Madras Cements Ltd., CHENNAI V. ACIT, Virudhunagar

CO 36/CHNY/2013

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9235 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 27-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 27-01-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 27-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JAGADISAN
• Assessee Lawyers: S DAS GUPTA IRS
• Keywords: Retrospective amendment; Bad and doubtful debts; Reason to believe; Reassessment proceedings
• Section: 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . !' , # $% $& BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI V. DURGA RAO, JUDICIAL MEMBER ./ITA NO.2217/MDS//2012 / ASSESSMENT YEAR : 2004-05 AND C.O.NO.36/MDS/2013 (IN ITA NO.2217/MDS/2012) THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-I, VIRUDHUNAGAR. VS. M/S. MADRAS CEMENTS LIMITED, RAMAMANDIRAM, RAJAPALAYAM 626 117. PAN AABCM8375L ( '( / APPELLANT) ( )*'( /RESPONDENT/ CROSS OBJECTOR) /APPELLANT BY : SHRI S. DAS GUPTA, IRS, JCIT / RESPONDENT BY : SHRI V. JAGADISAN, CA /DATE OF HEARING : 27 TH JANUARY, 2014 /DATE OF PRONOUNCEMENT : 27 TH JANUARY, 2014 - - ITA 2217/12 & CO 36/13 2 + / O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT THE APPEAL IS FILED BY THE REVENUE. THE CROSS OBJECTION IS FILED BY THE ASSESSEE. THE RELEVANT A SSESSMENT YEAR IS 2004-05. THE APPEAL AND CROSS OBJECTION AR E DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-II AT MADURAI PASSED ON 3-9-2012 AND ARISE OUT OF THE ASSESSMENT COMPLETED UNDER SECTION 143(3), READ WITH SEC. 147 OF THE INCOME-TAX ACT, 1961. 2. IN THE PRESENT CASE, THE ASSESSMENT WAS REOPENE D AND REASSESSMENT WAS COMPLETED IN THE LIGHT OF A SU BSEQUENT RETROSPECTIVE AMENDMENT BROUGHT IN SEC.115JB OF THE ACT. IN THE REASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS ADDED BACK ` 3.50 CRORES TO THE BOOK PROFIT OF THE ASSESSEE-COM PANY. THE AMOUNT RELATED TO PROVISION MADE BY THE ASSESSE E FOR BAD AND DOUBTFUL DEBTS. THE RETROSPECTIVE AMENDMENT HA S STATED THAT DIMINUTION IN THE VALUE OF ASSETS DEBITED BY T HE COMPANIES - - ITA 2217/12 & CO 36/13 3 IN THEIR PROFIT AND LOSS ACCOUNTS WILL BE ADDED BAC K TO THE BOOK PROFIT REPORTED FOR THE PURPOSE OF TAXATION. 3. IN FIRST APPEAL, THE COMMISSIONER OF INCOME- TAX(APPEALS) ACCEPTED THE CONTENTION OF THE ASSESSE E THAT THE ASSESSING OFFICER LACKED JURISDICTION TO ISSUE NOTI CE UNDER SEC.148 AND TO COMPLETE THE INCOME ESCAPING ASSESSM ENT UNDER SEC.147. THE COMMISSIONER OF INCOME-TAX(APPEALS) H ELD THAT REOPENING WAS MADE AFTER FOUR YEARS PERIOD AND THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SEC.143(3). HE ALSO HELD THAT THERE WAS NO LAPSE ON THE PART OF THE ASSESSEE IN D ISCLOSING ALL THE RELEVANT MATERIAL FACTS RELATING TO THE ASSESSM ENT AND THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE. ACCOR DINGLY, HE HELD THAT THE REASSESSMENT WAS WITHOUT JURISDICTION AND THEREFORE, AB INITIO VOID. BUT ON MERIT, THE COMMISSIONER OF INC OME- TAX(APPEALS) HELD THAT THE PROVISION MADE BY THE A SSESSEE- COMPANY WAS LIABLE TO BE ADDED BACK TO THE BOOK PRO FIT FOR THE PURPOSE OF SEC.115JB OF THE ACT. - - ITA 2217/12 & CO 36/13 4 4. IT IS THE GRIEVANCE OF THE REVENUE THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN HO LDING THAT THE SUBSEQUENT AMENDMENT OF LAW WITH RETROSPECTIVE EFFECT DOES NOT CONSTITUTE REASON TO BELIEVE THAT INCOME HAS ES CAPED ASSESSMENT. WE AGREE WITH THE VIEW TAKEN BY THE COMMISSIONER OF INCOME-TAX(APPEALS). THE HONBLE D ELHI HIGH COURT HAS HELD IN THE CASE OF CIT VS. SIL INVESTMEN TS LTD., 339 ITR 166, THAT REASSESSMENT AFTER FOUR YEARS WITHOUT FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY TH E MATERIAL FACTS, IS NOT JUSTIFIED FOR THE REASON THAT THE LAW HAS BE EN SUBSEQUENTLY AMENDED WITH RETROSPECTIVE EFFECT. IT SHOWS THAT EVEN IF THE LAW IS AMENDED SUBSEQUENTLY AND EVEN IF THE AMENDMENT I S RETROSPECTIVE, THE SAID DECISION DOES NOT STAND TO REASON TO JUSTIFY FOR ISSUING NOTICE UNDER SEC.148 IN THE PRE SENT CASE. THE ASSESSING OFFICER HAS NO CASE THAT THE ASSESSEE HAS NOT FURNISHED THE MATERIAL FACTS FULLY AND TRULY FOR TH E PURPOSE OF ASSESSMENT. THE ONLY REASON, WHICH MADE THE ASSES SING OFFICER TO REOPEN THE ASSESSMENT IS SUBSEQUENT RETR OSPECTIVE AMENDMENT OF LAW. AS HELD BY THE HONBLE DELHI HIG H COURT IN THE CASE OF CIT VS. SIL INVESTMENTS LTD., 339 ITR 1 66, THIS IS NOT - - ITA 2217/12 & CO 36/13 5 PERMISSIBLE. ACCORDINGLY, WE FIND THAT THE ORDER O F THE COMMISSIONER OF INCOME-TAX(APPEALS) ON THIS POINT I S JUSTIFIED. THEREFORE, THIS ARGUMENT OF THE REVENUE FAILS AND T HE APPEAL IS LIABLE TO BE DISMISSED. 5. REGARDING THE CROSS OBJECTION OF THE ASSESSEE, T HE SUBSEQUENT AMENDMENT BROUGHT IN THE ACT IS WITH REF ERENCE TO THE DIMINUTION IN THE VALUE OF ASSETS CLAIMED BY TH E ASSESSEE AS DEDUCTION IN COMPUTING THE BOOK PROFIT SO THAT THE PROVISION SHALL BE ADDED BACK TO THE BOOK PROFIT FOR THE PURPOSE OF INCOME-TAX. BUT PROVISION FOR BAD AND DOUBTFUL DEBTS IS NOT A DIMINUTION IN THE VALUE OF AN ASSET OF A COMPANY. BAD DEBTS ARE ACTIONABLE CLAIMS. THEY ARE NOT IN THE NATURE OF ASSETS. THE REFORE, THE DECISION OF THE COMMISSIONER OF INCOME-TAX(APPEALS) ON MERIT OF THE CASE CANNOT BE JUSTIFIED. WE ACCEPT THE CONTEN TION ADVANCED BY THE ASSESSEE. 6. IN RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THE CROSS OBJECTION FILED BY THE ASSE SSEE IS ALLOWED. - - ITA 2217/12 & CO 36/13 6 ORDERS PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON MONDAY, THE 27 TH OF JANUARY, 2014 AT CHENNAI. SD/- SD/- (V. DURGA RAO) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED, THE 27 TH JANUARY, 2014. MPO* COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GF.