DCIT, New Delhi V. DLF Powr Ltd., Gurgaon

ITA 2118/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90917 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-03-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 11-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS ANURADHA MISHRA
• Keywords: Retrospective amendment; Bad and doubtful debts; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 115JB; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI C.M. GARG : JUDICIAL MEMBER ITA NO. 2118/DEL/2013 A.Y. 2004-05 DCIT, CIRCLE 11(1), VS. M/S DLF POWER LTD., NEW DELHI. (NOW KNOWN AS EASTERN INDIA POWERTECH LTD.), DLF GALERIA, 12 TH FLOOR, DLF CITY, PHASE-IV, GURGAON. PAN: AAACD 0187 C ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : MRS. ANURADHA MISHRA CIT(DR ) RESPONDENT BY : SHRI R.S. SINGHVI CA DATE OF HEARING : 24/03-2015 DATE OF ORDER : 29-04-2015. O R D E R PER S.V. MEHROTRA, A.M:- THIS APPEAL, PREFERRED BY THE REVENUE, IS DIRECTED AGAINST THE ORDER LD LD. CIT(A)-XIII, NEW DELHI DATED 09-01-2013, RELATI NG TO AY 2004-05. SOLE EFFECTIVE GROUND RAISED IS AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS. 14,25,38,173/- MADE ON ACCOUNT OF PROVISION FOR DOU BTFUL DEBT. 2. BRIEF FACT ARE THAT THE ASSESSEE COMPANY IN THE RELEVANT ASSESSMENT YEAR WAS ENGAGED IN THE BUSINESS OF GENERATION OF POWER AND EXECUTING TRUNKEY PROJECTS. IT FILED ITS RETURN OF INCOME DECLARING LOSS OF RS. 2, 72,31,272/- AND THE BOOK PROFIT 2 ITA 2118/DEL/2013 M/S DLF POWER LTD. WAS SHOWN U/S 115JB AT RS. 7,03,23,450/-. THE ASSES SMENT U/S 143(3) WAS COMPLETED AT NIL INCOME AS AGAINST THE LOSS RETURNE D. THE AO HAS OBSERVED THAT FROM THE VERIFICATION OF RECORD IT TRANSPIRED THAT ASSESSEE DEBITED A PROVISION FOR BAD AND DOUBTFUL DEBTS TO P&L A/C AND THE SAME WAS ADDED BACK BY THE ASSESSEE IN ITS COMPUTATION OF INCOME UNDER NORMAL PROVISION S. HOWEVER, WHILE CALCULATING INCOME U/S 115JB, TOTAL AMOUNT I.E. 14,25,38,173/- WAS NOT ADDED BACK BY THE ASSESSEE FOR CALCULATION OF ITS BOOK PROFIT. ACCORD INGLY NOTICE DATED 4-9-2009 U/S 148 WAS ISSUED AFTER RECORDING FOLLOWING REASONS: THE ASSESSEE DEBITED A PROVISION FOR BAD AND DOUBT FUL DEBTS TO ITS P&L A/C AND THE SAME WAS ADDED BACK BY THE ASS ESSEE IN ITS COMPUTATION OF INCOME UNDER NORMAL PROVISIONS. HOWE VER, WHILE CALCULATING INCOME U/S 115JB, THE ABOVE AMOUN T I.E. RS. 14,25,38,173/- WAS NOT ADDED BACK BY THE ASSESSEE F OR CALCULATION OF ITS BOOK PROFIT\. THE ABOVE AMOUNT W AS REQUIRED TO BE ADDED BACK TO INCOME UNDER SPECIAL PROVISIONS SINCE IT WAS FOR AN UNASCERTAINED LIABILITY. THE ASSESSEE FA ILED TO DISCHARGE HIS DUTIES BY NOT ADDING BACK THE SAME IN TO HIS BOOK PROFITS U/S 115JB OF THE IT ACT. THUS THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSES SMENT AND TO REASSESS SUCH INCOME CHARGEABLE TO TAX WHICH HAS COME TO NOTICE NOW AND WAS OF THE FAILURE ON THE PART OF TH E ASSESSEE TO MAKE A RETURN FILED BY HIM AND THE ASSESSEE COMPANY FAILED TO DISCLOSE FULLY AND TRULY THE ABOVE SAID MATERIAL FA CTS NECESSARY FOR THE ASSESSMENT. I HAVE THEREFORE REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE AY 2004-05. 2.1. AFTER CONSIDERING THE ASSESSEES SUBMISSIONS, THE AO ADDED THE PROVISION FOR BAD AND DOUBTFUL DEBTS FOR DETERMINING THE BOOK PROFITS. 3 ITA 2118/DEL/2013 M/S DLF POWER LTD. 2.2. BEFORE LD. CIT(A) THE ASSESSEE HAD, INTER ALIA , SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3), THE A O VIDE QUESTIONNAIRE DATED 3-6- 2006 AT SL. NO. 9 HAD SOUGHT EXPLANATION/ VERIFICAT ION REGARDING DETAILS OF PROVISIONS MADE DURING THE YEAR. THE ASSESSEE HAD F ILED DETAILED NOTE WITH REGARD TO PROVISION FOR DOUBTFUL DEBTS VIS A VIS 115JB OF THE ACT. AFTER CONSIDERING IT, THE AO DID NOT TAKE ANY ADVERSE VIEW. THEREFORE, THE RE OPENING AFTER FOUR YEARS WAS ON ACCOUNT OF CHANGE OF OPINION ON A ISSUE DULY EXA MINED BY AO. FURTHER, IT WAS POINTED OUT THAT THE VIEW TAKEN BY THE AO WAS IN F ACT FORTIFIED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS . EICHER LTD. 287 ITR 170 AND CIT VS. INDRAPRASTHA MEDICAL CORPN. LTD. 214 CTR 70 3 AVAILABLE AT THE TIME OF THE PASSING OF THE ASSESSMENT ORDER DATED 11-12-200 6, HOLDING THAT PROVISION FOR DOUBTFUL DEBTS IS NOT REQUIRED TO BE ADDED BACK WH ILE COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. FURTHER, THIS VIE WAS SUBSEQUENTL Y CONFIRMED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. HCL COMNET 305 ITR 409. THE ASSESSEE ALSO RELIED UPON FOLLOWING DECISIONS: - E.I. DUPONT INDIA LTD. 169 TAXMAN 184 (DEL.); - JCIT VS. USHA MARTIN INDUSTRIES LTD. & ORS. 288 ITR 63(AT)(CAL.)(SB). 2.3. THUS, IN SUM AND SUBSTANCE THE ASSESSEES SUBM ISSION WAS THAT SINCE THE ASSESSEE HAD FULLY AND TRULY DISCLOSED ALL MATERIAL FACTS, NECESSARY FOR ASSESSMENT, IN VIEW OF THE PROVISO TO SECTION 147, REOPENING WA S BAD IN LAW. LD. CIT(A), AFTER ELABORATE CONSIDERATION OF ALL THE CASE LAWS, RELIE D BY ASSESSEE AND AFTER CONSIDERING THE QUESTIONNAIRE DATED 3-6-2006, ISSUE D BY THE AO AND REPLY THERETO, CONCLUDED THAT THE AO HAD APPLIED HIS MIND AND HE W AS SATISFIED WITH THE TERM OF PROVISION FOR DOUBTFUL DEBTS VIS A VIS BOOK PROFIT. ACCORDINGLY, THE REOPENING OF 4 ITA 2118/DEL/2013 M/S DLF POWER LTD. THE ASSESSMENT AND RE-COMPUTATION OF BOOK PROFIT U/ S 115JB WAS BASED ON MERE CHANGE OF OPINION OF THE AO. HE RELIED ON FOLLOWING DECISIONS: - CIT VS. KELVINATOR OF INDIA LTD. 320 ITR 561; - SITA WORLD TRAVELS (INDIA) LTD. VS. CIT 274 ITR 186 (DEL.); - ASTEROIDS TRADING AND INVESTMENTS (P) LTD. VS. DCIT (2009) 308 ITR 190 (BOM.) - SUN INVESTMENT PVT. LTD. VS. ACIT 18 TAXMANN.COM 21 8 (DELHI). - CIT VS. K. MOHAN & CO. (EXPORTS) (REGD.) 349 ITR 65 3. - VOLTAS LTD. VS. ACIT & OTHERS 349 ITR 656. 2.4. HE, ACCORDINGLY, ALLOWED THE ASSESSEES APPEAL . 2.5. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 3. LD. DR SUBMITTED THAT AO WAS FOLLOWING THE LAW F OR REOPENING. HE RELIED ON THE ORDER OF AO. 4. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF LD. CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS HAVE PE RUSED THE RECORD OF THE CASE. ADMITTEDLY THE REOPENING HAS BEEN DONE AFTER 4 YEARS FROM THE END OF ASSESSMENT YEAR AND, THEREFORE, THE PROVISO TO SECT ION 147 WAS ATTRACTED IN ASSESSEES CASE. IN VIEW OF THE MANDATE OF PROVISO THERE HAS TO BE FAILURE TO DISCLOSE ALL MATERIAL FACTS FULLY AND TRULY ON THE PART OF THE ASSESSEE AND THEN ONLY REASSESSMENT PROCEEDINGS COULD BE JUSTIFIED AFTER 4 YEARS. HOWEVER, IN THE REASONS RECORDED, THE AO MERELY STATED THAT THOUGH ASSESSEE WHILE COMPUTING THE INCOME 5 ITA 2118/DEL/2013 M/S DLF POWER LTD. UNDER THE NORMAL PROVISIONS OF THE ACT, ADDED BACK THE PROVISION FOR BAD AND DOUBTFUL DEBTS BUT WHILE COMPUTING/ CALCULATING INC OME U/S 115JB DID NOT ADD BACK THE PROVISIONS FOR BAD AND DOUBTFUL DEBTS AND, THEREFORE, THE INCOME HAD ESCAPED ASSESSMENT. THUS, THERE IS NO ALLEGATION TH AT THERE WAS ANY DEFAULT ON THE PART OF ASSESSEE IN DISCLOSING FULLY AND TRULY ALL MATERIAL FACTS. ADMITTEDLY, THE AO HAD RAISED QUERIES IN COURSE OF ORIGINAL ASSESSMEN T PROCEEDINGS WHICH WERE DULY REPLIED BY ASSESSEE VIS A VIS THE PROVISION OF SECT ION 115JB AND, THEREFORE, THIS WAS CLEARLY A CASE OF CHANGE OF OPINION, WHICH IS IMPER MISSIBLE FOR INITIATING PROCEEDINGS U/S 148. WE FIND THAT THIS ISSUE IS SQU ARELY COVERED BY THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF SUN INVEST MENT PVT. LTD. (SUPRA), WHEREIN UNDER IDENTICAL FACTS THE REASSESSMENTS WERE HELD T O BE WITHOUT JURISDICTION, OBSERVING AS UNDER: IT : WHERE REASSESSMENT NOTICE ISSUED TO ASSESSEE FOR REOPENING ASSESSMENT ON GROUND THAT PROVISIONS FOR DIMINUTION IN VALUE OF INVESTMENT WAS NOT ADDED BACK WHILE ARR IVING AT BOOK PROFIT UNDER SECTION 115JB HELD TO BE NOT JUST IFIED. SECTION 1 J5JB, READ WITH SECTION 147, OF THE INCOM E-TAX ACT, 1961 - MINIMUM ALTERNATE TAX - ASSESSMENT YEAR 2003 -04 - PETITIONER/ASSESSEE HAD FILED RETURN FOR RELEVANT A SSESSMENT YEAR DECLARING NIL INCOME - SAID RETURN WAS ACCOMPA NIED BY COMPUTATION OF INCOME, REPORT OF CHARTERED ACCOUNTA NTS IN FORM NO. 29B AND ANNEXURES THERETO AS WELL AS ANNUA L FINANCIAL ACCOUNTS - SCHEDULES FORMING PART OF BALA NCE SHEET AS ON 31-3-2003 WERE ALSO FILED ALONG WITH ANNUAL ACCO UNTS - POINTED ATTENTION OF ASSESSING OFFICER HAD BEEN DRA WN TO NOTE NO.3 OF SCHEDULE H APPENDED TO BALANCE SHEET - SAID NOTE EXPLAINED ENTRY MADE IN PROFIT AND LOSS ACCOUNT ON ACCOUNT 'OF PROVISION FOR DIMINUTION IN VALUE OF INVESTMENT - A SSESSING OFFICER THEREAFTER PASSED AN ORDER UNDER SECTION 14 3(3) COMPUTING TOTAL INCOME AT NIL - ON 19-5-2008, HE IS SUED A NOTICE UNDER SECTION 148 TO ASSESSEE FOR REOPENING ASSESSMENT - ASSESSING OFFICER WAS OF VIEW THAT PROVISION MADE F OR 6 ITA 2118/DEL/2013 M/S DLF POWER LTD. DIMINUTION IN VALUE OF INVESTMENT WAS ADDED BACK BY ASSESSEE FOR COMPUTING INCOME UNDER NORMAL PROVISIONS BUT SA ME WAS NOT ADDED BACK WHILE ARRIVING AT BOOK PROFITS; THAT THIS BEING AN UNASCERTAINED LIABILITY ACCORDING TO CLAUSE (C) OF EXPLANATION 1 TO SECTION 115JB SHOULD HAVE BEEN ADDED BACK WHILE COMPUTING BOOK PROFITS UNDER SECTION 115JB - IT WAS FOUND THA T AT TIME WHEN ORIGINAL ASSESSMENT WAS COMPLETED, ISSUE AS TO WHETHER CLAUSE (C) OF EXPLANATION 1 TO SECTION 115JB WOULD COVER CASES OF AMOUNTS SET ASIDE FOR DIMINUTION IN VALUE OF INV ESTMENT WAS DEBATABLE AND IT WAS ONLY AFTER CLAUSE (I) TO EXPLA NATION 1 BELOW SECTION 115JB WAS INSERTED BY FINANCE (NO 2) ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 1-4.-2001 THAT SAID CONTROVERSY WAS RESOLVED - WHETHER-SINCE AT TIME OF COMPLETING ORIGINAL ASSESSMENT UNDER SECTION 143(3), ASSESSING OFFICER HAD BEFORE HIM NOT ONLY PROFIT AND LOSS ACCOUNT AND BALANCE SH EET ALONG WITH SCHEDULES AND NOTES ON ACCOUNT, BUT ALSO HAD B EFORE HIM, STATEMENT OF TOTAL INCOME FILED BY ASSESSEE, WHICH CONTAINED NORMAL COMPUTATION OF TOTAL INCOME AS PER THE ACT A S ALSO COMPUTATION OF BOOK PROFIT IN ANNEXURE A TO AUDIT R EPORT IN FORM NO. 29B FURNISHED UNDER RULE 40B OF THE INCOME -TAX RULES FOR PURPOSES OF SECTION 115JB, THERE WAS THUS NO FAILURE ON PART OF ASSESSEE TO FURNISH FULL AND TRUE PARTIC ULARS NECESSARY FOR ITS ASSESSMENT - HELD, YES - WHETHER ASSESSEE COULD NOT BE EXPECTED TO ANTICIPATE STATUTORY AMEND MENTS MADE LATTER - HELD, YES - WHETHER IN ABSENCE OF ANY SPEC IFIC PROVISION, I.E., CLAUSE (I) OF EXPLANATION 1 IN SEC TION 115JB AT TIME WHEN ORIGINAL ASSESSMENT WAS MADE AND HAVING R EGARD TO DEBATABLE NATURE OF ISSUE AS TO WHETHER CLAUSE (C) OF EXPLANATION 1 TO SECTION 115JB WOULD COVER CASES OF AMOUNTS SET ASIDE FOR DIMINUTION IN VALUE OF INVESTMENT, IT COULD NEVER BE POSTULATED THAT IT WAS DUTY OF ASSESSEE TO HAVE INS TRUCTED OR INFORMED ASSESSING OFFICER AS TO LEGAL INFERENCE WH ICH HE SHOULD DRAW FROM PRIMARY FACTS - HELD, YES - WHETHE R, THEREFORE, THERE WAS NO FAILURE ON PART OF PETITION ER TO DISCLOSE FULL AND TRUE PRIMARY PARTICULARS AT TIME OF COMPLE TION OF- ORIGINAL ASSESSMENT AND HENCE NOTICE ISSUED UNDER S ECTION 148 WAS DECLARED TO BE WITHOUT JURISDICTION - HELD, YES [IN FAVOUR OF ASSESSEE] 7 ITA 2118/DEL/2013 M/S DLF POWER LTD. 5.1. THE HONBLE DELHI HIGH COURT ALSO CONSIDERED T HE INSERTION BY FINANCE (NO. 2) ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 1-4-200 1 AND AFTER CONSIDERING THE MERIT OF EACH AMENDMENT HELD THAT REASSESSMENT PROC EEDINGS WERE NOT JUSTIFIED. 5.2. SIMILARLY WE FIND THAT IN THE CASE OF CIT VS. K. MOHAN & CO. (EXPORTS) (REGD.) (SUPRA), IT WAS HELD THAT REOPENING OF ASSE SSMENT U/S 147 ON THE BASIS OF RETROSPECTIVE AMENDMENT IS NOT JUSTIFIED. 5.3. IN VIEW OF ABOVE, WE SEE NO REASON TO INTERFER E WITH THE ORDER OF LD. CIT(A) AND THE SAME IS UPHELD. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 29-04-2015. SD/- SD/- (C.M. GARG ) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: _______-04-2015. MP: C OPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR