TATA PETRODYNE LTD, MUMBAI V. ASST CIT 2(3), MUMBAI

CO 166/MUM/2014

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1315 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-09-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 13-08-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 13-08-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Period of limitation; Reasonable cause; Tangible material; Bad and doubtful debts; Difference of opinion; Condonation of delay; Reason to believe; Change of opinion
• Section: 143(3); 115JB; 148; 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI N.K.BILLAIYA, ACCOUNTANT MEMBER ITA NO. 7679/MUM/2010 (ASSESSMENT YEAR: 2003 - 04 ) DEPUTY COMMISSIONER OF INCOME - TAX 2(3), MUMBAI. APPELLANT VS. M/S.TATA PETRODYNE LTD. BOMBAY HOUSE, 24, HOMI MODY STREET, FORT, MUMBAI - 400 001. RESPONDENT PAN: AABCT0090N CROSS OBJN.NO.166/BANG/2014 (IN ITA NO.7679/MUM/2010) (ASSESSMENT YEAR: 2003 - 04) (BY THE ASSESSEE) REVENUE BY : SHRI HARSHAD VENGARLEKAR (DR) ASSESSEE BY: SHRI M.M.GOLVALA DATE OF HEARING: 13 /08/2015 . DATE OF PRONOUNCEMENT : : 16 / 0 9 /2015 O R D E R PER VIJAY PAL RAO, JM: TH E A PPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 4/8/2010 OF THE CIT(A) - 6, MUMBAI , FOR THE ASSESSMENT YEAR 2003 - 04. 2. SINCE THE ASSESSEE HAS CHALLENGED THE VALIDITY OF THE REOPENING OF THE ASSESSMENT IN THE CROSS - OBJECTION WHICH GOES TO ITA NO .7679/MUM/2010 & CO 166/MUM/2014 M/S.TATA PETRODYNE LTD., PAGE 2 OF 14 THE ROOT OF THE MATTER, THEREFORE, WE PROPOSE TO FIRST TAKE UP THE CROSS - OBJECTION FILED BY THE ASSESSEE. 3. THERE IS A DELAY OF 803 DAYS IN FILING OF THE CROSS OBJECTION BY THE ASSESSEE. THE ASSESSEE HAS FILED AN APPLICATION FOR CONDONATION OF DELAY ALONG WITH AN AFFIDAVIT OF EXECUTIVE DIRECTOR/CEO OF THE ASSESSEE - COMPANY. 4. WE HAVE HEARD THE LEARNED AR AS WELL AS THE LD. DR ON THE POINT OF CONDONATION OF DELAY OF FILING CROSS OBJECTIONS (CO) BY THE ASSESSEE. IT HAS BEEN SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE THAT THE ASSESSEE INITIALLY DID NOT FILE THE APPEAL OR CROSS - OBJECTION AGAINST THE IMPUGNED ORDER OF THE CIT(A) ON THE BELIEF THAT NOTHING FURTHER REMAINS TO BE DONE AS THE AP PEAL WAS ALLOWED ON MERITS BY THE CIT(A) . IT IS FURTHER SUBMITTED THAT THE ASSESSEE CHANGED ITS AUTHORIZED REPRESENTATIVE ON 1/8/2014AND DURING THE COURSE OF CONFERENCE HELD ON 7/8/2014, THE ASSESSEE WAS ADVISED THAT IT NEEDS TO FILE CO AGAINST THE DEPARTMENT S APPEAL BY CHALLENGING THE JURISDICTION OF THE AO TO REOPEN THE ASSESSMENT UNDER SECTION 147. ACCORDINGLY, ASSESSEE FILED THE CO B ELATEDLY BY 803 DAYS. THUS IT WA S PLEADED THAT THE DELAY IN FILING CO WAS NEITHER WILLFUL NOR DELIBERATE BUT WAS CAUSED BY MISUNDERSTANDING OF THE CORRECT LEGAL POSITION WHEN THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE ON MERITS AND DELETED THE ADDITION. 5. O N THE OTHER HAND, THE LEARNED DR SUBMITTED THAT THE CONDONATION OF DELAY IS NOT A MATTER OF RIGHT AND THE ASSESSEE HAS ITA NO .7679/MUM/2010 & CO 166/MUM/2014 M/S.TATA PETRODYNE LTD., PAGE 3 OF 14 NOT EXPLAINED REASONABLE CAUSE FOR NOT FILING CO WITHIN THE PERIOD OF LIMITATION. HE HAS RELIED UPON THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF DCM SHRIRAM CONSOLIDATED LTD. VS. ACIT R EPORTED IN 39 SOT 2 03 AS WELL AS THE DECISION OF THE HON BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. STERIPLATE (P) LTD., 20 TAXMAN.COM 375. HE HAS ALSO RELIED UPON THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF CIT VS. BEARDSELL LTD., 244 ITR 256 AND USHA MARTIN INDUST RIES LTD. 104 ITD 249 (SPECIAL BENCH). THUS THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT THE CO FILED BY THE ASSESSEE DESERVES TO BE DISMISSED IN LIMINE BEING BARRED BY LIMITATION. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS STATED IN THE AFFIDAVIT THAT THE NOTICE OF APPEAL FILED BY THE REVENUE WAS RECEIVED BY THE ASSESSEE ON 2/5/2012 . WE NOTE THAT ON THE HEARING ON 25/ 9 /201 2 THE AR OF THE ASSESSEE APPEARED BEFORE THE TRIBUNAL AND SOUGHT AN ADJOURNMENT AND ACCORDINGLY THE HEARING OF THE APPEAL BY THE RE VENUE WAS ADJOURNED TO 26/2/2013 . THE HEARING HAS BEEN ADJOURNED ON SUBSEQUENT OCCASIONS AS PER THE REQUEST OF THE ASSESSEE AND FINALLY THE HEARING WAS ADJOURNED TO 13/8/2015. IN THE MEAN TIME, THE ASSESSEE HAS FILED THE CO ON 13/8/2014. THUS, THERE WAS A DELAY OF 803 DAYS IN FILING THE CO BY THE ASSESSEE AFTER RECEIVING THE NOTICE OF THE REVENUE S APPEAL ON 2/5/2012. THE REA SON FOR DELAY HAS BEEN EXPLAINED AND STATED BY THE ASSESSEE IN THE AFFIDAVIT THAT SINCE THE APPEAL OF THE ITA NO .7679/MUM/2010 & CO 166/MUM/2014 M/S.TATA PETRODYNE LTD., PAGE 4 OF 14 ASSESSEE WAS DECIDED ON MERITS BY THE CIT(A) IN FAVOUR OF THE ASSESSEE THEREFORE, THE ASSESSEE WAS UNDER THE BONAFIDE IMPRESSION THAT NOTHING FURTHER REMAINS TO BE DONE ON THE PART OF THE ASSESSEE. THE ASSESSEE HAS STATED THAT ONLY ON THE CHANGE OF THE AUTHORIZED REPRESENTATIVE, ASSESSEE WAS ADVISED TO FILE THE CO BY CHALLENGING THE VALIDITY OF REOPENING OF THE ASSESSMENT. IT IS PERTINENT TO NOTE THAT THE ASSESSEE IS NOT AN ORDINARY OR AN INDIVIDUAL WHO IS NOT CONVERSANT WITH THE PROVISIONS OF LAW, AS THE ASSESSEE HAS BEEN ADVISED BY BEST OF THE PROFESSIONAL IN THE MATTER OF TAXATION AND LITIGATION. THE DELAY OF 803 DAYS IS INORDINATE DELAY AND THE ON LY REASON EXPLAINED BY THE ASSESSEE WAS THAT IT WAS UNDER THE IMPRESSION THAT SINCE THE CIT(A) HAS DECIDED THE APPEAL IN FAVOUR OF THE ASSESSEE ON MERITS, THEREFORE, NOTHING MORE WAS REQUIRED TO BE DONE ON THE PART OF THE ASSESSEE. ONCE THE ASSESSEE DECID ED TO ACCEPT THE IMPUGNED ORDER OF THE CIT(A), THEN SUCH AN INORDINATE DELAY IS REQUIRED TO BE EXPLAINED WITH SOME REASONABLE CAUSE AND TO THE SATISFACTION OF THE TRIBUNAL. IT IS NOT THE CASE OF THE ASSESSEE THAT THE EARLIER AR/COUNSEL OF THE ASSESSEE HAS GIVEN WRONG ADVICE FOR NOT FILING CO OR APPEAL AGAINST THE IMPUGNED ORDER, BUT THE ASSESSEE HAS ACCEPTED THE ORDER OF THE CIT(A) UNTIL THE CO WAS FILED BELATEDLY. EVEN OTHERWISE, THE EXPLANATION NARRATED IN THE AFFIDAVIT HAS NOT BEEN SUPPORTED BY ANY FAC T ON RECORD. IN THE MATTER OF CONDONATION OF DELAY, NO DOUBT LENIENT VIEW HAS TO BE TAKEN WHILE INTERPRETING THE SUFFICIENT CAUSE OF DELAY HOWEVER, THIS DOES NOT MEAN THAT THE LITIGANT HAS A FREE LICENSE TO APPROACH THE COURT ON ITA NO .7679/MUM/2010 & CO 166/MUM/2014 M/S.TATA PETRODYNE LTD., PAGE 5 OF 14 ITS WILL. THEREFORE, IN T HE ABSENCE OF ANY SATISFACTORY OR COGENT EXPLANATION, THE INORDINATE DELAY IN FILING THE CO REMAINS UNEXPLAINED WITH SUFFICIENT OR REASONABLE CAUSE. ACCORDINGLY, WE DECLINE TO CONDONE THE DELAY OF 803 DAYS IN FILING THE CO AND CONSEQUENTLY THE CO FILED BY THE ASSESSEE IS DISMISSED BEING BARRED BY LIMITATION. 6.1 THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS ALSO RAISED AN ALTERNATIVE PLEA THAT THI S ISSUE CAN BE RAISED UNDER RULE 27 OF THE ITAT RULES EVEN WITHOUT FILING CO OR APPEAL AGAINST THE IMPUGNED ORDER. HE HAS SUBMITTED THAT THE ISSUE OF VALIDITY OF RE - OPENING WAS RAISED BEFORE THE CIT(A), HOWEVER, THE CIT(A) AFTER DECIDING THE APPEAL ON MERITS, HAS NOT ADJUDICATED THIS GR OUND RAISED BY THE ASSESSEE ON THE REASON THAT IT NEEDS NO ADJUDICATION WHEN THE RELIEF HAS BEEN ALLOWED TO THE ASSESSEE ON SUBSTANTIVE ADDITION. HE HAS REFERRED TO PARAGRAPH 7 OF THE IMPUGNED ORDER AND SUBMITTED THAT THE CIT(A) DID NOT PROPOSE TO ADJUDI CATE THIS ISSUE. THUS, THE ASSESSEE CAN RAISE THIS ISSUE UNDER RULE 27 OF THE ITAT RULES. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 22/3/2006. SUBSEQUENTLY, AO REOPENED THE ASSESSMENT BY ISSUING NOTICE UNDER SECTION 148 ON 27/3/2008 ON TWO GROUNDS I.E. SITE RESTORATION COST AND PROVISION FOR DOUBTFUL ADVANCES ARE REQUIRED TO BE ADDED BACK TO BOOK PROFIT UNDER SECTION 115JB CONSIDERING BOTH THE PROVISIONS ARE NOT ASCERTAIN ABLE LIABILITIES. THE LEARNED ITA NO .7679/MUM/2010 & CO 166/MUM/2014 M/S.TATA PETRODYNE LTD., PAGE 6 OF 14 AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS POINTED OUT THAT THE CIT(A) HAS DELETED THE ADDITION MADE BY THE AO REGARDING SITE RESTORATION COST AND THE REVENUE HAS NOT CHALLENGED THE ORDER OF THE CIT(A) ON THIS ISSUE AS THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE ONLY ON THE GROUND OF DELETION OF ADDITION MADE BY THE AO ON ACCOUNT OF PROVISION FOR DOUBTFUL ADVANCES. THUS IN THE ABSENCE OF ANY NEW MATERIAL OR INFORMATION, THE REOPENING IS BASED ON CHANGE OF OPINION. TH E LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT EVEN ON THE ISSUE OF ADJUSTMENT IN THE BOOK PROFIT ON ACCOUNT OF PROVISION FOR DOUBTFUL ADVANCES WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS . HCL COM NET SYSTEMS & SERVICES (305 ITR 409) AS WELL AS BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF RALLIES INDIA VS. ACIT (323 ITR 54). THUS, AT THE TIME OF FRAMING ORIGINAL ASSESSMENT AS WELL AS AT THE TIME OF REOPENING OF T HE ASSESSMENT, THE ISSUE WAS SETTLED IN FAVOUR OF THE ASSESSEE AND THE REOPENING IS BASED ON THE CHANGE OF OPINION. LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE REOPENING IS BAD IN LAW THE REFORE THE APPEAL FILED BY THE REVENUE WOUL D NOT SURVIVE AND THE SAME IS LIABLE TO BE DISMISSED. 6 . 2 ON THE OTHER HAND, T HE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT THE REOPENING IS PRIOR TO THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. HCL COMNET SYSTEMS & SE RVICES LTD . ( 305 ITR 409)(SC) AS THERE ITA NO .7679/MUM/2010 & CO 166/MUM/2014 M/S.TATA PETRODYNE LTD., PAGE 7 OF 14 W ERE OTHER JUDGMENTS OF THE HON BLE MADRAS HIGH C O URT IN THE CASE OF DCIT VS. BEARHELL LTD. ( 2 4 4 ITR 256 ) AS WELL AS THE SPECIAL BENCH DECISION IN THE CASE OF JCIT VS. USHA MARTIN INDUSTRIES LTD. ( 104 ITD 249 ) WHEREBY THE ISSUE OF ADJUSTMENT ON ACCOUNT OF PROVISION FOR DOUBTFUL DEBTS HAS BEEN DECIDED IN FAVOUR OF THE REVENUE. HE HAS SUPPORTED THE ORDER OF THE AO. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. AS PER RUL E 27 OF THE ITAT RULES, 1963, THE RESPONDENT EVEN WITHOUT FILING AN APPEAL CAN SUPPORT THE ORDER OF THE CIT(A) ON ANY OF THE GROUNDS WHICH HA VE BEEN DECIDED AGAINST THE RESPONDENT. THUS, THE SCOPE OF RAISING A PLEA AGAINST THE MAINTAINABILITY OF THE APPEA L WITHOUT FILING THE APPEAL IS LIMITED UNDER RULE 27 OF THE ITAT RULES. IN OTHER WORDS, IF THE RESPONDENT SUCCEEDS ON THE PLEA RAISED UNDER RULE 27, THEN THE IMPUGNED ORDER OF THE CIT(A) WOULD STAND AND WILL HAVE FULL EFFECT INSOFAR AS IT IS AGAINST THE REVENUE . THUS IF THE PLEA RAISED BY THE ASSESSEE IS ACCEPTED AS REGARDS THE VALIDITY OF THE ASSESSMENT ORDER THEN THE EFFECT OF THE SAME WOULD BE ONLY TO THE EXTENT THAT THE APPEAL FILED BY THE REVENUE WILL BE DEFEATED. THE SCOPE OF RULE 27 OF THE ITAT R ULES HAS BEEN DISCUSSED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF B.R.BAMASI VS. CIT REPORTED IN 83 ITR 223 AS UNDER: BUT EVEN IF THE ASSESSEE HAD NOT MADE SUCH A STATEMENT, THE ABOVE JUDGMENT SHOWS THAT THE ASSESSEE WOULD BE ENTITLED TO RAISE A NEW GROUND, PROVIDED IT IS A GROUND OF LAW AND DOES NOT NECESSITATE ANY OTHER EVIDENCE TO BE RECORDED, THE NATURE OF WHICH WOU LD NOT ONLY BE A DEFENCE TO THE APPEAL ITSELF, BUT MAY ALSO AFFECT THE VALIDITY OF THE ENTIRE ASSESSMENT ITA NO .7679/MUM/2010 & CO 166/MUM/2014 M/S.TATA PETRODYNE LTD., PAGE 8 OF 14 PROCEEDINGS. IF THE GROUND SUCCEEDS, THE ONLY RESULT WOULD BE THAT THE APPEAL WOULD FAIL. THE ACCEPTANCE OF THE GROUND WOULD SHOW THAT THE ENTIRE ASSES SMENT PROCEEDINGS WERE INVALID, BUT YET THE TRIBUNAL WHICH HEARS THAT APPEAL WOULD HAVE NO POWER TO DISTURB OR TO SET ASIDE THE ORDER IN FAVOUR OF THE APPELLANT AGAINST WHICH THE APPEAL HAS BEEN FILED. THE GROUND WOULD SERVE ONLY AS A WEAPON OF DEFENCE AGA INST THE APPEAL. IF THE RESPONDENT HAS NOT HIMSELF TAKEN ANY PROCEEDINGS TO CHALLENGE THE ORDER IN APPEAL, THE TRIBUNAL CANNOT SET ASIDE THE ORDER APPEALED AGAINST. THAT ORDER WOULD STAND AND WOULD HAVE FULL EFFECT IN SO FAR AS IT IS AGAINST THE RESPONDENT . THE TRIBUNAL REFUSED TO ALLOW THE ASSESSEE TO TAKE UP THIS GROUND UNDER AN INCORRECT IMPRESSION OF LAW THAT IF THE POINT WAS ALLOWED TO BE URGED AND SUCCEEDED, THE TRIBUNAL WOULD HAVE NOT ONLY TO DISMISS THE APPEAL, BUT ALSO TO SET ASIDE THE ENTIRE ASSES SMENT. THE POINT WOULD HAVE SERVED AS A WEAPON OF DEFENCE AGAINST THE APPEAL, BUT IT COULD NOT BE MADE INTO A WEAPON OF ATTACK AGAINST THE ORDER IN SO FAR AS IT WAS AGAINST THE ASSESSEE. 8. WE FIND THAT THE ASSESSEE HAS RAISED THE ISSUE OF VALIDITY OF REOPENING BEFORE THE CIT(A). HOWEVER, THE CIT(A) DID NOT GO INTO THE QUESTION OF REOPENING OF THE ASSESSMENT AND THEREFORE, THE ISSUE REMAINS UN - ADJUDICATED AS PER PARA.7 OF THE CIT(A) S ORDER AS UNDER: 7. THE FIRST ADDITIONAL GROUND QUESTIONING TH E RE - OPENING OF THE ASSESSMENT AS BASED ON CHANGE OF OPINION NEEDS NO ADJUDICATION SINCE RELIEF HAS BEEN ALLOWED TO THE APPELLANT ON SUBSTANTIVE ADDITIONS . THUS THE ASSESSEE CAN RAISE THE PLEA OF VALIDITY OF REOPENING OF ASSESSMENT AS THE SAME WAS NOT DEC IDED BY THE CIT(A) BUT THE EFFECT OF THE SAID PLEA RAISED BY THE ASSESSEE UNDER RULE 27 IS ONLY TO THE EXTENT OF DEFENCE AGAINST THE APPEAL FILED BY THE REVENUE AND IF THE ASSESSEE SUCCEEDS IN THE SAID GROUND, THEN THE APPEAL FILED BY THE REVENUE WOULD FA IL. ITA NO .7679/MUM/2010 & CO 166/MUM/2014 M/S.TATA PETRODYNE LTD., PAGE 9 OF 14 9. THE AO HAS REOPENED THE ASSESSMENT BY RECORDING THE REASONS FOR REOPENING AS UNDER: IN THIS CASE ASSESSMENT WAS COMPLETED U/S 143(3) ON 22.3.2006 COMPUTING BOOK PROFIT OF RS.22,71,84,707/ - . ON PERUSAL OF THE RECORDS FOR AY 2003 - 04 IT IS SEEN THAT SITE RESTORATION COST OF RS.1,02,43,014/ - AND PROVISION FOR DOUBTFUL ADVANCES OF RS.61,85,324/ - IS REQUIRED TO BE ADDED BACK TO THE INCOME COMPUTED U/S 115JB SINCE BOTH THE PROVISIONS ARE NOT ASCERTAINED LIABILITIES. IN VIEW OF THE ABOVE, I AM SATISFI ED AND HAVE REASON TO BELIEVE THAT THE INCOME TO THE EXTENT OF RS.1,64,28,338/ - CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF THE PROVISION OF SEC.147 OF THE IT ACT. IT IS CLEAR FROM THE REASONS RECORDED BY THE AO THAT IT IS ONLY ON THE PERUSAL OF THE RECORD AVAILABLE WITH THE AO, HE HAS FORMED AN OPINION OR BELIEF THAT INCOME ASSESSABLE TO TAX HAS ESCAPED THE ASSESSMENT BECAUSE SITE RESTORATION COST OF RS.1,02,43,014/ - AND PROVISION FOR DOUBTFUL ADVANCES OF RS.61,85,324/ - WAS REQUIRED TO BE ADDED BACK TO THE INCOME COMPUTED UNDER SECTION 115JB. IN THE VIEW OF THE AO, THESE TWO ITEMS ARE NOT ASCERTAINED LIABILITIES. THUS FROM THE REASONS ITSELF IT IS CLEAR THAT NO NEW MATERIAL OR INF ORMATION CAME TO THE NOTICE OF THE AO SUBSEQUENT TO THE ASSESSMENT ORDER COMPLETED UNDER SECTION 143(3)ON 22/3/2003 BUT THE AO HAS FORMED A BELIEF AND OPINION ONLY BY RECONSIDERATION OF THE RECORD ALREADY AVAILABLE WITH HIM. AS REGARDS THE ISSUE OF COST O F SITE RESTORATION, THE CIT(A) HAS GIVEN THE FINDING THAT THE SITE RESTORATION EXPENSES ARE SCIENTIFICALLY ESTIMATED BY AN INDEPENDENT AGENCY VIZ. INSTITUTE OF OIL AND GAS PRODUCTION TECHNOLOGY. THE PROVISION HAS BEEN MADE AS PER THE ITA NO .7679/MUM/2010 & CO 166/MUM/2014 M/S.TATA PETRODYNE LTD., PAGE 10 OF 14 REQUIREMENT UNDER THE PRODUCTION SHARING CONTRACT AND THE ASSESSEE IS LIABLE TO CONTRIBUTE THIS AMOUNT TO THE SITE RESTORATION FUND IN EACH YEAR. THEREFORE, THE CIT(A) HAS GIVEN THE FINDING THAT THE PROVISION IS MADE FOR AN ASCERTAINED LIABILITY AND IT WAS NOT UNASCERTAINED L IABILITY. THE REVENUE HAS ACCEPTED THE FINDING OF THE CIT(A) EVEN FOR THE ASSESSMENT YEAR 2004 - 05 WHICH HAS BEEN FOLLOWED BY THE CIT(A) FOR THE YEAR UNDER CONSIDERATION ARISING FROM THE REOPENING OF THE ASSESSMENT. THUS IT IS CLEAR THAT THIS ISSUE WAS SE TTLED IN FAVOUR OF THE ASSESSEE BY THE CIT(A) FOR THE ASSESSMENT YEAR 2004 - 05 AND SUBSEQUENTLY THE REOPENING ON THE SAID ISSUE IS NOTHING BUT BASED ON CHANGE OF OPINION WHICH IS NOT PERMISSIBLE UNDER THE PROVISIONS OF THE ACT. 10. THE SECOND GROUND F OR REOPENING IS REGARDING PROVISIONS FOR DOUBTFUL ADVANCES. IT IS PERTINENT TO NOTE THAT AS PER THE EXPLANATION TO SEC.115JB EXISTED AT RELEVANT POINT OF TIME , ADJUSTMENT CAN BE MADE WHILE COMPUTING THE BOOK PROFIT IF THERE IS A PROVISION ON ACCOUNT OF UN ASCERTAINED LIABILITY. THE PROVISION FOR DOUBTFUL DEBTS IS NOT IN THE NATURE OF PROVISION FOR UNASCERTAINED LIABILITY BUT IT IS THE ASSET OF THE ASSESSEE ON WHICH THE PROVISION IS MADE ON ACCOUNT OF DOUBTFULNESS OF THE RECOVERY. THEREFORE, AT THAT POINT OF TIME, THERE WAS NO SUCH PROVISION UNDER SECTION 115JB TO MAKE ADJUSTMENT ON ACCOUNT OF PROVISION FOR DOUBTFUL DEBTS. THIS ISSUE WAS DECIDED BY THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. HCL COMNET SYSTEMS & SERVICES LTD. (292 ITR 299) WHICH HAS BEEN UPHELD BY THE HON BLE ITA NO .7679/MUM/2010 & CO 166/MUM/2014 M/S.TATA PETRODYNE LTD., PAGE 11 OF 14 SUPREME COURT REPORTED IN 305 ITR 409. BY FOLLOWING THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF HCL COMNET SYSTEMS & SERVICES LTD. (SUPRA), THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF RALLIES INDIA LTD. (S UPRA) HAS HELD AS UNDER: 17. SU B SEQUENT TO T H E D E CI S IO N O F T H E SU P REME C O URT I N HC L (2008 ) 305 ITR 409(SC), P A RL I AMENT STEPPED I N TO AMEND E X PLANAT IO N (1) TO S E C T IO N 1 15JB B Y T H E F I N A N C E AC T O F 20 0 9. A S A R ESULT O F T H E AMENDMENT, C L AUSE ( I ) C AME T O B E I NSERTED I N E X PLANAT IO N (1) SO AS T O PR O V I DE F O R T H E AM O UNT O R A M O UNTS SET A S I DE A S P R O V I S I O N F O R D I M I NUT IO N I N T H E VALUE O F AN ASSET. T HO U G H T H E AMENDMENT W AS MADE W I T H RETR O SP E C T I VE E F F E C T F R O M 1 ST A PR I L 2 001, I T W AS ENA C TED I N T O L AW A F T E R T H E A SSE SS I N G O F F I C ER H AD E X E R CI SED T H E P O W ER TO RE- O PEN T H E A SSESSMENT I N T H E PRESENT C ASE B Y HI S N O T I C E D ATED 16 TH JULY 2 008. C O NSEQUENTL Y , O N T H E D ATE O N W H I C H T H E A SSE S S I N G O F F I C ER E X E R CI SED HI S JUR I S D IC T I O N UNDER S E C T IO N 1 48, T H E A M ENDMENT W H I C H W A S B R O UG H T I N SU B S EQUENTLY B Y T H E F I NA N C E A C T O F 2 009 W AS N O T I N E X I STE N C E . 18. A L E G I SLA T I VE AMENDMENT, T HO UGH M A DE W I TH RE T R O SPE C T I VE E F F E C T H A S B EEN H ELD N O T T O JUST IF Y A RE C O URSE TO T H E REV I S IO NAL P O W ER O F T H E C O MM I S S I O N E R UNDER S E C T IO N 2 63 O F T H E IN C O ME T AX AC T I N C O M M I S S I O N E R OF I N COME T AX V / S . MAX IN DI A L I M I T E D . C O UNSEL F O R T H E R E VENUE S O UG H T TO D I ST I NGU I SH T H E J UD G M E N T I N M AX IN D I A (SUPRA) O N T H E G R O UND T H AT I T D EALT WI T H S E C T IO N 8 0 H H C AND O NE O F T H E GR O UNDS W H I C H W E I G H ED W I TH T H E SUPREME C O URT W AS T H AT T H E S E C T I O N H AD B EE N AMENDED SEVER A L T I MES. T H E JUDGMENT O F T H E SUPREME C O URT C ANN O T B E D I S T I NGU I S H ED F O R T H E R EAS O NS AS SU G GESTED B Y T H E C O UNSEL F O R T H E R E V ENU E . T H E PR I N CI PLE W H I C H H AS B EEN LA I D D O W N I N T H E JUDGMENT O F T H E SUPREME C O URT C A NN O T B E CO N FI NED TO S E C T I O N 8 0 H H C. IN T H AT C ASE, T H E RE V I S IO N A L AUT H O R I TY H AD S O UG H T T O E X ER C I SE I TS R EV I S I O NAL JU R I SD I C T I O N UNDER S E C T IO N 263. T H E E X ER C I SE O F P O W ER W A S C H ALLENGED F I R S TLY O N T H E G R O UND T H AT T W O V I E W S O N T H E I NTERPRE T AT IO N O F T H E PR O V I S IO N W ERE P O S S IB LE AND H E N C E, R E CO URSE TO SE C T IO N 263 W AS N O T PE R M I SS I B L E . M O R E O VE R , T H E S ECOND G R O UND W H I C H APPEARS T O H AVE B EEN URGED W AS T H AT T H E RETR O SP E C T I VE AMENDMENT TO T H E STATUT O RY PR O V I S IO N I N QUEST IO N W O ULD N O T H AVE A B EA R I NG O N T H E C O RR E C TNESS O F T H E R E CO URSE T O S E C T IO N 2 63 S I N C E O N T H E DATE O N W H I C H T H E P OW ER W AS ITA NO .7679/MUM/2010 & CO 166/MUM/2014 M/S.TATA PETRODYNE LTD., PAGE 12 OF 14 E X E R CI S E D B Y T H E C O MM I SS I O N E R , T H E L EG I S L AT I VE A M E ND M E N T H AD N O T B EEN B R O UG H T I NTO F O R C E. T H E JUDGMENT O F T H E SUPREME C O URT N O TES F I R S TLY T H AT O N T H E DATE O N W H I C H T H E C O MM I SS IO N E R PASS E D H I S O RD E R , T W O V I E W S O N T H E W O RD PR O FI T UNDER S E C T IO N 8 0 H H C W ERE P O S S IB LE AND T H E P R O V I S I O N I TSE L F H A D B EE N AMENDED O N SEVERAL O C C A S IO NS. TH E S ECOND G R O UND W H I C H W E I G H ED W I TH T H E SUPREME C O URT W AS T H AT T H E SU B SEQUENT A M ENDMENT I N 2 0 05 O F T H E PR O V I S IO NS O F S E C T IO N 8 0 HH C, EVEN T H O UGH RETR O SP E C T I VE, W O ULD N O T ATTRA C T T H E PR O V I S IO NS O F S E C T IO N 263, PART I C ULARLY WH EN T H E C O URT W O ULD H AVE TO T AKE I NTO A C C O UNT T H E P O S I T IO N O F L A W AS I T ST O O D O N T H E DATE W H EN T H E C O MM I S S IO NER PASSED HI S O RDER I N PURP O RTED E X ER C I SE O F H I S P OW ERS UNDER S E C T IO N 263. 19. IN T H E PRE S ENT C ASE, T H E PR I N C I PLE O F L A W W H I C H H AS B E EN LA I D D O W N B Y T H E SUPREME C O URT I N M AX I ND I A (SUPRA) WO U LD B E ATTRA C T E D. ON T H E D ATE O N W H I C H T H E A SSESS I NG O F F I C ER PURP O RTED T O E X ER C I SE H I S P O W ER TO RE- O PEN T H E A SSESSM E N T UNDER S E C T IO N 1 47, T H E L EG I S LAT I VE AMENDMENT B Y T H E I NSERT I O N O F C L AUSE ( I ) T O E X PLANAT IO N (1) TO S E C T I O N 115JB H AD N O T B EEN B R O UG H T I NTO F O R C E O N T H E ST A T U T E B O O K. O B V I O USL Y , T H ER E FO RE, T H E SU B SEQUENT AMENDMENT CO U L D N O T H AVE B E EN AND I S N O T A G R O UND W H I C H H AS B EEN TA K EN B Y T H E A S S ESS I NG O F F IC E R , W H I LE R E - O PEN I NG T H E ASSESSMENT. TH E VA L I D I TY O F T H E N O T I C E I SSUED B Y T H E A SSESS I NG O F F I C ER I N SEEK I NG T O RE- O PEN T H E ASSESSMENT MUST B E DETER M I NED W I TH R E F ERE N C E TO T H E REAS O NS W H I C H AR E FO UND I N SUPP O RT O F T H E RE- O PEN I NG O F T H E ASSESSMENT. T H ESE REA S O NS C ANN O T B E AL L OW ED T O B E SUPPLEMENTED O N A B AS I S W H I C H W AS N O T P RESENT TO T H E M I ND O F T H E O F F I C ER AND CO U L D N O T H AVE B EEN SO P RESENT O N T H E D ATE O N W H I C H T H E P O W ER TO R E - O PEN T H E ASSESSMENT W AS E X E R CI S E D. W E, T H E RE F O RE, HO L D T H AT T H E PR I N CI PLE L A I D D O W N B Y T H E SUPREME C O URT I N M AX IN D I A (SUPRA) W O ULD B E ATTR A C TED TO T H E P R E SE N T C ASE. C O NSEQUENTL Y , I T I S E V I DENT T H AT T H E O R D ER O F T H E A SSESS I NG O F F I C ER W I T H RE F EREN C E TO T H E CO MPUTA T IO N O F B O O K PR O F I TS UNDER S E C T I O N 1 15JB W AS AT THE LEA S T A PR O B A B LE V I E W AND AS A MATTER O F F A C T T H E C O RR E C T V I E W TO T AKE I N V I E W O F T H E DE C I S I O N O F T H E SUPREME C O URT I N HC L ( 2008 ) 305 ITR 409. . IT I S W E LL SETTLED T H AT T H E LAW L A I D D O W N B Y T H E SUPREME C O URT I S DE C LARAT O RY O F T H E P O S I T IO N AS I T A L W A Y S ST OO D. IN A N Y EVENT, AS W E H AVE N O TED, T H E V I EW O F T H E A SSES S I NG O F F I C ER W AS SUPP O RT E D B Y T H E I NTERPRETA T IO N PLA C E D EVEN CO NTEMP O RANE O USLY I N T H E JUDGMENT O F T H I S C O URT I N E CHJAY FORGINGS (2001) 251 ITR 15(BOM) AND I N T H E JUDGMENTS O F T H E DEL H I H I G H C O URT I N E I CHER (2006) 287 ITR 170 AND HC L ( 2007 ) 292 ITR 299. . IN T H E C I R C UMSTAN C ES, T H ERE W AS NO W A RRANT F O R RE- O PE N I NG T H E A S S E SSM E N T I N E X ER C I SE O F T H E P O W ER C O N F ERRED UNDER SE C T IO N 147. ITA NO .7679/MUM/2010 & CO 166/MUM/2014 M/S.TATA PETRODYNE LTD., PAGE 13 OF 14 THEREFORE, AT THE TIME OF ORIGINAL ASSESSMENT PASSED UNDER SECTION 143(3) AS WELL AS AT THE TIME OF REOPENING OF THE ASSESSMENT, THE ISSUE WAS SETTLED IN FAVOUR OF THE ASSESSEE. EVEN OTHERWISE, THIS ISSUE WAS A HIGHLY DEBATABLE ISSUE AND ONCE THE AO HAS P ASSED THE ASSESSMENT ORDER UNDER SECTION 143(3) AND IN THE ABSENCE OF ANY TANGIBLE MATERIAL OR INFORMATION TO BELIEVE THAT PROVISION FOR DOUBTFUL ADVANCES IS REQUIRED TO BE ADDED WHILE COMPUTING THE BOOK PROFIT UNDER SECTION 115JB, REOPENING ON THIS GROUND IS BASED MERELY ON CHANGE OF OPINION. ACCORDINGLY, WE ARE OF THE VIEW THAT THE REOPENING IS NOT SUSTAINABLE. S INCE THIS ISSUE WAS NOT RAISED BEFORE US BY THE ASSESSEE EITHER IN THE APPEAL OR IN THE CROSS - OBJECTION, THEREFORE, THE SCOPE OF RAISING THIS P LEA UNDER RULE 27 OF THE ITAT, RULES, 1963 WILL HAVE THE EFFECT ONLY TO THE EXTENT OF DE FEAT OF THE REVENUE S APPEAL. ACCORDINGLY, WE UPHOLD THE IMPUGNED ORDER OF THE CIT(A) AND THE APPEAL FILED BY THE REVENUE STANDS DISMISSED, AS A RESULT OF THE PLEA RA ISED BY THE ASSESSEE UNDER RULE 27 IN RESPECT OF VALIDITY OF THE REOPENING. IN THE RESULT, THE APPEAL OF THE REVENUE AND THE CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 1 6 TH SEPTEMBER , 2015. S D / - S D / - (N.K.BILLAIYA) (VIJAY PAL RAO) ACCOUNANT MEMBER JUDICIAL MEMBER EKSRINIVASULU, SR.PS ITA NO .7679/MUM/2010 & CO 166/MUM/2014 M/S.TATA PETRODYNE LTD., PAGE 14 OF 14 COPY TO: 1. A PPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, MUMBAI. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL MUMBAI