EPC INDUSTRIES LTD, NASHIK V. ACIT OSD 10(1), MUMBAI

ITA 3210/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8648 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: I
• Next Hearing Date: 29-09-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 06-05-2016
• Court: TRIBUNAL
• Department Lawyers: P R GHOSH
• Assessee Lawyers: DINKLE H HARIYA
• Keywords: Reopening of assessment; Depreciation; Tangible material; Bad and doubtful debts; Difference of opinion; Assessment record; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I , MUMBAI BEFORE SHRI RA JENDRA , ACCOUNTANT MEMBER AND SHRI CN PRASAD , JUDICIAL MEMBER ITA NO. 32 1 0 /MUM/201 6 : (A.Y : 20 07 - 08 ) EPC INDUSTRIES LTD. PLOT NO. H - 109, MIDC AMBAD NASHIK 4 22010 PAN : AA ACE2 659J ( / APPELLANT) VS. ACIT OSD 10(1) MUMBAI ( / RESPONDENT) / A PPELLANT BY : SHRI DINKLE H HARIYA REVENUE BY : SHRI PR GHOSH / DATE OF HEARING : 1 5 /1 1 /201 6 DATE OF PRONOUNCEMENT : 10/ 02/2017 / O R D E R PER C.N.PRASAD (J.M.) : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT (APPEALS) - 2 4 , MUMBAI DATED 29 . 0 2 .201 6 FOR THE ASSESSMENT YEAR 20 07 - 08 ARISING OUT OF THE ASSESSMENT ORDER PASSED U/S 143(3) READ WITH SECTION 147 OF THE ACT . 2. IN THE GROUNDS OF APPEAL, THE ASSESSEE IS CHALLENGING THE ORDER OF THE LD. CIT (APPEALS) IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN INITIATING 2 M/S EPC INDUSTRIES LTD. ITA NO . 3210 /MUM/201 6 REASSESSMENT PROCEEDINGS AND FRAMING ASSESSMENT BY INVOKING PROVISIONS OF SECTION 147 R.W.S. 148 OF THE ACT. ON MERITS, TH E ASSESSEE HA S CHALLENG ED THE ORDER OF THE LD. CIT (APPEALS) IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN TREATING THE LOAN AMOUNT OF RS.30,07,71,569/ - WAIVED BY THE BANK AS INCOME U/S 41(1) READ WITH SECTION 28(IV) OF THE INCOME TAX ACT. 3. BRI EFLY STATED THE FACTS ARE THAT THE ASSESSEE WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF HDPE PIPES, FITTINGS AND SPRINKLER SYSTEM FILED ITS RETURN OF INCOME ON 31.10.2007 DECLARING NIL INCOME. ASSESSMENT WAS COMPLETED U/S 143(3) DETERMINING THE I NCOME AT RS.1,28,19,120/ - BEFORE SET OFF OF BROUGHT FORWARD BUSINESS LOSSES AND NIL INCOME AFTER SET OFF OF SUCH LOSSES . SUBSEQUENTLY, ASSESSMENT WAS REOPENED UNDER SECTION 147 AND THE REASSESSMENT WAS COMPLETED ON 22.03.2013 U/S 143(3) R .W.S. 147 DETERMIN ING THE INCOME OF THE ASSESSEE AT RS.31,35,90,689/ - BEFORE SET OFF OF BROUGHT FORWARD BUSINESS LOSSES AND NIL INCOME AFTER SET OFF OF BROUGHT FORWARD BUSINESS LOSSES. WHILE COMPLETING THE REASSESSMENT, THE ASSESSING OFFICER MADE ADDITION OF RS.30,07,71,56 9/ - BEING THE WAIVER OF PRINCIPAL AMOUNT OF LOAN BY BANK AS TAXABLE U/S 41(1)/ 28(IV) OF THE ACT. ON APPEAL, THE LD. CIT (APPEALS) SUSTAINED THE REOPENING OF ASSESSMENT AS WELL AS THE ADDITION MADE BY THE ASSESSING OFFICER ON MERITS , AGAINST WHICH THE ASSE SSEE IS IN APPEAL BEFORE US. 4. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITS THAT THE REOPENING OF ASSESSMENT U/S 147 IS BAD IN LAW. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT IN THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CALLED FOR THE DETAILS IN RESPECT OF WAIVER OF LOAN ON ACCOUNT OF ONE TIME 3 M/S EPC INDUSTRIES LTD. ITA NO . 3210 /MUM/201 6 SETTLEMENT WITH BANK AND NCD HOLDERS. THE ASSESSEE FILED A DETAILED SUBMISSION AS TO WHY THE PRINCIPAL AMOUNT WHICH WAS WAIVED BY THE BANK ON ONE TIME SETTLEMENT IS NOT TA XABLE AND AT THE SAME TIME, THE FACT OF OFFERING INTEREST WAIVED BY THE BANK TO TAX WAS ALSO BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER. THE LD. COUNSEL SUBMITS THAT AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, ASSESSMENT WAS COMPLETED U/S 143(3) BY THE ASSESSING OFFICER ACCEPTING THE SUBMISSIONS OF THE ASSESS EE THAT THE PRINCIPAL AMOUNT WAIVED BY THE BANKS ON ONE TIME SETTLEMENT IS NOT LIABLE TO BE TAXED U/S 41(1) /2 8 (IV) OF THE ACT. LD. COUNSEL SUBMITS THAT DETAILED REPLY FURNISHED IN THE COUR SE OF ASSESSMENT PROCEEDINGS I S PLACED AT PAGE NO.120 OF THE PAPER BOOK. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT SINCE THE ASSESSEE HAS FURNISHED ALL THE NECESSARY DETAILS, IN THE COURSE OF ASSESSMENT PROCEEDINGS AND THERE WERE NO TANGIBLE MATERIALS CAME ON RECORD SUBSEQUENT TO COMPLETION OF ASSESSMENT SUGGESTING THAT THERE IS ESCAPEMENT OF INCOME BY THE ASSESSEE, THE LD. COUNSEL SUBMITS THAT IT IS MERE CHANGE OF OPINION BY THE ASSESSING OFFICER TO BRING TO TAX THE PRINCIPAL AMOUNT WAIVED BY THE BANK S UNDER ONE TIME SETTLEMENT WHICH IS BAD IN LAW . THE LD. COUNSEL REFERRING TO PAGE 143 OF THE PAPER BOOK WHICH CONTAINS THE REASONS FOR REOPENING THE REASSESSMENT , SUBMITS THAT THE REASONS RECORDED BY THE ASSESSING OFFICER DOES NOT SUGGEST THAT ANY NEW IN FORMATION HAS COME ON RECORD SUGGESTING ESCAPEMENT OF INCOME. THE LD. COUNSEL FURTHER SUBMITS THAT IT IS VERY EVIDENT FROM THE REASSESSMENT ORDER THAT THE ASSESSING OFFICER STATES THAT ON PERUSAL OF THE RECORDS , IT WAS SEEN THAT DEDUCTION OF RS.30.07 CRORES WAS CLAIMED AS WAIVER OF LOAN ON ONE TIME SETTLEMENT WITH BANK AND NCD HOLDERS. THIS WAS CREDITED TO P&L ACCOUNT, BUT WAS CLAIMED AS DEDUCTION IN THE COMPUTATION OF INCOME AND THER EFORE 4 M/S EPC INDUSTRIES LTD. ITA NO . 3210 /MUM/201 6 INCOME CHARGEABLE TO TAX H AS ESCAPED ASSESSMENT. LD. COUNSEL THEREFORE SUBMITS THAT THIS CLEARLY SHOWS THAT NO NEW INFORMATION HAS COME ON RECORD SO AS TO TAKE A DIFFERENT VIEW BY THE ASSESSING OFFICER TO BRING TO TAX THE WAIVER OF LOAN ON ONE TIME SETTLEMENT CLAIM AS DEDUCT I ON BY THE ASSESSEE. THEREFORE, HE SUBMITS THAT IT IS A MERE CHANGE OF OPINION AND THEREFORE REASSESSMENT MADE U/S 143(3) R.W.S.147 IS BAD IN LAW. THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE FOLLOWING DECISIONS IN SUPPORT OF HIS CONTENTIONS AS STATED ABOVE . ( 1 ) CIT VS. KELVINATOR OF INDIA LTD. [(2010) 320 ITR 561 (SC)] ( 2 ) JASHAN TEXTILES MILLS P. LTD. VS. DCIT [(2006) 284 ITR 542 (BOM)] ( 3 ) GERMAN REMEDIES LTD. VS DCIT [(2006) 285 ITR 26(BOM)] ( 4 ) GERMAN REMEDIES LTD. VS CIT [(2006) 28 7 ITR 494(BOM)] ( 5 ) SIEMENS INFORMATION SYSTEMS LTD VS ASSTT. CIT [(2007) 295 ITR 333 (BOM)] ( 6 ) HARYANA ACCRYLIC MANUFACTURING CO.VS . CIT[(2009) 308 ITR 38 (DEL.)] ( 7 ) ASAIN PAINTS VS DY.CIT [(2009) 308 ITR 195 (BOM)] 5 . COMING TO THE MERITS OF THE CASE, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFAC TURING PLASTIC PIPES. UP TO A. Y . 2001 - 02 COMPANY HAS INCURRED HUGE LOSS AS A RESULT IT BECOME SICK COMPANY AND GOT REGISTER ED BY BIFR IN TERMS OF SECTION 3(1)( O ) OF SICK INDUSTRIAL COMPANIES ACT ( SICA ) . HE SUBMITS THAT SBI WAS APPOINTED AS OPERATING AGENCY TO CARRY OUT TECHNO ECONOMIC VIABILITY STUDY, VALUATION OF ASSETS AND TO PREPARE DRAFT REHABILITATION SCHEME. T HE LD. COU NSEL FOR THE ASSESSEE SUBMITTED THAT AS PER REVIVAL SCHEME AS APPROVED BY BIFR VIDE ORDER DATED 21 DECEMBER 2006 THE BANK AND DEBENTURE HOLDERS HAVE AGREED FOR ONE 5 M/S EPC INDUSTRIES LTD. ITA NO . 3210 /MUM/201 6 TIME SETTLEMENT (OTS) OF THEIR OUTSTANDING PR INCIPAL AND INTEREST. T HE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT I N TERMS OF ONE TIME S ETTLEMENT THE BANKS AND DEBENTURE HOLDERS HAVE AGREED TO SETTLE PRINCIPAL AMO UNT AT RS.1,000 LACS AND RS.934/ - RESPECTIVELY. HE SUBMITS THAT DETAIL ED WORKING IS ATTACHED IN PAPER BOOK AT PG.243 . T HE LD. COUNS EL FOR THE ASSESSEE SUBMITTED THAT THE COMPANY HAS OFFERED WAIVER OF INTEREST AS PER PROVISION OF SECTION 41(1) OF IT ACT, 1961 AND WAIVER OF PRINCIPAL AMOUNT CREDITED TO PROFIT AND LOSS ACCOUNT HAVE NOT BEEN CONSIDERED AS INCOME U/S 41(1) AND OR U/S 28 OF IT ACT, 1961. 6. T HE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE COMPANY HAS RAISED THE FUND BY ISSUE OF DEBENTURE IN THE YEAR 1994 - 95. THE AMOUNT SO BORROWED HAD BEEN UTILIZED FOR ACQUISITION OF FIXED ASSETS. THE INVESTMENT IN ACQUISITION OF FIXED ASSETS WAS MADE IN THE YEAR 1994 - 95 AND 1995 - 96. HE SUBMITS THAT T H E CERTIFICATE RECEIVED FROM THE CHARTERED ACCOUNTANTS TO ESTABLISH THIS FACT HAS BEEN PLACED IN PAPER BOOK AT PG.243A TO 243D . T HE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE L OANS FROM BANK WERE TAKEN AGAINST THE HYPOTHECATION OF STOCKS AND BOOK DEBT S AND THE SAME HAS ALSO BEEN UTILIZED FOR THE PURPOSE OF FIXED ASSETS FROM TIME TO TIME. T HE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT COURT HAVE TIME AND AGAIN HELD THAT WHEN THE AMOUNT BORROWED HAVE BEEN UTILIZED FOR THE PURPOSE OF FIXED ASSETS, IT DOE S NOT RESULT IN A REVENUE RECEIPTS. FOR THIS PROPOSITION HE PLACED R ELIANCE ON FOLLOWING CASES . (1) CIT V/S TOSHA INTERNATIONAL LTD. [1 76 TAXMAN 187 (DEL) ] (2) MAHINDRA AND MAHINDRA LTD. V/S CIT [ 261 ITR 501 (BOM)] (3) TRAVANCORE RUBBER & TEA CO LTD. V/S CIT [ 243 I TR 158 (SC) ] 6 M/S EPC INDUSTRIES LTD. ITA NO . 3210 /MUM/201 6 (4) ISKAREMECO REGENT LTD.. V/S CIT [ 196 TAXMAN 103 (MAD) ] (5) LOGITRONIC P LTD. V/S. CIT [ 333 ITR 386 (DEL) ] (6) CIT V/S XYLON HOLDING PVT. LTD. [26 TAXMAN.COM 333 (BOM) ] 7. THE LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW IN REOPENING THE ASSESSMENT U/S 147 AND MAKING ADDITION U/S 41(1)/28(IV) IN RESPECT OF THE WAIVER OF PRINCIPAL AMOUNT BY BANK AND NCD HOLDERS . 8 . WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW, THE PAPERS REFERRED TO IN THE PAPER BOOK AND THE CASE LAWS RELIED ON. IN THIS CASE, ASSESSEE FILED RETURN OF INCOME DECLARING NIL INCOME ON 31.10.2007 AND THE ASSESSMENT WAS COMPLETED U/S 143(3) ON 30.11.2009. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CALLED FOR THE DETAILS IN RESPECT OF WAIVER OF PRINCIPAL AMOUNT OF LOAN ON ONE TIME SETTLEMENT FROM THE BANK CLAIMED AS DEDUCTION IN THE COMPUTATION OF INCO ME. THE ASSESSEE VIDE LETTER DATED 16.10.2009 SUBMITTED A DETAILED EXPLANATION AND CLARIFICATION AS TO WHY ONLY THE INTEREST WHICH WAS WAIVED BY THE BANK WAS OFFERED TO TAX AND WHY THE PRINCIPAL AMOUNT OF LOAN WHICH WAS WAIVED BY THE BANK ON ONE TIME SETT LEMENT WAS CLAIMED AS NOT TAXABLE AND DEDUCTION WAS CLAIMED IN THE RETURN OF INCOME . IN ITS DETAILED SUBMISSION , THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISIONS IN SUPPORT OF ITS CONTENTION THAT THE PRINCIPAL AMOUNT WAIVED BY THE BANKS ON ONE TIME SETT LEMENT IS NOT TAXABLE. THE DETAILED NOTE SUBMITTED BY THE ASSESSEE IS AS UNDER : 1. DURI NG THE PREVIOUS YEARS ENDING 31 ST MARCH 2007 THE COMPANY HAS MADE ONE TIME SETTLEMENT (OTS) WITH DEBENTURE HOLDERS AND BANKS. THE LENDERS HAVE AGREED TO WAIVE THE INTEREST 7 M/S EPC INDUSTRIES LTD. ITA NO . 3210 /MUM/201 6 AND PRINCIPAL AMOUNT OF DEBTS THE DETAILS BREAKUP OF PRINCIPAL AND INTEREST AS ON THE DATE OF SETTLEMENT ARE GIVEN IN ANNEXURE I. 2. COPI ES OF OTS LETTERS FROM BANKS AND FINANCIAL INSTITUTIONS ARE ATTACHED HEREWITH. 3. THE COMPANY HAS ISSUED RS 1800 LACS 16.5% SECURED NON CONVERTIBLE DEBENTURE TO VARIOUS FINANCIAL INSTITUTIONS IN THE YEAR 1995 DEBENTURES WERE ISSUED FOR ITS EXPANSION CUM DIVERSIFICATION OF THE PROJECT. IT WAS SECURED AGAINST FIRST CHARGE ON MORTGAGE OF COMPA NY'S IMMOVEABLE PROPERTIES AND PLANT AND MACHINERIES PRESENT AND FUTURE. 4. THE BANKS HAVE ALSO SANCTION ED LOAN TO THE COMPANY FOR CARRYING ON ITS BUSINESS ACTIVITIES AGAINST THE SECURITIES OF IMMOVEABLE PROPERTIES AND OTHER ASSETS. 5. THE COMPANY MADE CASH LOSSES AND FAILED TO REPAY ITS PRINCIPAL AND INTEREST TO BANKS AND DEBENTURE HOLDERS. ON 02/07/2001 BIFR DECLARED THE COMPANY AS SICK IN TERMS OF SECTION 3 (1) (O) OF SICA. STATE BANK OF INDIA WAS APPOINTED AS THE OPERATING AGENCY TO CARRY OUT TECHNO ECONOMIC VIABILITY STUDY, VALUATION OF ASSETS AND TO PREPARE DRAFT REHABILITATION SCHEME (DRS) . 6. AS PER THE REVIVAL SCHEME AS APPROVED BY BOARD OF INDUSTRIAL AND FINANCE CORPORATION VIDE ORDER DATED 21 ST DECEMBER 2006 THE BANK AND DEBENTURE HOLDERS HAVE AGREED FOR OTS OF THEIR OUTSTANDING PRINCIPAL AND INTEREST. 7. THE BANKS AND DEBENTURE HOLDERS HAVE AGREED TO SETTLE THE PRINCIPAL AMOUNT AT R S 1000 LAC S AND R S 934 LAC S RESPECTIVELY. THE INTEREST HAVE BEEN WAIVE D BY THE BANK OF R S 2469.93 LAC S AND DEBENTURE HOLDERS R S 824.82 LACS, AGGREGATING TO RE 3294.65 LAC S . THE WAIVER OF INTEREST HAVE BEEN OFFERED FOR TAX AS UNDER PROVISION OF SECTION 41(1) OF THE INCOME TAX ACT 1961. THE WAIVER OF PRINCIPAL AMOUNT OF BANKS AND DEBENTURE HOLDERS OF RS 2141.61 LAC S AND RS 866.00 LAC S RESPECTIVELY HAVE BEEN CREDITED TO PROFIT & LOSS 8 M/S EPC INDUSTRIES LTD. ITA NO . 3210 /MUM/201 6 ACCOUNTS NOT CONSIDERED TAXABLE UNDER THE PROVISION OF SECTION 41(1) OF THE ACT, IN AS MUCH AS THERE WAS NO ALLOWANCES OR DEDUCTION OF THI S LIABILITY CLAIMED IN EARLIER YEARS. THE PROVISIONS OF SECTION 41(1) OF THE ACT IS ATTRACTED ONLY THAT LIABILITY WHICH CAN ONLY BE CEASED IF IT HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT IN THE EARLIER YEARS AS A LOSS OR EXPENDITURE OR TRADING LIABIL ITIES. UNLESS AND UNTIL THAT LIABILITY DEBITED TO THE PROFIT AND LOSS ACCOUNT IN THE EARLIER YEARS IT CANNOT BECOME AN INCOME OF THE CO M PANY ON ITS CESSATION IN VIEW OF THE PROVISIONS OF SECTION 41(L) OF THE ACT. THE PROVISIONS OF SECTION 28 OF THE ACT WHI CH DEAL WITH VARIOUS TYPES OF RECEIPTS WHICH CAN FORM PART OF 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' WITH THE 'SUBMISSION THAT THIS TYPE OF RECEIPT DOES NOT FALL IN ANY CATEGORY OF THE RECEIPTS GIVEN UNDER SECTION 28 OF THE ACT. SINCE THERE IS NO SP ECIFIC HEAD WITH REGARD TO CHARGEABILITY OF WAVIER OF LOAN IT CANNOT ASSUME THE CHARACTER OF TAXABLE INCOME. IN SUPPORT OF THIS CONTENTION, THE RELIANCE HAS BEEN PLACED ON FOLLOWING CASES. (I) COMFUND FINANCIAL SERVICES ( I ) LTD. V S DY. CIT [ 67 ITD 304 (BANG) ] (II) CIT VS. CHETAN CHEMICALS (P.) LTD [ 267 ITR 770 (GUJ) ] (III) MAHINDRA AND MAHINDRA LTD. V. C I T [ 261 ITR 501 (BOM) ] (IV) CIT VS . HUKUMCHAND MOHANLAL [ 82 ITR 624 (SC) ] (V) MEHBOOB PRODUCTIONS (P.) LTD. V. CIT [ 106 ITR 758 (BOM) ] 9. THE ASSESSMENT WAS COMPLETED U/S 143(3) ON 30.11.2009 ACCEPTING THE SUBMISSION OF THE ASSESSEE. NO ADDITION WAS MADE IN THE ASSESSMENT ORDER IN RESPECT OF THE PRINCIPAL AMOUNT WAIVED BY THE BANKS UNDER ONE TIME SETTLEMENT, WHICH WAS CLAIMED AS DEDUCTION I N THE COMPUTATION OF INCOME BY THE ASSESSEE. 10 . SUBSEQUENTLY, THE ASSESSING OFFICER ISSUED NOTICES DATED 29.03.2012 U/S 148 AND IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE SUBMITTED THAT THE COPY OF RETURN SUBMITTED ON 31.10.2007 MAY BE TREATED AS RETURN FILED IN RESPONSE TO 9 M/S EPC INDUSTRIES LTD. ITA NO . 3210 /MUM/201 6 NOTICE U/S 148. FURTHER, TH E ASSESSEE REQUESTED THE ASSESSING OFFICER TO GIVE REASONS FOR REOPENING ASSESSMENT BY LETTER DATED 14.12.2012 . THE ASSESSING OFFICER INTIMATED THE REASONS FOR REOPENING OF THE ASSESSMENT AS UNDER THE ASSESSEE HAD CLAIMED DEDUCTION OF RS.30,07,71,569/ - F OR WAIVER OF LOAN ON ACCOUNT OF ONE TIME SETTLEMENT (OTS) WITH BANKS AND NCD HOLDERS. THE AMOUNT WAS CREDITED TO THE P&L A/C AS INCOME BUT CLAIMED AS DEDUCTION IN THE STATEMENT OF COMPUTATION OF INCOME. THE ASSESSEE HAD CLAIMED DEDUCTION FOR DEPRECIATION ON THE ASSETS ACQUIRED WITH THE SAID LOAN, BANKS CLAIMED THE WRITE - OFF OF THE LOAN ON OTS AS BAD DEBTS AND THE WRITE BACK BY ASSESSEE WAS TO BE TREATED AS INCOME. THEREFORE, I HAVE REASONS TO BELIEVE THAT INCOME TO THE EXTENT OF RS.30.07 CRORES HAS ESCAP ED ASSESSMENT WITH IN THE MEANING OF SECTION 147 OF THE ACT. 11 . ON RECEIVING THE REASONS FOR REOPENING, ASSESSEE BY LETTER DATED 01.01.2013 SUBMITTED ITS OBJECTIONS STATING THAT THERE IS NO ESCAPEMENT OF INCOME BY THE ASSESSEE AND IT HAD FURNISHED ALL TH E INFORMATION IN THE COURSE OF ASSESSMENT PROCEEDINGS IN RESPECT OF WAIVER OF LOAN BY THE BANKS ON ONE TIME SETTLEMENT AS REQUIRED BY THE ASSESSING OFFICER AND THEREFORE REOPENING OF ASSESSMENT WAS MERELY A CHANGE OF OPINION AND THERE WERE NO TANGIBLE MATE RIALS WHICH CAME ON RECORD SUBSEQUENT TO COMPLETION OF ASSESSMENT TO JUSTIFY THE CONCLUSION THAT THE INCOME HAD ESCAPED ASSESSMENT , HENCE REASSESSMENT IS BAD IN LAW . HOWEVER, THE ASSESSING OFFICER REJECTED THE OBJECTIONS OF THE ASSESSEE BY ORDER DATED 08. 01.13 AND COMPLETED REASSESSMENT U/S 143(3) ON 22.03.2013 BRINGING TO TAX THE WAIVER OF PRINCIPAL AMOUNT OF LOAN OF RS.30,07,71,569 / - AS INCOME OF THE ASSESSEE U/S 41(1) / 28 (IV) OF THE IT ACT. 10 M/S EPC INDUSTRIES LTD. ITA NO . 3210 /MUM/201 6 12. ON PERUSAL OF THE REASSESSMENT ORDER, WE FIND THAT THE ASSESSMENT WAS REOPENED ONLY BASED ON THE INFORMATION WHICH WA S ALREADY AVAILABLE ON THE RECORDS AND NO NEW TANGIBLE MATERIALS HAVE COME ON RECORD SUGGESTING ESCAPED OF INCOME IN RESPECT OF WAIVER OF LOAN ON OTS BY BANKS WHICH WAS CLAIMED AS DEDUCTION BY T HE ASSESSEE . IT IS VERY APPARENT FROM THE REASSESSMENT ORDER THAT THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT INCOME HAD ESCAPED ASSESSMENT FOR THE REASON THAT ASSESSEE CLAIMED DEDUCTION OF RS.30.07 CRORES AS WAIVER OF LOAN ON ACCOUNT OF ONE TIME SE TTLEMENT WITH BANK AND NCD HOLDERS AND THIS AMOUNT WAS CREDITED TO P&L ACCOUNT AS INCOME, BUT WAS CLAIMED AS DEDUCTION IN THE COMPUTATION OF INCOME AND THEREFORE INCOME HAD ESCAPED ASSESSMENT. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS NOT S UBMITTED ANY DETAILS IN RESPECT OF THE LOAN WAIVED BY THE BANKS, BUT, IT WAS THE CONTENTION OF THE ASSESSING OFFICER THAT THERE IS NO CHANGE OF OPINION WHICH IN OUR CONSIDERED VIEW IS NOT CORRECT. THE ASSESSEE HAS FURNISHED ALL THE INFORMATION AND A DETAI LED SUBMISSION ALONG WITH CASE LAW IN ITS SUPPORT FOR ITS CLAIM FOR DEDUCTION OF WAIVER OF LOAN BY BANKS ON OTS. WE ALSO FIND THAT THERE IS NOTHING ON RECORD TO SUGGEST THAT THE REVENUE HAS GOT TANGIBLE MATERIAL IN ITS POSSESSION AFTER COMPLETION OF ASSESSMENT SUGGESTING ESCAPEMENT OF INCOME. WHAT WE SEE IS ONLY MERE CHANGE OF OPINION OF THE INCUMBENT ASSESSING OFFICER TO BRING TO TAX THE AMOUNT OF PRINCIPAL WAIVER OF LOAN CLAIMED AS DEDUCTION BY THE ASSESSEE IN ITS COMPUTATION OF INCOME ON SAME SET OF FACTS WHICH WERE ALREADY ON RECORD. 13 . THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ASIAN PAINTS LTD. VS. DCIT [308 ITR 195] HELD THAT WHEN A REGULAR ORDER OF ASSESSMENT IS PASSED U/S 143(3) A PRESUMPTION CAN BE RAISED THAT SUCH ORDER HAS BEEN PASSED ON 11 M/S EPC INDUSTRIES LTD. ITA NO . 3210 /MUM/201 6 APPLICATION OF MIND. IT WAS HELD THAT IF NON APPLICATION OF MIND BY THE ASSESSING OFFICER IN PASSING AN ORDER WOULD ITSELF CONFER JURISDICTION UPON THE ASSESSING OFFICER TO REOPEN THE PROCEEDING S WITHOUT KNOWING FURTHER , I T WOULD AMOUNT TO GIVING A PREMIUM TO AN AUTHORITY TO THE ASSESSING OFFICER EXERCIS ING QUASI JUDICIAL FUNCTION TO TAKE BENEFIT OF HIS OWN WRONG. THE HONBLE HIGH COURT HELD THAT THE LEGISLATURE HAS NOT CONFERRED THE POWER ON TH E ASSESSING OFFICER TO REVIEW HIS OWN ORDER. THE HONBLE HIGH COURT HELD THAT INITIATION OF REASSESSMENT PROCEEDINGS WOULD AMOUNT TO CHANGE OF OPINION OF THE ASSESSING OFFICER AS IT WAS MERELY A FRESH APPLICATION OF MIND BY THE ASSESSING OFFICER TO THE SA ME SET OF FACTS. IT WAS HELD BY THE HIGH COURT THAT SINCE THE ASSESSING OFFICER HAS FAILED TO APPLY HIS MIND TO THE RELEVANT MATERIAL WHILE FRAMING THE ASSESSMENT ORDER, HE WOULD NOT TAKE ADVANTAGE OF HIS OWN WRONG. THE LEGISLATURE HAS NOT CONFERRED POWE R ON THE ASSESSING OFFICER TO REVIEW HIS OWN ORDER. WHILE HOLDING SO, THE HONBLE HIGH COURT ALSO CONSIDER ED THE FULL BENCH DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT VS KELVINATOR OF INDIA LTD [ 256 ITR 1 ] WHICH WAS LATER AFFIRMED BY THE SUPREME COURT , REPORTED IN [ 320 ITR 561 ] AS CIT VS KELVINATOR OF INDIA LTD. THE HONBLE HIGH COURT WHILE HOLDING SO HELD AS UNDER 7. WE HAVE HEARD THE LEARNED COUNSEL APPEARING FOR BOTH SIDES. WE HAVE ALSO GONE THROUGH THE JUDGMENTS ON WHICH RELIANCE WAS PLACED BY THE LEARNED COUNSEL APPEARING FOR BOTH SIDES. 8. IN THE ORDER REJECTING THE OBJECTION FILED BY THE PETITIONER TO THE NOTICE UNDER SECTION 148, RESPONDENT NO. 1 HAS OBSERVED 'VERIFICATION OF ASSESSMENT RECORD REVEALS THAT THE SAID DETAILS WERE CALLED F OR BUT INADVERTENTLY THE SAME WERE NOT TAKEN INTO ACCOUNT WHILE FRAMING THE ASSESSMENT AND, THEREFORE, IT CANNOT BE SAID THAT THERE IS A CHANGE OF OPINION.' ACCORDING TO RESPONDENT NO. 12 M/S EPC INDUSTRIES LTD. ITA NO . 3210 /MUM/201 6 1, THUS, THE RELEVANT MATERIAL WAS AVAILABLE ON RECORD, BUT HE FAILED T O APPLY HIS MIND TO THAT MATERIAL IN MAKING THE ASSESSMENT ORDER. THE QUESTION IS, CAN RESPONDENT NO. 1 TAKE RECOURSE TO THE PROVISION OF SECTION 147 FOR HIS OWN FAILURE TO APPLY HIS MIND TO THE MATERIAL WHICH, ACCORDING TO HIM, IS RELEVANT AND WHICH WAS A VAILABLE ON RECORD. WE FIND THAT THIS SITUATION HAS BEEN CONSIDERED BY THE FULL BENCH OF THE DELHI HIGH COURT IN ITS JUDGMENT IN THE CASE OF CIT V. KELVINATOR OF INDIA LTD. [2002] 256 ITR 1 AND THE FULL BENCH HAS OBSERVED THUS (PAGE 19) : 'THE SAID SUBMISSION IS FALLACIOUS. AN ORDER OF ASSESSMENT CAN BE PASSED EITHER IN TERMS OF SUB - SECTION (1) OF SECTION 143 OR SUB - SECTION (3) OF SECTION 143. WHEN A REGULAR ORDER OF ASSESSMENT IS PASSED IN TERMS OF THE SAID SUB - SECTION (3) OF SECTION 143 A PRESUMPTION CAN BE RAISED THAT SUCH AN ORDER HAS BEEN PASSED ON APPLICATION OF MIND. IT IS WELL KNOWN T HAT A PRESUMPTION CAN ALSO BE RAISED TO THE EFFECT THAT IN TERMS OF CLAUSE ( E ) OF SECTION 114 OF THE INDIAN EVIDENCE ACT JUDICIAL AND OFFICIAL ACTS HAVE BEEN REGULARLY PERFORMED. IF IT BE HELD THAT AN ORDER WHICH HAS BEEN PASSED PURPORTEDLY WITHOUT APPLICA TION OF MIND WOULD ITSELF CONFER JURISDICTION UPON THE ASSESSING OFFICER TO REOPEN THE PROCEEDING WITHOUT ANYTHING FURTHER, THE SAME WOULD AMOUNT TO GIVING A PREMIUM TO AN AUTHORITY EXERCISING QUASI - JUDICIAL FUNCTION TO TAKE BENEFIT OF ITS OWN WRONG.' 9. IT IS CLEAR FROM THE OBSERVATIONS MADE ABOVE THAT THE FULL BENCH OF THE DELHI HIGH COURT HAS TAKEN A VIEW THAT IN A SITUATION WHERE ACCORDING TO THE ASSESSING OFFICER HE FAILED TO APPLY HIS MIND TO THE RELEVANT MATERIAL IN MAKING THE ASSESSMENT ORDER, HE C ANNOT TAKE ADVANTAGE OF HIS OWN WRONG AND REOPEN THE ASSESSMENT BY TAKING RECOURSE TO THE PROVISIONS OF SECTION 147. WE FIND, OURSELF, IN RESPECTFUL AGREEMENT WITH THE VIEW TAKEN BY THE FULL BENCH OF THE DELHI HIGH COURT. 10. IT IS FURTHER TO BE SEEN THAT THE LEGISLATURE HAS NOT CONFERRED POWER ON THE ASSESSING OFFICER TO REVIEW ITS OWN ORDER. THEREFORE, THE POWER UNDER SECTION 147 CANNOT BE USED TO REVIEW THE ORDER. IN THE PRESENT CASE, THOUGH THE ASSESSING OFFICER HAS USED TH E 13 M/S EPC INDUSTRIES LTD. ITA NO . 3210 /MUM/201 6 PHRASE 'REASON TO BELIEVE', ADMITTEDLY BETWEEN THE DATE OF THE ORDER OF ASSESSMENT SOUGHT TO BE REOPENED AND THE DATE OF FORMATION OF OPINION BY THE ASSESSING OFFICER, NOTHING NEW HAS HAPPENED, THEREFORE, NO NEW MATERIAL HAS COME ON RECORD, NO NEW INFORM ATION HAS BEEN RECEIVED, IT IS MERELY A FRESH APPLICATION OF MIND BY THE SAME ASSESSING OFFICER TO THE SAME SET OF FACTS AND THE REASON THAT HAS BEEN GIVEN IS THAT THE SOME MATERIAL WHICH WAS AVAILABLE ON RECORD WHILE ASSESSMENT ORDER WAS MADE WAS INADVERT ENTLY EXCLUDED FROM CONSIDERATION. THIS WILL, IN OUR OPINION, AMOUNT TO OPENING OF THE ASSESSMENT MERELY BECAUSE THERE IS CHANGE OF OPINION. THE FULL BENCH OF THE DELHI HIGH COURT IN ITS JUDGMENT IN THE CASE OF KELVINATOR [2002] 256 ITR1 REFERRED TO ABOVE, HAS TAKEN A CLEAR VIEW THAT REOPENING OF ASSESSMENT UNDER SECTION 147 MERELY BECAUSE THERE IS A CHANGE OF OPINION CANNOT BE ALLOWED. IN OUR OPINION, THEREFORE, IN THE PRESENT CASE ALSO, IT WAS NOT PERMISSIBLE FOR RESPONDENT NO. 1 TO ISSUE NOTICE UNDER SEC TION 148. 14. I N THE CASE OF SIEMENS INFORMATION SYSTEMS LTD. VS. ACIT [ 295 ITR 333 ], THE HONBLE BOMBAY HIGH COURT HELD THAT THE ASSESSING OFFICER ON THE SAME SET OF FACTS HAD TAKEN A VIEW WHICH WAS DIFFERENT FROM THE VIEWS TAKEN BY THE PREVIOUS ASSESSING OFFICER ON THE INTERPRETATI ON OF THE SAME PROVISION OF LAW AND THEREFORE IT IS MERE CHANGE OF OPINION WHICH IS NOT PERM ISSIBLE. 1 5 . IN VIEW OF WHAT IS EXPLAINED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT IN THE CASE ON HAND, REOPENING OF ASSESSMENT U/S 147 IS ONLY ON MERE CHANGE OF OPINION BY THE ASSESSING OFFICER ON SOME SET OF FACTS WHICH WERE ALREADY AVAILABLE ON RECORD BEFORE HIM WHILE COMPLETING THE ORIGINAL ASSESSMENT U/S 143(3) OF THE ACT. THUS, F OLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF KELVINATOR INDIA LTD. AND THE ABOVE DECISIONS OF THE JURISDICTIONAL HIGH 14 M/S EPC INDUSTRIES LTD. ITA NO . 3210 /MUM/201 6 COURT, WE HOLD THAT REASSESSMENT MADE U/S 143 R.W.S. 147 IS BAD IN LAW. HENCE WE QUASH THE REASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER. 1 6 . AS WE HAVE HELD THAT REOPENING OF ASSESSMENT ITSELF IS BAD IN LAW WE ARE NOT GOING INTO MERITS OF THE CASE SINCE IT WOULD BECOME ONLY ACADEMIC AT THIS STAGE. THEREFORE, GROUNDS ON MERIT ARE KEPT OPEN. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLO WED . ORDER PRONOUNCED IN THE OPEN COURT ON THE 10 TH DAY OF FEBRUARY 2017 . SD/ - SD/ - RA JENDRA C.N.PRASAD / / ACCOUNTANT MEMBER JUDICIAL MEMBER / MUMBAI; / DATED 10 / 02 / 2017 LR, SPS 15 M/S EPC INDUSTRIES LTD. ITA NO . 3210 /MUM/201 6 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, (ASSTT. REGISTRAR) , / ITAT, MUM 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. // TRUE COPY / /