The District Co-Op. Central Bank Ltd., Kakinada V. THE ITO, WARD-2, Kakinada

ITA 365/VIZ/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6437 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 02-02-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 24-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T S N MURTHY
• Assessee Lawyers: K GOPALAKRISHNA
• Keywords: Depreciation; Audit objection; Principle of natural justice; Period of limitation; Tangible material; Bad and doubtful debts; Difference of opinion; Valuation report; Revised return; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 27; 148; 37

Judgement Text

ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NOS.309, 365 & 366/VIZAG/2013 ( / ASSESSMENT YEARS: 2007-08, 2008-09 & 2009-10) THE DISTRICT CO - OP. CENTRAL BANK LTD., KAKINADA ITO, WARD - 2, KAKINADA [PAN NO. AAAAT4266G ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI K. GOPALA KRISHNA, AR / RESPONDENT BY : SHRI T.S.N. MURTHY, DR / DATE OF HEARING : 17. 0 2 .201 7 / DATE OF PRONOUNCEMENT : 03.03.2017 ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 2 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THESE ARE 3 APPEALS FILED BY THE ASSESSEE ARE DIRE CTED AGAINST SEPARATE, BUT IDENTICAL ORDERS OF THE COMMI SSIONER OF INCOME- TAX (A)-11, MUMBAI, CAMP OFFICE AT VISAKHAPATNAM FO R THE ASSESSMENT YEARS 2007-08, 2008-09 & 2009-10. SINCE, THE FACTS ARE IDENTICAL AND ISSUES ARE COMMON, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED-OFF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENI ENCE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A CO-OPERATIVE SOCIETY, REGISTERED UNDER THE PROVISIONS OF ANDHRA PRADESH CO-OPERATIVE SOCIETIES ACT, CARRYING ON THE BANKING BUSINESS OF LENDING PRIMARILY TO AGRICULTURAL SECTOR. THE ASSESSEE HAS FILED ITS RE TURN OF INCOME FOR ALL THE THREE ASSESSMENT YEARS 2007-08 TO 2009-10 U/S 1 39(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE AC T'). THE RETURNS WAS INITIALLY PROCESSED U/S 143(1) OF THE ACT, FOR ALL THE ASSESSMENT YEARS. SUBSEQUENTLY, THE ASSESSMENT FOR THE ASSESSMENT YEA R 2007-08 HAS BEEN SUBJECTED TO SCRUTINY AND THE A.O. HAS COMPLET ED ASSESSMENT U/S 143(3) OF THE ACT ON 17.2.2009 DETERMINING TOTAL IN COME OF ` 65,150/-. HOWEVER, THE ASSESSMENT FOR THE ASSESSMENT YEAR 200 8-09 AND 2009-10 ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 3 HAS BEEN COMPLETED U/S 143(1) OF THE ACT AND INTIMA TION U/S 143(1)(A) OF THE ACT HAS BEEN ISSUED ACCEPTING INCOME DECLARE D BY THE ASSESSEE. 3. SUBSEQUENTLY, THE ASSESSMENTS FOR THE ASSESSMENT YEAR 2007-08 TO 2009-10 HAVE BEEN RE-OPENED BY ISSUANCE OF NOTIC E U/S 148 OF THE ACT. THE A.O. RE-OPENED THE ASSESSMENT AFTER RECOR DING REASONS FOR RE- OPENING OF ASSESSMENT, AS PER WHICH THE A.O. STATED THAT WHILE ARRIVING AT INCOME UNDER THE HEAD INCOME FROM BUSINESS, TH E ASSESSEE CLAIMED DEDUCTION U/S 36(1)(VIIA) OF THE ACT, TOWARDS PROVI SION FOR BAD AND DOUBTFUL DEBTS FOR AN AMOUNT OF 7.5% OF THE TOTAL I NCOME, COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND C HAPTER VIA AND AN AMOUNT NOT EXCEEDING 10% OF THE AGGREGATE AVERAGE A DVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER, WHEREAS, THE ASSESSEE HAS ACTUALLY CREATED RESERVE FOR BAD AND DOUBTFUL DEBTS, WHICH IS LESS THAN DEDUCTION CLAIMED U/S 36( 1)(VIIA) OF THE ACT. THEREFORE, IN TERMS OF BOARDS INSTRUCTION NO.17/20 08 DATED 26.11.2008, THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 36(1)(VI IA) OF THE ACT, TOWARDS PROVISION FOR BAD AND DOUBTFUL DEBTS AS WORKED OUT AS PER THE PROVISIONS, SUBJECT TO MAXIMUM AMOUNT ACTUALLY CREA TED IN THE BOOKS OF ACCOUNTS IN THE RELEVANT ACCOUNTING YEAR. SINCE, T HE ASSESSEE HAS CLAIMED DEDUCTION TOWARDS BAD AND DOUBTFUL DEBTS U/ S 36(1)(VIIA) OF THE ACT, IN EXCESS OF ACTUAL RESERVE CREATED IN THE BOO KS OF ACCOUNTS AND ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 4 WHICH WAS NOT SUBJECTED TO VERIFICATION AT THE TIME OF COMPLETION OF ORIGINAL ASSESSMENT U/S 143(3)/143(1) OF THE ACT, I HAVE A REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED A SSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT, FOR THE ASSE SSMENT YEARS 2007- 08 TO 2009-10. THEREFORE, ISSUED A NOTICE U/S 148 OF THE ACT FOR ALL THE 3 YEARS AND ASKED THE ASSESSEE TO FURNISH A RETURN. 4. IN RESPONSE TO NOTICES U/S 148 OF THE ACT, THE A SSESSEE HAS FILED A LETTER ON 8.8.2011 REQUESTING TO FURNISH REASONS RE CORDED FOR RE-OPENING THE ASSESSMENT. THEREAFTER, THE ASSESSEE HAS FILED ONE MORE LETTER ON 26.8.2011 AND REQUESTED TO TREAT RETURN FILED U/S 1 39(1) OF THE ACT, FOR THE ASSESSMENT YEAR 2007-08 AS RETURN FILED IN RESP ONSE TO NOTICE ISSUED U/S 148 OF THE ACT. HOWEVER, THE ASSESSEE HAS FILE D A REVISED RETURN IN RESPONSE TO NOTICE U/S 148 OF THE ACT, ON 26.8.2011 FOR THE ASSESSMENT YEARS 2008-09 AND 2009-10. FURTHER, THE ASSESSEE, VEHEMENTLY RAISED OBJECTIONS FOR RE-OPENING OF ASSESSMENT BY FILING A LETTER ON 26.8.2011, BY STATING THAT THE RE-OPENING OF ASSESSMENT IS BAD IN LAW AS THE A.O. HAS RE-OPENED THE ASSESSMENT MERELY ON THE BASIS OF CHANGE OF OPINION WITHOUT THERE BEING ANY TANGIBLE MATERIAL CAME TO T HE KNOWLEDGE OF THE A.O., SUBSEQUENT TO THE COMPLETION OF ORIGINAL ASSE SSMENT U/S 143(1) & 143(3) OF THE ACT. THE A.O., AFTER CONSIDERING THE OBJECTIONS FILED BY THE ASSESSEE AND ALSO OTHER RELEVANT MATERIALS COMPLETE D ASSESSMENT U/S ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 5 143(3) R.W.S. 147 OF THE ACT ON 30.12.2011 AND DETE RMINED TOTAL INCOME OF ` 13,39,53,049/-, ` 7,95,89,262/- & ` 7,31,26,120/- RESPECTIVELY, FOR THE ASSESSMENT YEARS 2007-08, 2008-09 & 2009-10. 5. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE HAS CHALLENGED THE RE-ASSESSMENT PROCEEDINGS ON THE GRO UND THAT RE- OPENING OF ASSESSMENT IS BAD IN LAW AND LIABLE TO B E QUASHED, AS THE A.O. HAS RE-OPENED THE ASSESSMENT MERELY ON CHANGE OF OPINION WITHOUT ANY TANGIBLE MATERIAL WHICH SUGGESTS ESCAPE MENT OF INCOME WITHIN THE MEANING OF SECTION 147 OF THE ACT. THE ASSESSEE HAS FILED ELABORATE WRITTEN SUBMISSIONS AND ALSO RELIED UPON PLETHORA OF JUDGEMENTS. THE ASSESSEE ALSO AGITATED THE ISSUES ON MERIT AND CONTENDED THAT THE A.O. WAS ERRED IN RESTRICTING DE DUCTIONS TOWARDS PROVISION FOR BAD AND DOUBTFUL DEBTS WITHOUT UNDERS TANDING THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT, WHERE IN IT WAS CATEGORICALLY SPECIFIED DEDUCTION TOWARDS PROVISION FOR BAD AND D OUBTFUL DEBTS IN THE CASE OF CO-OPERATIVE BANKS. THE ASSESSEE ALSO MADE A FRESH CLAIM TOWARDS EXCLUSION OF AMOUNT WITHDRAWN FROM RESERVES FOR BAD AND DOUBTFUL DEBTS CREATED FOR THE PREVIOUS FINANCIAL Y EARS, WHICH WAS NOT MADE EITHER IN THE ORIGINAL RETURN OF INCOME FILED U/S 139(1) OF THE ACT OR REVISED RETURN FILED U/S 148 OF THE ACT. THE AS SESSEE CONTENDED THAT ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 6 IT HAS WITHDRAWN CERTAIN AMOUNT FROM RESERVES CREAT ED IN THE EARLIER YEARS TOWARDS PROVISION FOR BAD AND DOUBTFUL DEBTS AND CREDITED TO THE PROFIT & LOSS ACCOUNT AND FAILED TO EXCLUDE THE SAM E FROM THE TOTAL INCOME FOR THE RESPECTIVE ASSESSMENT YEARS ON THE P LEA THAT THE TOTAL INCOME AFTER CLAIMING DEDUCTION TOWARDS PROVISION F OR BAD AND DOUBTFUL DEBTS U/S 36(1)(VIIA) OF THE ACT REDUCED TO NIL. 6. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALSO BY RELIED UPON PLETHORA OF JUDGEMENTS, HELD TH AT THE ASSESSEE HAS NOT PROVIDED NECESSARY INFORMATION NEITHER ALONG WI TH RETURN OF INCOME NOR DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH EREFORE, THE ARGUMENTS OF THE ASSESSEE THAT THE ASSESSMENT HAS B EEN RE-OPENED MERELY ON CHANGE OF OPINION IS INCORRECT. THE CIT( A) FURTHER HELD THAT THE SECOND LIMB OF ARGUMENT OF THE ASSESSEE IS THAT THERE IS NO NEW TANGIBLE MATERIAL IN THE POSSESSION OF THE A.O. TO ACQUIRE JURISDICTION TO INITIATE PROCEEDINGS U/S 147 OF THE ACT, IS ALSO FA ILS AS THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR IND IA LTD. 320 ITR 561, SPEAKS ABOUT TANGIBLE MATERIAL, BUT NOT NEW TANGIBL E MATERIAL. IT IS A FACT THAT THE ASSESSMENT FOR THE ASSESSMENT YEAR 20 07-08 HAS BEEN COMPLETED U/S 143(3) OF THE ACT, BUT THE A.O. FAILE D TO EXAMINE THE ISSUE WITH REFERENCE TO THE PROVISIONS OF THE ACT A ND INSTRUCTIONS OF THE CBDT, WHEREIN THE CBDT HAS EXPLAINED THE POSITION O F LAW WITH REGARD ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 7 TO THE DEDUCTION TOWARDS PROVISION FOR BAD AND DOUB TFUL DEBTS. IN SO FAR AS ASSESSMENT YEAR 2008-09 & 2009-10, THE QUEST ION OF CHANGE OF OPINION DOES NOT ARISE AS THE ASSESSMENT FOR THE AB OVE TWO YEARS HAS BEEN COMPLETED U/S 143(1) OF THE ACT, THEREFORE, TH E A.O. DOES NOT HAVE ANY OCCASION TO APPLY HIS MIND TO THE FACTS OF THE CASE AND HENCE THE CONCEPT OF CHANGE OF OPINION DOES NOT ARISE. WITH T HESE OBSERVATIONS, REJECTED THE LEGAL GROUND RAISED BY THE ASSESSEE CH ALLENGING THE VALIDITY OF RE-ASSESSMENT PROCEEDINGS. 7. IN SO FAR AS MERITS OF THE ISSUE IS CONCERNED, T HE CIT(A) REJECTED THE CLAIM OF THE ASSESSEE WITH REGARD TO DEDUCTION TOWARDS PROVISION FOR BAD AND DOUBTFUL DEBTS BY HOLDING THAT DEDUCTION TO WARDS PROVISION FOR BAD AND DOUBTFUL DEBTS IS ALLOWED SUBJECT TO ACTUAL PROVISION CREATED IN THE BOOKS OF ACCOUNTS. IN THIS CASE, THE ASSESSEE HAS CREATED LESS PROVISION IN THE BOOKS OF ACCOUNTS, WHEREAS THE ASS ESSEE HAS MADE CLAIM AS PER THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT, IN THE STATEMENT OF COMPUTATION OF TOTAL INCOME, THEREFORE , THE A.O. WAS RIGHT IN RESTRICTING THE DEDUCTION TOWARDS PROVISION FOR BAD AND DOUBTFUL DEBTS TO THE EXTENT ACTUAL PROVISION CREATED IN THE BOOKS OF ACCOUNTS. IN SO FAR AS FRESH CLAIM MADE BY THE ASSESSEE, TOWARDS EX CLUSION OF AMOUNT WITHDRAWN FROM RESERVE CREATED IN THE EARLIER PERIO D TOWARDS PROVISION FOR BAD AND DOUBTFUL DEBTS, THE CIT(A) HELD THAT TH E ASSESSEE CANNOT ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 8 MAKE ANY FRESH CLAIM IN THE RE-ASSESSMENT PROCEEDIN GS, AS THE RE- OPENING OF THE ASSESSMENT IS FOR THE BENEFIT OF REV ENUE. IN SUPPORT OF HIS FINDINGS, RELIED UPON THE DECISION OF HONBLE S UPREME COURT IN THE CASE OF CIT VS. V. JAGAN MOHAN RAO 75 ITR 373 AND C IT VS. SUN ENGINEERING WORKS PVT. LTD. 198 ITR 297. 8. AGGRIEVED BY THE CIT(A) ORDER, THE ASSESSEE PREF ERRED AN APPEAL BEFORE US AND RAISED THE FOLLOWING GROUNDS OF APPEA L. SINCE, THE ASSESSEE HAS RAISED COMMON GROUNDS FOR ALL THE 3 YE ARS, FOR THE SAKE OF CONVENIENCE, WE EXTRACT GROUNDS RAISED FOR THE ASSE SSMENT YEAR 2007-08. 1.THE IMPUGNED ORDER OF THE LD. COMMISSIONER OF (APP EALS), VISAKHAPATNAM IS OPPOSED TO LAW, FACTS AND IN THE C IRCUMSTANCES OF THE CASE. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE APPELLATE ORDER PASSED BY THE LD. CIT(A) IS ILLEGAL AND AGAINST THE PRINCI PLES OF NATURAL JUSTICE, WITHOUT GIVING AMPLE OPPORTUNITY TO THE APPELLANTS DURING THE COURSE OF HEARING AND AGAINST THE PROVISIONS OF THE INCOME TAX ACT, 1961. 3. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRE D IN NOT APPRECIATING THE FACT THAT THE ORIGINAL ASSESSMENT WAS COMPLETED BY THE THEN LD. ASSESSING OFFICER, WARD-2, KAKINADA AND THE ORDER P ASSED BY THE SUCCEEDING LD. ASSESSING OFFICER U/S 147/148 OF THE INCOME TAX ACT, 1961 IS BAD IN LAW. 4. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRE D IN UPHOLDING THE ORDER OF THE LD. ASSESSING OFFICER, WHO PASSED THE IMPUGNED ORDER PURELY ON THE BASIS OF MERE CHANGE OF OPINION EVEN THOUGH F ULL FACTS ARE DISCLOSED IN THE RETURN OF INCOME AND NO FRESH MATERIAL WAS AVAI LABLE DURING THE COURSE OF REASSESSMENT PROCEEDINGS. A) SINCE NO FRESH MATERIAL HAD COME TO THE KNOWLEDGE OF AO AFTER PASSING OF ORIGINAL ORDER AND THE ISSUE INVOLVED WAS EXAMIN ED IN THE ORIGINAL ASSESSMENT, THEREFORE, THIS BEING A CASE OF CHANGE OF OPINION, MADE THE REASSESSMENT PROCEEDINGS UNJUSTIFIED. RELIED ON: COMMISSIONER OF INCOME TAX VS. EXPEDITORS INTERNATIO NAL INDIA (P) LTD. (DEL-HC)(2013)049(I)ITCL 0289 B) REASSESSMENT COULD NOT BE MADE WHERE THERE WAS FULL DISCLOSURE OF FACTS AND NO NEW MATERIAL WAS AVAILABLE TO REOPEN T HE CASE, THEREFORE, IT WAS A MERE CHANGE OF OPINION. ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 9 RELIED ON: GUJARAT TEA PROCESSORS & PACKERS LTD., VS. DEPUTY C OMMISSIONER OF INCOME TAX (GUJ-HC) (2013)050(I)ITCL 0193 C) IN THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. KELVINATOR OF INDIA LTD., REPORTED IN (2010)(1)TMI 11-SC WAS HELD THAT IF REVENUE WAS OF T HE OPINION THAT THE ASSESSING OFFICER ERRONEOUSLY AND TO THE PREJUDICE OF THE INTEREST OF THE REVENUE ALLOWED CERTAIN CLAIM, IN A GIVEN SITUATION , IT WOULD HAVE BEEN OPEN FOR THE APPROPRIATE AUTHORITY TO EXERCISE REVI SIONAL POWERS. HOWEVER, ONCE THE CLAIM WAS FULLY EXAMINED, POWER O F REOPENING WAS SIMPLY NOT AVAILABLE. D) THERE WAS NO OTHER MATERIAL FOR THE AO FOR REOPENIN G OF THE ASSESSMENT AND FOUND THAT THE REOPENING OF THE ASSESSMENT ON T HE SAME MATERIAL WAS UNJUSTIFIED. RELIED ON: COMMISSIONER OF INCOME TAX, BHOPAL VS. TRIMURTHI B UILDERS 2011-TIOL-541-HC-MP-IT. E) WHEN THE AO HAS ALREADY ALLOWED THE CLAIM OF THE A SSESEE IN THE REGULAR ASSESSMENT, IT CANNOT ISSUE NOTICE FOR REOPENING TH E ASSESSMENT ON THE BASIS OF THE SAME DOCUMENTS MERELY ON THE BASIS OF CHANGE OF OPINION. RELIED ON: ABHIYOG HOLDINGS PVT. LTD., VS. INCOME TAX OFFICER (OSD) RANGE- 1 2012-TIOL-601-HC-AHM-IT. F) WHERE ASSESSEE HAD DISCLOSED FULL FACTS AND NO NEW MATERIAL WAS AVAILABLE TO REVENUE TO REOPEN THE CASE, IT WAS A CASE OF MER E CHANGE OF OPINION AND, HENCE, REASSESSMENT COULD NOT BE MADE IN SUCH A CASE. RELIED ON: JAGSON INTERNATIONAL LTD., VS. COMMISSIONER OF INCOME TAX (2012) 46 (I) ITCL 517 (DEL-HC). 9. THE ASSESSEE ALSO FILED A PETITION FOR ADMISSION OF ADDITIONAL GROUNDS, WHEREIN IT HAS RAISED ADDITIONAL GROUNDS C HALLENGING THE VALIDITY OF RE-ASSESSMENT PROCEEDINGS ON THE GROUND THAT THE REASONS RECORDED FOR RE-OPENING OF ASSESSMENT HAS NOT BEEN FURNISHED, DESPITE A SPECIFIC REQUEST MADE BY THE ASSESSEE, IN THE LIGHT OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF G.K.N. DRIVE S HAFTS INDIA LTD. VS. INCOME TAX OFFICER AND OTHERS (2003) 259 ITR 19 (SC ). THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE ARE REPRODUCED AS UN DER: ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 10 7A) THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S), OUGHT TO HAVE APPRECIATED THE FACTS THAT THE ASSESSING OFFICER HA D NOT GIVEN THE COPY OF THE REASONS RECORDED FOR THE RE OPENING OF THE ASSE SSMENT U/S147OF THE ACT, AFTER FILING OF THE RETURN AND BEFORE COMMENCE MENT OF THE PROCEEDINGS EVEN AT THE INSTANCE OF THE REQUEST OF ASSESSEE FOR THE SAME VIDE LETTER 8TH AUGUST 2011, WHICH IS MANDATORY ON THE PART OF THE A.O. FAILING WHICH THE PROCEEDINGS BECOME INVALID AND BA D IN LAW AS FOR THE SUPREME COURT ON IN GKN DRIVESHAFT'S (INDIA) LTD. (2 003) 259 ITR 19 SC 7B). THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S), HAS ERRED IN LAW AND IN FACTS RELATED TO NO FRESH TANGIBLE MATER IAL AVAILABLE FOR RE- ASSESSMENT AND THE MATERIAL WAS ALREADY PROVIDED AT THE TIME OF ORIGINAL ASSESSMENT WAS TAKEN INTO CONSIDERATION. 8. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), O UGHT TO HAVE APPRECIATED THE FACT THAT ISSUED NOTICE U/S 148 OF THE INCOME TAX ACT, BASED ON THE CBDT INSTRUCTION NUMBER 17/2008 DATED 26.11.2008 IS INVALID AND SUBSEQUENT PROCEEDINGS U/S 147 ARE BAD IN LAW. 9. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), I S TO BE APPRECIATE THE FACTS THAT THE CBDT CIRCULAR 17/2008 ISSUED ON 21/11/2008, WHEREAS THE DATE OF FILING OF RETURNS FOR THE ASST YEAR 2007-08, IS ON 30TH SEPTEMBER,2007, HENCE RETROSPECTIVE APPLICATION OF THE SAME TO THE ASST. PROCEEDINGS OF 2007-08 IS BAD IN LAW. 10. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), E RRED IN LAW AND FACTS IN NOT ALLOWING DEDUCTION IN RESPECT OF T HE PROVISION MADE AGAINST NRA., OVERDUE INTEREST RESERVE ACCOUNT, LON G TERM RESCHEDULE LOAN INTEREST ACCOUNT AND OVERDUE INTEREST ACCOUNT (CASH CREDIT ) ARE ALL IN THE NATURE OF THE PROVISION FOR BAD AND DOUBTFUL DEBTS. HENCE, ALL THESE RESERVE ACCOUNTS TO BE CONSOLIDATED UNDER PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT AND ITS DEDUCTION IN RESPECT THEREOF SHOULD BE ALLOWED WITHIN THE OVERALL LIMIT PRESCRIBED U/S 36(1)(VII) A OF THE ACT. 11. THE A.O. AND COMMISSIONER OF INCOME TAX (APPEALS), ERRED IN DISALLOWING THE CO- OPERATIVE EDUCATION FUND, SUSPE NSE ACCOUNT DUE TO MORE THAN FIVE YEARS WRITTEN OFF FEES PAID TO RAMDA S CO-OPERATIVE TRAINING INSTITUTE SPOILED CURRENCY STOCK ACCOUNT I N CENTRAL OFFICE AND SPOILED CURRENCY STOCK ACCOUNT IN TUNI BRANCH WHICH DEDUCTIONS ARE ALLOWABLE DEDUCTIONS U/S 37 OF THE INCOME TAX ACT, WITHOUT JURISDICTION UNDER SEC 147 OF THE INCOME TAX ACT. 10. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERAT ION FROM THESE APPEALS IS VALIDITY OF RE-ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS RAISED COMMON GROUNDS FOR ALL THE 3 YEARS, CHALLENG ING THE VALIDITY ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 11 OF RE-ASSESSMENT PROCEEDINGS ON THE GROUND THAT THE A.O. HAS RE- OPENED THE ASSESSMENTS MERELY ON CHANGE OF OPINION WITHOUT ANY FRESH MATERIALS, SUBSEQUENTLY CAME TO HIS KNOWLEDGE AFTER COMPLETION OF ORIGINAL ASSESSMENT U/S 143(1)/143(3) OF THE ACT. THE LD. A.R. FOR THE ASSESSEE SUBMITTED THAT THE A. O. HAS RE-OPENED THE ASSESSMENT MERELY ON CHANGE OF OPINION WITHOUT THERE BEING ANY FRESH MATERIAL WHICH SUGGEST ESCAPEMENT OF INCO ME WITHIN THE MEANING OF SECTION 147(A) OF THE ACT, WHICH IS A PR E-CONDITION FOR RE-OPENING OF ASSESSMENT, WHETHER THE ASSESSMENT IS COMPLETED U/S 143(1) OR 143(3) OF THE ACT. THE LD. A.R. FURTHER S UBMITTED THAT THE A.O. HAS RECORDED REASONS, AS PER WHICH HE IS REFER RING TO THE RETURN OF INCOME FILED BY THE ASSESSEE AND ALSO CBDT INSTR UCTION NO.17/2008 DATED 26.11.2008 TO FORM A REASON TO BEL IEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. E XCEPT THIS, THE A.O. HAS NOT REFERRED TO ANY FRESH TANGIBLE MATERIA L TO FORM A REASONABLE BELIEF THAT THE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. THEREFORE, THE FORMATION OF REASON TO BELIEVE IS PURELY ON THE BASIS OF CHANGE OF OPINION, BUT NOT BASED ON ANY TANGIBLE MATERIAL WHICH IS NOT PERMISSIBLE UNDER THE LAW. ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 12 11. THE LD. A.R. FURTHER SUBMITTED THAT THE ASSESSM ENT FOR THE ASSESSMENT YEAR 2007-08 HAS BEEN COMPLETED U/S 143( 3) OF THE ACT, WHEREIN THE THEN A.O. HAD CALLED FOR EACH AND EVERY INFORMATION WITH REGARD TO DEDUCTION TOWARDS PROVISION FOR BAD AND DOUBTFUL DEBTS AND AFTER THOROUGH EXAMINATION OF THE FACTS H AS ALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE. THE MATERIAL RE LIED UPON BY THE A.O. TO FORM A REASON TO BELIEVE IS THE RETURN OF I NCOME FILED BY THE ASSESSEE WHICH WAS ALREADY AVAILABLE WITH THE A.O. AT THE TIME OF COMPLETION OF ORIGINAL ASSESSMENT. THE CBDT INSTRU CTION RELIED UPON BY THE A.O. IS ALSO ALREADY AVAILABLE WITH THE A.O. AT THE TIME OF COMPLETION OF ORIGINAL ASSESSMENT AND ALSO FACT THAT WHICH IS AN INTERNAL DOCUMENT OF THE DEPARTMENT ISSUED FOR THE BENEFIT OF THE ASSESSING OFFICER FOR DISCHARGING THEIR OFFICIAL FU NCTIONS AND ALSO EXPLAINING THE POSITION OF LAW WITH REGARD TO ALLOW ABILITY OF DEDUCTIONS TOWARDS PROVISION FOR BAD AND DOUBTFUL D EBTS. THE A.O. RELIED UPON THE SAME SET OF DOCUMENTS TO FORM A REA SONABLE REASON TO BELIEVE, WHICH IS NOTHING BUT A MERE CHANGE OF O PINION, WHICH IS NOT PERMITTED UNDER LAW. IN SUPPORT OF HIS ARGUMENT S, THE ASSESSEE HAS RELIED UPON THE FOLLOWING DECISIONS: ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 13 1. CIT VS. ORIENT CRAFT LTD. (2013) 254 ITR 536 (DEL) 2. ARVIND POLYCOTE VS. CHANDRA RAM SPECIAL CIVIL A PPLICATION NO.2385 OF 201 3. CIT VS. KELVINATOR INDIA LTD. 328 ITR 561 (SC) 4. SIGNATURE HOTELS PVT. LTD. VS. ITO (2011) 338 I TR 51 (DEL) 5. MADHUKAR KHOSLA VS. ACIT (2014) 367 ITR 165 (DEL ) 6. CIT VS. ATUL KUMAR 362 KTR 693 7. CIT VS. JAGSON INTERNATIONAL LTD. (2012) 345 ITR 414 (DELHI). 12. THE LD. A.R. MADE AN ALTERNATIVE PLEA BY FILING ADDITIONAL GROUND OF APPEAL, CHALLENGING THE VALIDITY OF RE-ASSESSMEN T PROCEEDINGS ON THE GROUND THAT THE RE-ASSESSMENT ORDER PASSED BY THE A .O. IS BAD IN LAW AND LIABLE TO BE QUASHED, AS THE A.O. HAS NOT FURNI SHED REASONS RECORDED FOR RE-OPENING OF THE ASSESSMENT, DESPITE A SPECIFIC REQUEST MADE BY THE ASSESSEE BY FILING A LETTER. THE A.R. FURTHER SUBMITTED THAT THE HONBLE SUPREME COURT IN THE CASE OF G.K.N. DRI VE SHAFTS INDIA LTD. VS. DCIT (2003) 259 ITR 19 (SC) HAS LAID DOWN THE P ROCEDURE FOR RE- ASSESSMENT PROCEEDINGS, AS PER WHICH THE ASSESSEE H AS TO FILE A RETURN IN RESPONSE TO NOTICE U/S 148 OF THE ACT AND IF HE SO DESIRES TO SEEK REASONS FOR ISSUING NOTICES. ONCE, THE ASSESSEE MA DE A REQUEST FOR REASONS RECORDED FOR RE-OPENING OF THE ASSESSMENT, THE A.O. IS BOUND TO FURNISH REASONS WITHIN A REASONABLE TIME AND ALS O DISPOSE OF OBJECTIONS, IF ANY FILED BY THE ASSESSEE BEFORE COM PLETION OF RE- ASSESSMENT PROCEEDINGS. SINCE, THE A.O. FAILED TO FURNISH REASONS RECORDED FOR RE-OPENING OF ASSESSMENT, THE ASSESSME NT PROCEEDINGS ARE BAD IN LAW AND LIABLE TO BE QUASHED. TO THIS EFFEC T, THE ASSESSEE HAS ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 14 FILED AN AFFIDAVIT STATING THAT THE A.O. HAS NOT FU RNISHED REASONS RECORDED FOR RE-OPENING OF THE ASSESSMENT BEFORE CO MPLETION OF ASSESSMENT PROCEEDINGS U/S 143(3) R.W.S. 147 OF THE ACT. IN SUPPORT OF HIS ARGUMENTS, RELIED UPON THE FOLLOWING JUDGEMENTS : 1. GKN DRIVESHAFTS (INDIA) LTD. VS. DCIT (2003) 259 I TR 19(SC) 2. ASIAN PAIN LTD. VS. DCIT (2008) 296 ITR 96 (BOM) 3. IOT INFRASTRUCTURE AND ENG. SERVICES LTD. VS. ACIT ( 2010) 329 ITR 1(BOM) 4. ALLANDA COLD STORAGE VS. ITO (2006) 287 ITR 1 (BOM) (ASST YR.2001- 2002) 5. BHABESH CHANDRA PANJA VS. ITO (2010) 41 SOT 390 (TM ) (KOL) 6. BERGER PAINTS INDIA LTD. VS. ASST. COMM. OF INCOME TA X AND ORS (2004) 266 ITR 462 (CAL) 7. GUJARAT FLUOROCHEMICALS LTD. VS. DCIT (2008) 15 DTR (GUJ) 1 8. NANDLAL TEJMAL KOTHARI VS. INSPECTING ACIT (1998) 2 30 ITR 943(SC) 9. CIT VS. SAFETAX INTERNATIONAL INDIA PVT. LTD. (DELHI HIGH COURT) 10. CIT VS. VIDESH SANCHAR NIGAM LTD. (2012) 340 ITR 66 (BOM) 11. TATA INTERNATIONAL MUMBAI ITAT ITA 3309 TO 3361/M/2 009 DATED 29.6.2012. 13. ON THE OTHER HAND, THE LD. D.R. STRONGLY SUPPOR TING THE ORDER OF THE CIT(A), SUBMITTED THAT THE A.O. HAS RIGHTLY RE- OPENED THE ASSESSMENT AS THE ASSESSEE HAS CLAIMED EXCESSIVE DE DUCTIONS TOWARDS PROVISION FOR BAD AND DOUBTFUL DEBTS IN CONTRAVENTI ON OF THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT AND CBDT INSTRUCT ION NO.17/2008 DATED 26.11.2008. THE PROVISIONS OF SECTION 36(1)(VIIA) R.W.S. 36(2) OF THE ACT, HAS CLEARLY EXPLAINED THE POSITION OF ALLOWABI LITY OF DEDUCTIONS TOWARDS PROVISION FOR BAD AND DOUBTFUL DEBTS, WHICH WAS FURTHER SUPPORTED BY THE INSTRUCTIONS ISSUED BY THE CBDT VI DE NO.17/2008, WHEREIN THE LAW WITH REGARD TO DEDUCTION TOWARDS PR OVISION FOR BAD AND ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 15 DOUBTFUL DEBTS HAS BEEN CLEARLY SPECIFIED. THE A.O . IGNORING THE PROVISIONS OF ACT, AS WELL AS THE CBDT INSTRUCTIONS HAS ALLOWED DEDUCTIONS TOWARDS PROVISION FOR BAD AND DOUBTFUL D EBTS AS CLAIMED BY THE ASSESSEE, WITHOUT EXAMINING THE ACTUAL PROVISIO N CREATED IN THE BOOKS OF ACCOUNTS, WHICH RESULTED IN EXCESS DEDUCTI ON, CONSEQUENTLY, THE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. IN SO FAR AS AS SESSMENT YEAR 2008- 09 & 2009-10, THE ASSESSMENT HAS BEEN COMPLETED U/S 143(1) OF THE ACT, THEREFORE, THE A.O. NEVER HAD AN OCCASION TO A PPLY HIS MIND TO THE FACTS OF THE CASE, THEREFORE, THE QUESTION OF THE C ONCEPT OF CHANGE OF OPINION DOES NOT ARISE. THE CIT(A) AFTER CONSIDERI NG THE PROVISIONS OF LAW AND ALSO RELIED UPON PLETHORA OF JUDGEMENTS DIS CUSSED IN HIS ORDER HAS RIGHTLY REJECTED THE GROUND RAISED BY THE ASSES SEE CHALLENGING THE VALIDITY OF RE-ASSESSMENT PROCEEDINGS AND HIS ORDER SHOULD BE UPHELD. 14. IN SO FAR AS ALTERNATIVE PLEA OF THE ASSESSEE, THE LD. D.R. SUBMITTED THAT THOUGH THE ASSESSEE HAS MADE A CLAIM BY FILING ADDITIONAL GROUND OF APPEAL CHALLENGING THE VALIDIT Y OF RE-ASSESSMENT PROCEEDINGS ON THE GROUND THAT THE REASONS RECORDED FOR RE-OPENING OF THE ASSESSMENT HAS NOT BEEN FURNISHED, THERE IS NO RECORD IN THE FILE TO INDICATE THAT THE ASSESSEE HAS MADE A SPECIFIC REQU EST FOR REASONS RECORDED FOR RE-OPENING OF THE ASSESSMENT BEFORE FI LING REVISED RETURN ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 16 IN RESPONSE TO NOTICE U/S 148 OF THE ACT. THOUGH T HE HONBLE SUPREME COURT IN THE CASE OF G.K.N. DRIVE SHAFTS INDIA LTD . (SUPRA), HAD CLEARLY STATED THAT THE REASONS RECORDED FOR RE-OPENING HAS TO BE FURNISHED IN CASE THE ASSESSEE MADE A REQUEST, BUT THE FACT REMA INS THAT THERE IS NO RECORDS IN THE FILE TO INDICATE THAT THE ASSESSEE H AS MADE A REQUEST FOR REASONS RECORDED FOR RE-OPENING OF THE ASSESSMENT. IN THE ABSENCE OF ANY REQUEST, THERE IS NO MERITS IN THE GROUND RAISE D BY THE ASSESSEE THAT THE A.O. HAS NOT FURNISHED ANY REASONS RECORDE D FOR RE-OPENING OF THE ASSESSMENT. 15. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE FACTUAL MATRIX WHICH LEADS TO RE-OPENING OF ASSESSM ENT FOR THE ASSESSMENT YEAR 2007-08 TO 2009-10 ARE THAT THE ASS ESSEE HAS CLAIMED DEDUCTION TOWARDS PROVISION FOR BAD AND DOUBTFUL DE BTS UNDER THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT. THE ASSESSEE HAS CLAIMED DEDUCTIONS TOWARDS PROVISION FOR BAD AND DOUBTFUL D EBTS FOR AN AMOUNT OF 7.5% OF THE TOTAL INCOME BEFORE ALLOWING ANY DED UCTION UNDER THIS CLAUSE AND CHAPTER VIA OF THE ACT AND FURTHER DEDUC TIONS OF 10% OF THE AVERAGE ADVANCES OF RURAL BRANCHES OF THE ASSESSEE. THE ASSESSMENT FOR THE ASSESSMENT YEAR 2007-08 HAS BEEN COMPLETED U/S 143(3) OF THE ACT. IN THE ASSESSMENT PROCEEDINGS, THE A.O. HAS A LLOWED DEDUCTIONS ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 17 TOWARDS BAD AND DOUBTFUL DEBTS CLAIMED BY THE ASSES SEE. THE ASSESSMENT FOR THE ASSESSMENT YEARS 2008-09 & 2009- 10 HAS BEEN COMPLETED U/S 143(1) OF THE ACT. IN THE ASSESSMENT PROCEEDINGS, THE A.O. HAS ISSUED INTIMATION U/S 143(1)(A) OF THE ACT , ACCEPTING THE CLAIM MADE BY THE ASSESSEE TOWARDS PROVISION FOR BAD AND DOUBTFUL DEBT U/S 36(1)(VIIA) OF THE ACT. SUBSEQUENTLY, THE ASSESSME NTS HAS BEEN RE- OPENED U/S 147 OF THE ACT, AFTER RECORDING THE REAS ONS FOR RE-OPENING OF THE ASSESSMENT WHICH READS AS FOLLOWS: 'I SUBMIT THAT THE ASSESSMENT FOR THE ASSESSMENT YEA R 2007-08 IN THE ABOVE CASE WAS COMPLETED UNDER SEC. 143(3) ON 17-12-2009 ACCEP TING THE TOTAL INCOME AT RS.65, 150 AS DECLARED BY THE ASSESSEE. IT IS NOTICED THAT THE ADMITTED TOTAL INCOME INCLUD ES INCOME UNDER THE HEAD 'HOUSE PROPERTY' AT RS.65, 152 AND THE INCOME UNDER THE HEAD 'BUSINESS' AT RS.NLL. WHILE ARRIVING AT THE INCOME UNDER THE 'BUS INESS', THE ASSESSEE CLAIMED DEDUCTION UNDER SEC.36(1)(VIIA) AT RS. 13,89,32,937 . IT IS FURTHER NOTICED THAT THE ASSESSEE HAS ACTUALLY CREATED RESERVE FOR BAD A ND DOUBTFUL DEBTS AT RS.45,11,200 ONLY. THEREFORE, IN TERMS OF THE BOARDS INSTRUCTIONS NO. 1712008, DATED 26-11-20 08, THE ASSESSEE IS ENTITLED TO THE DEDUCTION UNDER SEC.36(1)(VIIA) TOW ARDS BAD AND DOUBTFUL DEBTS AS WORKED OUT AS PER THE PROVISIONS SUBJECT T O A MAXIMUM OF THE AMOUNT ACTUALLY CREATED IN THE BOOKS OF ACCOUNT IN RELEVANT ACCOUNTING YEAR. IN THIS CASE, THE AMOUNT WORKED OUT AS PER SEC.36(1 )(VIIA) IS RS.21,51,80,030 WHILE THE RESERVE CREATED IN THE RE LEVANT ACCOUNTING YEAR IS ONLY PS. 45,11,200. THEREFORE, THE ASSESSEE IS ENTI TLED TO ONLY SUM OF RS.45, 11,200 BEING THE ACTUAL RESERVE CREATED. A COPY OF THE BOARD'S INSTRUCTION NO. 712008, DATED 26-11-2008 IS ENCLOSED FOR READY REFERENCE. THE WORKING OF THE TOTAL INCOME ADMITTED BY THE ASS ESSEE IS GIVEN HEREUNDER: ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 18 NET PROFIT AS PER PROFIT AND LOSS OF ACCOUNT 1,69,96,099 ADD: RESERVES CREATED (INCLUDING BAD & DOUBT FUL DEBTS) (SCH. NO.16A) 11,83,67,058 ADD: INCOME TAX PAID 48,63,075 ADD: MUNICIPAL TAXES CONSIDERED UNDER PROPERTY INCO ME 1,05,789 14,03,32,021 LESS: RENTS RECEIVED CONSIDERED SEPARATELY 1,98,863 LESS: DEPRECIATION ALLOWABLE INCLUDED IN RESERVES ( NE T) 12,00,221 13,89,32,937 LESS: DEDUCTION U/S 36(1)(VIIA) 7.5% OF TOTAL INCOME OF 13,89,98,089 4,886 10% OF AVERAGE ADVANCES OF RURAL BRANCHES 21,51,75,144 21,51,80,030 RESTRICTED TO INCOME UNDER THE HEAD BUSINESS 13,89,32,927 BUSINESS INCOM E 0 INCOME UNDER HOUSE PROPERTY OFFERED AS THE TOTAL INCOME FOR THE YEAR 65,152 THE WORKING OF THE TOTAL INCOME BY ALLOWING THE COR RECT DEDUCTION UNDER SEC.36(1)(VIIA) IS GIVEN AS UNDER: NET PROFIT AS PER PROFIT AND LOSS OF ACCOUNT 1,69,96,099 ADD: R ESERVES CREATED (SCH. NO.16A) 11,83,67,058 ADD: INCOME TAX PAID 48,63,075 ADD: MUNICIPAL TAXES CONSIDERED UNDER PROPERTY INCO ME 1,05,789 14,03,32,021 LESS: RENTS RECEIVED CONSIDERED SEPARATELY 1,98,863 LESS: DEPRECIATION ALLOWABLE INCLUDED IN RESERVE S (NET) 12,00,221 TOTAL INCOME (BEFORE DEDUCTION U/S 36(1)(VIIA) 13,89,32,937 LESS: DEDUCTION U/S 36(1)(VIIA): RESTRICTED TO THE AMOUNT OF RESERVE FOR BAD & DOUBTFUL DEBTS ACTUALLY DEBITED TO THE PROFIT & LOSS ACCOUNT 45,11,200 REVISED TOTAL INCOME UND ER THE HEAD BUSINESS 13,44,21,737 INCOME UNDER HOUSE PROPERTY AS ADMITTED 65,152 TOTAL INCOME 13,44,86,889 THUS, THE TOTAL INCOME WORKS OUT TO RS.13,44,86,889 AS AGAINST THE INCOME ASSESSED AT RS.65,152/-. THE INCOME ESCAPED ASSESS MENT WORKS OUT TO RS.13,44,21,737/-. IN THE ASSESSMENT COMPLETED U/S 143(3), THE ABOVE A MOUNT WAS OMITTED TO BE SUBJECTED TO TAX. I HAVE, THEREFORE, REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX TO THE TUNE OF RS.13,44,21,737 HA S ESCAPED ASSESSMENT WITHIN THE MEANING OF SEC.147 OF THE INCOMETAX ACT, 1961 FOR THE ASSESSMENT YEAR 2007-08. ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 19 16. ON PERUSAL OF THE REASONS RECORDED BY THE A.O., FOR RE-OPENING OF THE ASSESSMENT, WE FIND THAT THE A.O. HAS RECORD ED REASONS ON THE BASIS OF RETURN OF INCOME FILED BY THE ASSESSEE WITH REFERENCE TO CBDT INSTRUCTION NO.17/2008 DATED 26.11.2008, WHICH EXPLAINS THE POSITION OF LAW WITH REGARD TO DEDUCTION TOWARDS PR OVISION FOR BAD AND DOUBTFUL DEBTS UNDER THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT. ADMITTEDLY, THE A.O. HAS NOT REFERRED TO ANY OTHER MATERIAL EXCEPT RETURN OF INCOME FILED BY THE ASSESSEE AND C BDT INSTRUCTIONS. IT IS ALSO AN ADMITTED FACT THAT THE SE TWO DOCUMENTS ARE ALREADY AVAILABLE WITH THE A.O. AT THE TIME OF COMPLETION OF ASSESSMENT U/S 143(3)/143(1) OF THE ACT. IT IS ALS O AN UNDISPUTED FACT THAT THE INSTRUCTIONS ISSUED BY THE CBDT, ONLY EXPLAINS THE LAW WITH REGARD TO THE DEDUCTION TOWARDS PROVISION FOR BAD AND DOUBTFUL DEBTS AS PROVIDED U/S 36(1)(VIIA) OF THE ACT. THER EFORE, FROM THESE FACTS, THE ONLY ISSUE CAME UP FOR OUR CONSIDERATION IS WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, RE- OPENING OF THE ASSESSMENT IS BASED ON ANY TANGIBLE MATERIAL WHICH CAME TO THE KNOWLEDGE OF THE A.O. SUBSEQUENT TO THE COMPLETION OF ORIGINAL ASSESSMENT U/S 143(1)/143(3) OF THE ACT OR IT IS ME RELY A CHANGE OF OPINION WITHOUT THERE BEING ANY FRESH MATERIALS IN THE HAND OF THE A.O. ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 20 17. THE A.O. RE-OPENED THE ASSESSMENT ON THE GROUND THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. THE A.O. HAS RECORDED REAS ONS WHICH WERE REPRODUCED IN THE ASSESSMENT ORDER. THE A.O. FORME D REASON TO BELIEVE BASED ON THE INSTRUCTIONS ISSUED BY THE CBDT VIDE I NSTRUCTIONS NO.17/2008 DATED 26.11.2008, WHICH EXPLAINS THE POS ITION OF LAW WITH REGARD TO DEDUCTIONS TOWARDS PROVISION FOR BAD AND DOUBTFUL DEBTS U/S 36(1)(VIIA) OF THE ACT, EXCEPT THIS NO OTHER TANGIB LE MATERIAL AVAILABLE WITH THE A.O. OR CAME TO HIS KNOWLEDGE AFTER THE OR IGINAL ASSESSMENT. THE A.O. FORMED HIS REASON TO BELIEVE SOLELY ON THE GROUND THAT EXCESS DEDUCTION ALLOWED U/S 36(1)(VIIA) OF THE ACT, TOWAR DS BAD AND DOUBTFUL DEBTS, WHICH IS OTHERWISE NOT ALLOWABLE AND HENCE O PINED THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. 18. THE PROVISIONS OF SECTION 147, PROVIDES FOR RE- OPENING OF ASSESSMENT, IF THE A.O. HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. IN THIS CASE, ADMITTEDLY, THE RE-OPENING IS WITHIN 4 YEARS, THEREFORE, THE SECOND PROVISO TO SECTION 147 OF THE ACT HAS NO APPLICATION, WHICH MANDATES F AILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERI AL FACTS NECESSARY FOR ASSESSMENT. SINCE, THE RE-OPENING WAS WITHIN 4 YEA RS, AS PER THE FIRST PROVISO TO SECTION 147 OF THE ACT, FOR RE-OPENING O F ANY ASSESSMENT, THE ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 21 A.O. SHOULD HAVE A REASON TO BELIEVE THAT INCOME CH ARGEABLE TO TAX HAD ESCAPED ASSESSMENT. NO DOUBT THE REASON TO BELIEVE SHOULD BE SUBJECTIVE BUT NOT OBJECTIVE. THEREFORE, THE REASO N TO BELIEVE FOR RE- OPENING ASSESSMENT SHOULD BE BASED ON TANGIBLE MATE RIAL, WHICH WAS NOT AVAILABLE WITH THE A.O. AT THE TIME OF ORIGINAL ASSESSMENT, BUT NOT MERELY ON CHANGE OF OPINION BASED ON THE SAME SET O F FACTS WHICH WAS AVAILABLE AT THE TIME OF COMPLETION OF ORIGINAL ASS ESSMENT. THE MEANING OF TANGIBLE MATERIAL AND THE WORD CHANGE OF OPIN ION HAS BEEN EXPLAINED BY VARIOUS COURTS. BEFORE RE-OPENING THE ASSESSMENT, THE A.O. SHOULD HAVE REASON TO BELIEVE THAT INCOME CHAR GEABLE TO TAX HAD ESCAPED ASSESSMENT. UNLESS THERE IS A SOUND BASIS FOR FORMATION OF REASON TO BELIEVE FOR RE-OPENING ASSESSMENT, IT WOU LD AMOUNT TO A REVIEW OF ALREADY CONCLUDED ASSESSMENTS. THEREFORE , IN THE ABSENCE OF SUCH REASON TO BELIEVE, IT AFFECTS THE VERY JURISDI CTION TO INITIATE THE ASSESSMENT PROCEEDINGS. THEREFORE, THE CONDITION P RECEDENT FOR ASSUMPTION OF JURISDICTION U/S 147A OF THE ACT IS R EASON TO BELIEVE WHICH IS TO BE NECESSARILY RECORDED WITH A SOUND FOOTING BASED ON SOME TANGIBLE MATERIALS OTHER THAN THE MATERIAL ALREADY IN THE POSSESSION OF THE A.O. ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 22 19. THE ASSESSMENT CAN BE RE-OPENED U/S 147 OF THE ACT IF THE A.O. HAD REASON TO BELIEVE, BUT ASSESSMENT CANNOT BE RE- OPENED ON A MERE CHANGE OF OPINION, I.E. ON THE SAME SET OF FACTS AN D MATERIAL WHICH WAS IN THE KNOWLEDGE OF THE A.O. THE A.O. CANNOT ISSUE NOTICE U/S 148 OF THE ACT, MERELY BECAUSE IT FELT THAT A DECISION WHI CH HAS BEEN TAKEN EARLIER IS NOT CORRECT AND NEEDS TO BE CORRECTED. THEREFORE, TO FORM A REASON TO BELIEVE, THERE SHOULD BE A TANGIBLE MATER IAL OTHER THAN THE MATERIAL AVAILABLE WITH THE A.O. AT THE TIME OF ORI GINAL ASSESSMENT. IF THE REASON RECORDED FOR RE-OPENING IS NOT BASED ON ANY MATERIAL OR WHICH IS BASED ON SAME SET OF FACTS, WHICH WAS AVAI LABLE WITH THE A.O. AT THE TIME OF ORIGINAL ASSESSMENT, THEN IT AMOUNTS TO MERE CHANGE OF OPINION, BUT NOT A SOUND REASON TO BELIEVE TO RE-OP EN THE ASSESSMENT. 20. THE REASON TO BELIEVE SHOULD BE BASED ON SUBJEC TIVE ASSESSMENT OF TANGIBLE MATERIAL WHICH SUGGESTS ESCAPEMENT OF I NCOME CHARGEABLE TO TAX. WHAT IS TANGIBLE MATERIAL HAS NOT BEEN DEFINE D IN THE ACT. BUT, THE COURTS HAVE INTERPRETED TO MEAN A FRESH MATERIAL, W HICH WAS NOT AVAILABLE TO THE A.O. AT THE TIME OF ORIGINAL ASSES SMENT. EVEN THOUGH THE LAW DOES NOT SPECIFY THE CONDITION OF NEW MATER IAL, IT CAN BE READ IN ACCORDANCE WITH THE LEGISLATIVE INTENTION. FOR INS TANCE, THE HONBLE SUPREME COURT IN THE CASE OF G.K. DRIVE SHAFTS (200 3) 259 ITR 19 HAS UPHELD PASSING OF OBJECTIVE ORDER. SIMILARLY, CONC EPT OF CHANGE OF ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 23 OPINION IS NOT PRESCRIBED BY STATUTE. BUT THESE C ONCEPTS HAVE BEEN EVOLVED IN VIEW OF INTERPRETATION AND OBSERVATION O F COURTS AFTER GOING THROUGH THE LEGISLATIVE INTENTION AND PROVISIONS OF THE ACT, OTHERWISE POWER TO RE-OPEN WILL BE ABUSED BY THE A.O. TO RE-O PEN THE ASSESSMENT AND WHAT HE CANNOT DO DIRECTLY, HE WILL DO INDIRECT LY. THEREFORE, IN THE ABSENCE OF TANGIBLE MATERIAL, ALLOWING THE A.O. TO RE-OPEN THE ASSESSMENT ON THE BASIS OF ASSESSMENT, WHETHER COMP LETED U/S 143(1) OR 143(3) OF THE ACT, WOULD AMOUNT TO REVIEW OF THE EARLIER PROCEEDING AND ABUSE OF POWER BY THE A.O. THE ASSESSMENT CAN BE RE-OPENED, IF THE A.O. HAD REASON TO BELIEVE AND THAT BELIEF IS B ASED ON NEW MATERIAL WHICH WAS NOT THERE AT THE TIME OF ORIGINAL ASSESSM ENT. IF THE REASON TO BELIEVE IS BASED ON RE-APPRAISAL OR RE-CONSIDERATIO N OF THE MATERIAL/INFORMATION ALREADY AVAILABLE ON RECORD AT THE TIME OF COMPLETION OF ORIGINAL ASSESSMENT, THEN RE-OPENING IS CERTAINLY BASED ON MERE CHANGE OF OPINION WHICH IS NOT PERMISSIBLE UND ER LAW. 21. HAVING SAID, LET US EXAMINE WHAT CONSTITUTES A MATERIAL TO FORM A REASON TO BELIEVE. WHETHER CBDT INSTRUCTION, WHICH IS AN INTERNAL DOCUMENT OF THE DEPARTMENT ISSUED FOR THE BENEFIT O F THE A.OS, CONSTITUTES A TANGIBLE MATERIAL FOR THE PURPOSE OF RE-OPENING ASSESSMENT. THE APPELLATE AUTHORITIES INCLUDING COU RTS IN VARIOUS CASES HELD THAT DIRECTIONS/INSTRUCTIONS OF HIGHER AUTHORI TIES, AUDIT OBJECTIONS ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 24 AND VALUATION REPORT CANNOT BE CONSIDERED AS MATERI ALS FOR RE-OPENING OF ASSESSMENT AS IT CAN BE AT BEST CONSIDERED AS OPINI ON OF THE PARTY WHO ISSUES SUCH DIRECTION, BUT NEITHER IT AMOUNTS TO IN FORMATION NOR CAN FORM A GROUND FOR REASON TO BELIEVE THAT THE ASSESSEE HA D FAILED TO DISCLOSE TRULY AND FULLY ALL INFORMATION NECESSARY FOR COMPL ETION OF ASSESSMENT. SIMILARLY, IN OUR VIEW, CBDT INSTRUCTIONS, WHICH IS MEANT FOR THE BENEFIT OF THE A.OS, IN DISCHARGING THEIR FUNCTIONS CANNOT BE CONSIDERED AS TANGIBLE MATERIAL TO FORM A REASON TO BELIEVE IN IN DIVIDUAL ASSESSEES CASE. WE FURTHER OF THE VIEW THAT MATERIAL SHOULD BE EITHER WITHIN OR OUTSIDE THE FILE, BUT IT SHOULD BE RELATED TO THE A SSESSEE AND ITS AFFAIRS WHICH SUGGEST ESCAPEMENT OF INCOME IS ONLY CAN BE C ONSIDERED AS MATERIAL FOR RE-OPENING OF ASSESSMENT, BUT NOT A GE NERAL INFORMATION AFFECTS ALL THE ASSESSEES IN GENERAL. 22. HAVING SAID, LET US EXAMINE IS THERE ANY DIFFER ENT VIEWS IN RESPECT OF REASON TO BELIEVE IN CASES OF ASSESSMENT COMPLET ED U/S 143(1) & 143(3) OF THE ACT. IF THE ASSESSMENT IS NOT FRAMED U/S 143(3) OF THE ACT, BEFORE THE EXPIRY OF THE PERIOD OF LIMITATION FOR A PARTICULAR ASSESSMENT YEAR, THEN IT WOULD BE PRESUMED THAT THE RETURN HAS BEEN ACCEPTED AS CORRECT AND ASSESSMENT HAS BEEN COMPLET ED U/S 143(1) OF THE ACT. THEREAFTER, THE RECOURSE CAN BE TAKEN TO SECTION 147 OF THE ACT, PROVIDED FRESH MATERIAL HAS BEEN RECEIVED BY T HE ASSESSING OFFICER, ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 25 AFTER THE EXPIRY OF LIMITATION FIXED FOR FRAMING TH E ORIGINAL ASSESSMENT. BUT, THERE MUST BE NEW MATERIAL WHICH CAME TO THE K NOWLEDGE OF THE A.O. AFTER COMPLETION OF THE ORIGINAL ASSESSMENT. IF THE ORIGINAL ASSESSMENT IS COMPLETED U/S 143(1) OF THE ACT, AND THEREAFTER THE A.O. HAS RECEIVED FRESH MATERIAL WHICH PINPOINTS ESCAPEM ENT OF INCOME, ACTION CAN BE TAKEN BY THE A.O. U/S 147 OF THE ACT, AS THE A.O. NEVER HAD AN OCCASION TO EXPRESS ANY OPINION IN THE ASSES SMENT FRAMED U/S 143(1) OF THE ACT, AS IT IS MERELY A PROCESSING OF RETURN AND HENCE, THE CONCEPT OF CHANGE OF OPINION DOES NOT ARISE. BUT, IN THE ABSENCE OF NEW MATERIAL, WHETHER ASSESSMENT COMPLETED U/S 143(1) & 143(3) OF THE ACT, IF THE ASSESSMENT IS RE-OPENED, THEN IT WOULD AMOUN T TO MERE CHANGE OF OPINION, WHICH IS NOT PERMISSIBLE UNDER LAW. 23. HAVING SAID, LET US EXAMINE THE FACTS OF THE PR ESENT CASE. IN THIS CASE, THE ASSESSMENT FOR THE ASSESSMENT YEAR 2007-0 8 HAS BEEN COMPLETED U/S 143(3) OF THE ACT. HOWEVER, THE ASSE SSMENT FOR THE ASSESSMENT YEAR 2008-09 & 2009-10 HAS BEEN COMPLETE D U/S 143(1) OF THE ACT. ADMITTEDLY, RE-OPENING OF ASSESSMENT IN A LL THE 3 YEARS IS WITHIN 4 YEARS, HENCE SECOND PROVISO TO SECTION 147 OF THE ACT, HAS NO APPLICATION. IF YOU EXAMINE THE FACTS OF THE PRESE NT CASE WITH FIRST PROVISO TO SECTION 147 OF THE ACT, IT IS CLEAR THAT THE A.O. HAS RECORDED COMMON REASONS FOR ALL THE 3 YEARS. IF YOU GO THRO UGH THE REASONS ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 26 RECORDED BY THE A.O., IT IS UNDOUBTEDLY CLEAR THAT THE A.O. HAS REFERRED TO THE RETURN OF INCOME FILED BY THE ASSESSEE AND A LSO CBDT INSTRUCTION NO.17/2008 DATED 26.11.2008, WHICH IS ALREADY AVAIL ABLE WITH THE A.O. BEFORE COMPLETION OF ASSESSMENT FOR THE ASSESSMENT YEAR 2007-08 TO 2009-10. EXCEPT REFERRING TO RETURN OF INCOME AND CBDT INSTRUCTIONS, THE A.O. NEVER REFERRED TO ANY NEW MATERIAL WHICH C AME TO HIS KNOWLEDGE AFTER COMPLETION OF ORIGINAL ASSESSMENT T O FORM A REASON TO BELIEVE, WHICH IS CLEAR FROM THE READING OF REASONS RECORDED FOR RE- OPENING OF ASSESSMENT. WE FURTHER OBSERVED THAT THE ASSESSMENT FOR THE ASSESSMENT YEAR 2007-08 HAS BEEN COMPLETED U/S 143(3) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A. O. HAD ISSUED A SPECIFIC NOTICE DATED 12.5.2008 AND 19.10.2009, CAL LED UPON THE ASSESSEE TO FURNISH DETAILS OF DEDUCTION CLAIMED U/ S 36(1)(VIIA) OF THE ACT AND THE ASSESSEE HAS FURNISHED COMPLETE DETAILS OF DEDUCTIONS CLAIMED U/S 36(1)(VIIA) OF THE ACT. THEREFORE, ONC E THE A.O. HAVING MADE ASSESSMENT, AFTER OBTAINING EXPLANATIONS FROM THE ASSESSEE REGARDING ITS CLAIM OF DEDUCTION U/S 36(1)(VIIA) OF THE ACT, RE-OPENING OF ASSESSMENT ON THE SAME GROUND IN THE ABSENCE OF ANY TANGIBLE MATERIAL IS DEFINITELY BASED ON MERE CHANGE OF OPINION AND T HEREFORE, THE SAME IS NOT SUSTAINABLE. ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 27 24. IN SO FAR AS ASSESSMENT YEAR 2008-09 AND 2009-1 0, EXCEPT MINOR CHANGES IN FACTS TO THE EFFECT THAT THE ASSESSMENT WAS COMPLETED U/S 143(1) OF THE ACT, ALL THE FACTS ARE IDENTICAL TO T HAT OF THE FACTS FOR ASSESSMENT YEAR 2007-08. THE A.O. HAD RECORDED COM MON REASONS FOR ALL THE ASSESSMENT YEARS, WHICH IS BASED ON RETURN OF INCOME AND CBDT INSTRUCTION NO.17/2008 DATED 26.11.2008, BUT NOTHIN G ON RECORD TO INDICATE THAT THE A.O. HAD ANY NEW MATERIAL WHICH W AS NOT THERE AT THE TIME OF ORIGINAL ASSESSMENT TO FORM A REASONABLE BE LIEF THAT INCOME HAD ESCAPED ASSESSMENT. IN OUR OPINION, CBDT INSTRUCTI ONS WHICH WAS ISSUED BY THE CBDT FOR THE BENEFIT OF THE AOS AND A LSO WHICH WAS AVAILABLE WITH THE A.O. BEFORE COMPLETION OF ORIGIN AL ASSESSMENT FOR ALL THE 3 YEARS CANNOT CONSTITUTE A TANGIBLE MATERIAL F OR RE-OPENING OF ASSESSMENT, WHICH WAS FURTHER SUPPORTED BY THE DECI SION OF HONBLE HIGH COURT OF GUJARAT IN THE CASE OF ARAVINDA POLYC OTE LTD. VS. CHANDRA RAM (2013) 353 ITR 511, WHEREIN THE HONBLE HIGH CO URT CATEGORICALLY HELD THAT SUCH TANGIBLE MATERIAL MAY BE SOMETHING T HAT THE A.O. DID NOT NOTICE AT THE TIME OF ORIGINAL ASSESSMENT EITHER BE CAUSE THE MATERIAL DID NOT FORM PART OF THE RECORD ITSELF OR WAS NOT BROUG HT TO HIS NOTICE. IN ANY CASE, THE CIRCULAR OF THE CBDT WOULD NOT SATISF Y SUCH A TEST. AS ALREADY NOTED, THE CIRCULAR ONLY LAYS DOWN GENERAL REFERENCE AND EXPECT THE A.OS TO EXAMINE THE ISSUES REFERRED TO IN THE S AID CIRCULAR OR ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 28 INSTRUCTIONS WITH REFERENCE TO THE PROVISIONS OF LA W. THEREFORE, WE ARE OF THE VIEW THAT A GENERAL INSTRUCTION, WHICH IS ME ANT FOR THE BENEFIT OF THE A.O. AND ALSO WHICH EXPLAINS THE POSITION OF LA W CANNOT BE CONSIDERED AS A TANGIBLE MATERIAL FOR RE-OPENING TH E INDIVIDUAL ASSESSMENT OF ANY ASSESSEE. WE FURTHER NOTICED THA T THE CBDT INSTRUCTION NO.17/2008 DATED 26.11.2008 WHICH IS IS SUED SUBSEQUENT TO THE DATE OF FILING OF THE RETURN BY THE ASSESSEE FO R THE ASSESSMENT YEAR 2007-08 AND 2008-09 I.E. ON 30.10.2008 CANNOT BE RE LIED UPON BY THE A.O. AS A TANGIBLE MATERIAL TO RE-OPEN THE ASSESSME NT. WE FURTHER OBSERVED THAT THE WORDS HAS REASON TO BELIEVE ARE STRONGER THAN THE WORDS IS SATISFIED. IN OTHER WORDS, THE A.O. HIM SELF FORMED AN OBJECTIVE AND PRIMA FACIE OPINION HIMSELF ON THE BA SIS OF EXPRESSED STATEMENT OR REASONS OR DEFINITE/RELEVANT MATERIAL IN HIS POSSESSION. TO PUT IT DIFFERENTLY, THE WORDS REASON TO BELIEVE S UGGEST THAT THE BELIEF MUST BE THAT OF A HONEST AND REASONABLE PERSON BASE D UPON REASONABLE GROUNDS AND THAT THE A.O. MAY ACT ON IRECT OR CIRCU MSTANTIAL EVIDENCE, BUT NOT ON MERE SUSPICION, GOSSIP OR RUMOUR. 25. IN THE PRESENT CASE ON HAND, ON PERUSAL OF THE FACTS AVAILABLE ON RECORD, WE FIND THAT THE A.O. HAS FORMED AN OPINION MERELY BASED ON THE RETURN OF INCOME AND CBDT INSTRUCTIONS, BUT NOT BASED ON ANY TANGIBLE MATERIAL WHICH CAME TO HIS KNOWLEDGE SUBSE QUENT TO THE ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 29 COMPLETION OF ORIGINAL ASSESSMENT COMPLETED U/S 143 (1) & 143(3) OF THE ACT. THE HONBLE SUPREME COURT, IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. (2010) 320 ITR 561, HELD THAT EVEN POST AMENDMENT U/S 147 OF THE ACT W.E.F. 1.4.1989, THE CONCEPT OF CHANGE O F OPINION HAS NOT BEEN GIVEN A GO BY. THOUGH THERE IS NO QUESTION OF CHANGE OF OPINION IN THE CASES WHERE THE ASSESSMENT HAS BEEN COMPLETE D U/S 143(1) OF THE ACT, BUT THE FACTS REMAINS THAT THE A.O. SHOULD FORM REASONS TO BELIEVE WHICH SHOULD BE BASED ON A NEW MATERIAL WHI CH IS CAME TO HIS KNOWLEDGE AFTER COMPLETION OF ORIGINAL ASSESSMENT, BUT NOT BASED ON SAME SET OF FACTS OR RETURN OF INCOME, WHICH IS ALR EADY AVAILABLE WITH THE A.O. AT THE TIME OF COMPLETION OF ORIGINAL ASSESSME NT. THEREFORE, WE ARE OF THE VIEW THAT THERE IS NO SOUND BASIS FOR FO RMATION OF REASON TO BELIEVE FOR RE-OPENING OF THE ASSESSMENT AND HENCE, RE-OPENING OF ASSESSMENT FOR THE ASSESSMENT YEAR 2007-08, 2008-09 & 2009-10 IS BAD IN LAW CONSEQUENTLY SUBSEQUENT ASSESSMENT PROCEEDIN GS ARE LIABLE TO BE QUASHED. 26. COMING TO THE ALTERNATIVE PLEA OF THE ASSESSEE. THE ASSESSEE HAS FILED COMMON ADDITIONAL GROUND FOR ALL THE 3 YEARS, CHALLENGING THE VALIDITY OF RE-ASSESSMENT PROCEEDINGS ON THE GROUND THAT THE A.O. HAS NOT FURNISHED REASONS RECORDED FOR RE-OPENING OF TH E ASSESSMENT, DESPITE A SPECIFIC REQUEST MADE BY THE ASSESSEE, IN VIEW OF THE DECISION ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 30 OF HONBLE SUPREME COURT IN THE CASE OF G.K.N. DRIV E SHAFTS INDIA LTD. VS. ITO AND OTHERS (SUPRA). THE LD. A.R. SUBMITTED THAT THE ASSESSEE HAS FILED A LETTER ON 8.8.2011 AND REQUESTED THE A. O. TO FURNISH REASONS RECORDED FOR RE-OPENING OF THE ASSESSMENT FOR ALL T HE ASSESSMENT YEARS. INSPITE OF REQUEST, THE A.O. HAS NOT FURNISHED REAS ONS RECORDED FOR RE- OPENING OF THE ASSESSMENT EVEN BEFORE COMPLETION OF ASSESSMENT U/S 143(3) R.W.S. 147 OF THE ACT, CONSEQUENTLY, SUBSEQU ENT ASSESSMENT PROCEEDINGS ARE BAD IN LAW AND LIABLE TO BE QUASHED . IN SUPPORT OF HIS ARGUMENTS FILED PHOTOCOPY OF LETTER ADDRESSED TO TH E A.O. WHICH WAS MARKED AT PG.50 & 51 OF THE PAPER BOOK FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2007-08. THE ASSESSEE ALSO FILED A N AFFIDAVIT IN SUPPORT OF HIS CLAIM THAT THE A.O. HAD NOT FURNISHE D REASONS RECORDED FOR RE-OPENING OF THE ASSESSMENT. 27. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATE RIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS FILED A LETTER REQUES TING THE A.O. TO FURNISH REASONS RECORDED FOR RE-OPENING OF THE ASSESSMENT. WE FURTHER OBSERVED THAT THE REVENUE FAILED TO BRING ON RECORD ANY EVIDENCE TO COUNTER THE CLAIM MADE BY THE ASSESSEE THAT THE A.O . HAS NOT FURNISHED REASONS RECORDED FOR RE-OPENING OF ASSESSMENT. THE LAW IS WELL SETTLED NOW THAT IN RESPECT OF RE-OPENING OF ASSESSMENT, TH E HONBLE SUPREME COURT, IN THE CASE OF G.K.N. DRIVE SHAFTS INDIA LT D. 259 ITR 19, HELD ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 31 THAT IT IS MANDATORY ON THE PART OF THE A.O. TO PRO VIDE THE REASONS RECORDED FOR RE-OPENING OF THE ASSESSMENT, IN CASE THE ASSESSEE HAS MADE A REQUEST FOR THE COPY OF THE REASONS RECORDED FOR RE-OPENING OF THE ASSESSMENT. IN THE SAID JUDGEMENT, THE HONBLE SUPREME COURT LAID DOWN THE PROCEDURE TO BE FOLLOWED BY THE A.O. AND T HE ASSESSEE AFTER THE ISSUE OF A NOTICE U/S 148 OF THE ACT. THE COUR T FURTHER OBSERVED THAT IT MUST BE FOLLOWED BY BOTH THE PARTIES. IF ANY PAR TY MAKES A DEFAULT IN FOLLOWING THE PROCEDURE, IT IS TO HIS DETRIMENT. A CCORDINGLY, AS PER THE SAID JUDGEMENT, THE COURT OBSERVED THAT ON RECEIPT OF NOTICE U/S 148 OF THE ACT, THE ASSESSEE CAN FILE A FRESH RETURN OF IN COME DECLARING HIS TRUE INCOME IN COMPLIANCE TO THE NOTICE. ALTERNATIVELY, THE ASSESSEE CAN WRITE TO THE A.O. THAT THE RETURN ALREADY FILED U/S 139(1) OF THE ACT, MAY BE TREATED AS A RETURN FILED IN COMPLIANCE TO NOTIC E U/S 148 OF THE ACT. AFTER FILING THE RETURN, THE ASSESSEE SHOULD SIMULT ANEOUSLY REQUEST FOR THE SUPPLY OF REASONS FOR THE ISSUE OF NOTICE U/S 1 48 OF THE ACT. THE ASSESSEE ALSO CAN FILE ITS OBJECTIONS TO THE ISSUE OF NOTICE AFTER TAKING LEGAL ADVICE AND THE ASSESSING OFFICER IS BOUND TO DISPOSE OF THE SAME BY A SPEAKING ORDER. THE COURT FURTHER OBSERVED TH AT UNLESS THE A.O. DEALT WITH THE OBJECTIONS OF THE ASSESSEE, CANNOT P ROCEED FURTHER IN THE MATTER. THEREFORE, AS PER THE JUDGEMENT OF THE HON BLE SUPREME COURT, IT IS ABUNDANTLY CLEAR THAT THE A.O. HAS TO FURNISH REASONS RECORDED FOR ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 32 RE-OPENING OF THE ASSESSMENT, IF THE ASSESSEE HAS M ADE A SPECIFIC REQUEST. IF THE A.O. FAILED TO FURNISH THE REASONS DESPITE A SPECIFIC REQUEST MADE BY THE ASSESSEE, THEN THE SUBSEQUENT A SSESSMENT PROCEEDINGS ARE BAD IN LAW AND LIABLE TO BE QUASHED . 28. WE FURTHER OBSERVED THAT THE HONBLE BOMBAY HIGH COURT, IN THE CASE OF CIT VS. VIDESH SANCHAR NIGAM LTD. (2012) 34 0 ITR 66, HAS HELD THAT IN CASE REASONS ARE NOT FURNISHED BY THE A.O. TO THE ASSESSEE, BEFORE COMPLETION OF RE-ASSESSMENT PROCEEDINGS, RE- ASSESSMENT ORDER CANNOT BE UPHELD. WE FURTHER NOTICED THAT THE SLP FILED BY THE REVENUE AGAINST THE ORDER OF THE HONBLE HIGH COURT HAS BEE N REJECTED BY THE HONBLE SUPREME COURT. THEREFORE, IN VIEW OF THE R EJECTION OF SLP FILED BY THE REVENUE BY THE SUPREME COURT, THE LAW LAID D OWN BY THE HONBLE BOMBAY HIGH COURT IN THE SAID CASE BECOMES FINAL AN D WHICH APPROVED THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F G.K.N. DRIVE SHAFTS INDIA LTD. (SUPRA). A SIMILAR VIEW HAS BEE N REITERATED BY HONBLE KARNATAKA HIGH COURT, IN THE CASE OF KOTHARI METALS IN WRIT APPEAL NO.218/2015 (IT), WHEREIN IT HAS BEEN HELD THAT THE QUESTION OF NON- FURNISHING THE REASONS FOR RE-OPENING ON ALREADY CO NCLUDED ASSESSMENT GOES TO VERY ROUTE OF THE MATTER AND THAT THE ASSES SEE IS ENTITLED TO BE FURNISHED REASONS FOR SUCH RE-OPENING AND THAT IF R EASONS ARE NOT FURNISHED TO THE ASSESSEE, THEN THE PROCEEDINGS FOR THE RE-ASSESSMENT ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 33 CANNOT BE TAKEN ANY FURTHER, AND RE-OPENING OF THE ASSESSMENT WOULD BE BAD IN LAW. FROM THE READING OF THE ABOVE JUDGE MENTS, IT IS ABUNDANTLY CLEAR THAT THE A.O. IS BOUND TO FURNISH REASONS RECORDED FOR RE-OPENING OF THE ASSESSMENT, IF THE ASSESSEE MADE A SPECIFIC REQUEST. IN CASE THE A.O. FAILED TO FURNISH REASONS RECORDED , DESPITE A SPECIFIC REQUEST MADE BY THE ASSESSEE, THEN THE RE-ASSESSMEN T PROCEEDINGS IS BAD IN LAW AND LIABLE TO BE QUASHED. 29. IN THE PRESENT CASE ON HAND, ON PERUSAL OF THE FACTS AVAILABLE ON RECORD, WE FIND THAT THE A.O. HAD ISSUED NOTICE U/S 148 OF THE ACT, ON 30.6.2011 CALLING UPON THE ASSESSEE TO FURNISH RETU RN OF INCOME. IN RESPONSE, THE ASSESSEE HAS FILED A LETTER ON 18.7.2 011 REQUESTING FOR TIME OF ATLEAST 30 DAYS FOR SUBMITTING THE REQUIRED DETAILS. THEREAFTER, THE A.O. HAS ISSUED A LETTER DATED 25.7.2011 TO FUR NISH RETURNS IN RESPONSE TO NOTICE ISSUED U/S 148 OF THE ACT. IN R ESPONSE TO LETTER, THE ASSESSEE HAS FILED A LETTER ON 8.8.2011 AND REQUEST ED THE A.O. TO FURNISH REASONS RECORDED FOR RE-OPENING OF THE ASSESSMENT F OR ALL THE ASSESSMENT YEARS. THEREAFTER, THE ASSESSEE HAS FIL ED ONE MORE LETTER ON 26.8.2011 AND REQUESTED THE A.O. TO TREAT THE RETUR N FILED EARLIER U/S 139(1) OF THE ACT, AS THE RETURN FILED IN RESPONSE TO NOTICE ISSUED U/S 148 OF THE ACT, FOR THE ASSESSMENT YEAR 2007-08, BU T THE ASSESSEE HAS FILED RETURNS IN RESPONSE TO NOTICE U/S 148 OF THE ACT, FOR THE ASSESSMENT ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 34 YEAR 2008-09 AND 2009-10. THEREFORE, IT IS ABUNDAN TLY CLEAR THAT THE ASSESSEE HAS FOLLOWED THE PROCEDURE LAID DOWN BY TH E HONBLE SUPREME COURT, IN THE CASE OF G.K.N. DRIVE SHAFTS INDIA LT D. (SUPRA). IT IS ONLY THE A.O. HAS NOT FOLLOWED THE PROCEDURE LAID DOWN B Y THE HONBLE SUPREME COURT. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, THE RE-O PENING OF THE ASSESSMENT FOR THE ASSESSMENT YEARS 2007-08, 2008-0 9 & 2009-10 IS INVALID AND THEREFORE, CONSEQUENT RE-ASSESSMENT ORD ER PASSED BY THE A.O. IS ILLEGAL AND THE SAME IS HEREBY QUASHED. WE FURTHER OF THE OPINION THAT THE RE-ASSESSMENT ORDER PASSED BY THE A.O. IS NOT MAINTAINABLE EITHER ON FIRST COUNT I.E. THE RE-OPEN ING IS MERELY ON THE BASIS OF CHANGE OF OPINION WITHOUT THERE BEING ANY FRESH MATERIAL AND ALSO IT IS NOT MAINTAINABLE ON SECOND COUNT I.E. TH E REASONS RECORDED FOR RE-OPENING OF THE ASSESSMENT HAS NOT BEEN FURNISHED . HENCE, WE QUASHED RE-ASSESSMENT ORDER PASSED BY THE A.O. FOR THE ASSESSMENT YEAR 2007-08, 2008-09 & 2009-10. 30. THE ASSESSEE HAS CHALLENGED THE ISSUES ON MERIT . SINCE, WE HAVE ALREADY DECIDED THE ISSUE ON LEGAL GROUND AND QUASH ED THE RE- ASSESSMENT ORDER PASSED BY THE A.O. AS INVALID AND LIABLE TO BE QUASHED, THE OTHER ISSUES RAISED BY THE ASSESSEE ON MERITS IS PURELY ITA NOS.309, 365 & 366/VIZAG/2013 THE DISTRICT CO-OP. CENTRAL BANK LTD., KAKINADA 35 ACADEMIC IN NATURE AND THEREFORE, WE ARE NOT GOING TO ADJUDICATE THE ISSUES ON MERIT AT THIS POINT OF TIME. 31. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E IN ITA NOS.309, 365 & 366/VIZAG/2013 ARE ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 3 RD MAR17. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 03.03.2017 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE DISTRICT CO-OP. CENTRAL BANK LTD., D.NO.70-1-28/1, NAGAMALLITHOTA, KAKINADA-533 003. 2. / THE RESPONDENT THE ITO, WARD-2, KAKINADA 3. + / THE CIT, RAJAHMUNDRY 4. + ( ) / THE CIT (A)-11, MUMBAI, CAMP OFFICE VISAKHAPATN AM 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM