection. Third ground was retrospective amendment in section 115JB of the Act. Surely, beyond a period of four years this cannot be a ground for reassessment on assessment. Such legal proposition requires no authority of law. Nevertheless, we may refer to decision of Division Bench of this Court in case of Denish Industries Ltd. v. ITO [2004] 271 ITR 340/140 Taxman 456, wherein it was held and observed as under: "It is true that when there is a statutory amendment with retrospective effect, the statutory amendment has to operate as if the law as amended was there on the statute book/However, as per the settled legal position the fiction is to operate within the field for which it is meant. Hence, if the proceedings were pending on 1st April, 1986 when the statutory amendment was made, whether assessment proceedings or proceedings by way of appeal or revision or reference, Expln. 8 would have certainly operated. However, on the question whether the assessee had failed to disclose fully and truly all material facts necessary for assessment, it is obvious ....