2026 (2) TMI 768

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....l of the same, we deem it fit to condone the delay by holding that there was sufficient cause for the delay in filing the present appeal. Accordingly, the delay is condoned. 3. The Revenue has raised the following grounds of appeal and the assessee has raised the following grounds in its cross objection: Grounds raised by the Revenue: "1. On the facts and circumstances of the case and in law, the Ld. CIT (A) erred in holding reopening u/s. 147 of the Act not valid and the quashing impugned assessment order without considering the fact that the reopening proceedings were initiated on receipt of revenue audit objection. 2. On the facts and circumstances of the case and in law, the Ld. CIT (A) erred in holding reopening u/s. 147 of the Act not valid and the quashing impugned assessment order failing to consider that revenue audit objections are tangible material. 3. The appellant craves the leaves to add, amend, alter and/or delete any of the grounds of appeals of appeal as above." Grounds raised by the assessee: 1. On the facts and in the circumstances of the case and in law the Id. CIT(A) erred in not adjudicating on the groun....

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....l provisions and book profit u/s 115JB of the Act at Rs. 5584,71,35,821/-. Subsequently, the Learned Principal Commissioner of Income Tax ("Ld. PCIT" for short) invoked the revisionary powers u/s 263 of the Act and vide order dated 26.03.2019 passed u/s 263 of the Act directed the Ld. AO to add back the provisions and contingencies amounting to Rs. 6516,66,53,000/- debited to the P&L account while computing the book profits. Further, the order giving effect of Ld. PCIT was passed on 26.03.2019 determining total income at Rs. 5164,43,19,448/- under the normal provisions and book profit at Rs. 9032,65,84,821/- was recomputed after making additions amounting to Rs. 6516,66,53,000/-. The Ld. PCIT also passed order u/s 263 of the Act dated 11.03.2020 setting aside the order dated 28.03.2018 giving effect to the Ld. CIT(A)'s order dated 12.12.2017 passed by the Ld. AO giving certain directions to compute the correct income and the order giving effect was passed u/s 143(3) r.w.s. 263 of the Act dated 29.09.2021 determining the total income at Rs. 5536,17,83,210/- under the normal provisions and book profit u/s 115JB of the Act at Rs. 9032,65,84,821/-. It is also observed that order u/s 15....

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....h Court in the case of Godrej & Boyce Manufacturing Co. Ltd. Vs. ACIT 140 taxmann.com 345. 8. Aggrieved, the Revenue is in appeal before us challenging the order of Ld. CIT(A) on the abovementioned grounds and the assessee has also raised cross objection on the ground that the Ld. CIT(A) has not decided the issue on the merits of the case. 9. We have heard the rival submissions and perused the materials available on record. The issue that requires adjudication in the present appeal is whether the Ld. CIT(A) was right in allowing the appeal of the assessee by holding the re-assessment to be invalid. From the factual background of the case, it is evident that during the scrutiny assessment u/s 143(3) of the Act the Ld. AO made the following additions/disallowances vide assessment order dated 30.03.2017: Sl No Particulars of addition/disallowance Under Normal Income Under MAT (i.e. Book Profit) 1 Disallowance u/s.14A 1288744800 1288744800 2 Amortization of lease premium 38854000   3 Income from foreign branches 21174615000 11451440634 4 Broken Period interest 1386100000 0 5 Provision for wage revision 6250....

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....ted 12-12-2017 was passed on 28-03- 2018 and total income under normal provision was computed at Rs. 5164,43,19,448/- and book profit u/s.115JB of the Act at Rs. 5584,71,35,821/-. Thereafter, the Pr.CIT vide his order u/s.263 of the Act dated 26-03-2019 directed the AO to add back the provisions and contingencies amounting to Rs. 6516,66,53,000/- debited to the profit and loss account while computing the book profit as per the Act. The order giving effect of the PCIT-2, Mumbai dated 26-03-2019 was passed on 26-03-2019 determining the total income at Rs. 5164,43,19,448/- under normal provision and book profit of Rs. 9032,65,84,821/- was recomputed by making addition of Rs. 6516,66,53,000/-. 3. As enumerated above, in the order passed 26-03-2019 Book Profit of Rs. 9032,65,84,821/- was computed after making an addition of Rs. 6516,66,53,000/- under the various heads provisions & contingencies and an amount of Rs. 907,04,11,000/- was deducted while computing the book profit. In this regard it is worth to mention here that the bad debts written off is not allowable under the explanation 1 of the section 115JB of the IT Act, whereas department has allowed the deduction of provis....

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....omputing the book profits. The Ld. DR contended that based on the Revenue audit report the discrepancy in computation of book profit u/s 115JB of the Act on account of bad debts was brought to the knowledge and on the said tangible material the Ld. AO reopened the assessee's case vide notice u/s 148 of the Act. The Ld. DR further argued that the Ld. CIT(A) erred in not considering that the audit objection is a tangible material for reopening, which according to the Ld. DR was of high evidentiary value. The Ld. DR contended that these are not mere "change of opinion" as alleged by the assessee, where there was a reason to believe based on the audit objection that income has escaped assessment. The Ld. DR relied on the decision of the Hon'ble Apex Court in the case of CIT Vs. P.V.S. Beedies Pvt. Ltd. (1999) 237 ITR 13 (SC) wherein it was held that the audit party pointing out factual error or omission in the assessment is permissible for reopening a case which was in accordance with section 147(b) of the Act. 13. The contention of the Learned Authorized Representative (Ld. AR) for the assessee was that there was no new tangible material available with the Ld. AO for reopening the ....

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....ason 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 material facts necessary for his assessment, for that assessment year:" 15. On a bare reading of the said provision, it is evident that the proviso to section 147 of the Act categorically states that where there has already been a scrutiny assessment u/s 143(3) of the Act or re-assessment u/s 147 of the Act has been completed for the relevant assessment year, the Ld. AO shall not invoke the said provision after expiry of four years from the end of the relevant assessment year unless there is failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment resulting in escapement of income chargeable to tax. Further, in the present case, it is observed that the Ld. PCIT has given a specific direction that the bad debt written off and the withdrawal from the staff welfare provision for staff welfare disbursement during the year should be reduced while computing the book profit u/s 115JB of the Act, which clearly establishes the fact t....