ACIT, New Delhi V. M/s. Living Media India Ltd., New Delhi

ITA 4399/DEL/2011

• Counselvise Citation: 439920114 RSA 2011
• Duration Of Justice: 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 30-07-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 04-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DK MISHR A
• Keywords: Business income; Depreciation; Earning of tax free income; Additional evidence; Bad and doubtful debts; Difference of opinion; Assessment record; Tax effect; Reason to believe; Unabsorbed depreciation; Change of opinion; Reassessment proceedings
• Section: 143(3); 14A; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI R.K. GUPTA AND SHRI B.C. MEENA ITA NO. 4399/DEL/11 ASSTT.YR. 2006-07 ACIT, CIRCLE 4(1), VS. M/S LIVING MEDIA INDIA LTD ., NEW DELHI. 9-K BLOCK, CONNAUGHT PLACE, NEW DELHI-110001. PAN/ GIR NO. AAACL0087H ITA NO. 4406/DEL/11 ASSTT.YR. 2006-07 M/S LIVING MEDIA INDIA LTD., VS. ACIT, CIRCLE 4(1), 9-K BLOCK, CONNAUGHT PLACE, NEW DELHI. NEW DELHI-110001. ( APPELLANT ) ( RESPONDENT ) DEPARTMENT BY : SHRI D.K. MISHRA CIT (DR) ASSESSEE BY : SHRI SALIL AGARWAL ADV. O R D E R PER R.K. GUPTA, J.M: : THESE ARE CROSS-APPEALS FILED BY THE REVENUE AS WEL L AS THE ASSESSEE, ASSAILING CIT(A)S ORDER DATED 22-03-2011 FOR A. Y. 2006-07 ON THEIR RESPECTIVE GRIEVANCES. BOTH THE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY A COMMON ORDER FOR THE SAKE OF CONVE NIENCE. 2. IN APPEAL OF THE ASSESSEE, GROUND NO. 1 TO 1.4 R ELATES TO UPHOLDING THE ASSUMPTION OF JURISDICTION U/S 147 OF THE I.T. ACT. BRIEF FACTS OF THE CASE ARE THAT ORIGINAL ASSESSMENT IN THIS CASE WAS COMPLETED U/S 143(3) ON AN INCOME OF RS. 16,73,26,015/- AS AGAINST RETURNED INCOME OF RS. 16,67,22,015/- ON 26-12-2008. THEREAFTER FOLLOWING REASONS WERE RECOR DED FOR REOPENING OF THE ASSESSMENT, COPY OF WHICH IS PLACED AT PAGE 78 OF THE PAPER BOOK: ITA 4399 & 4406/DEL/11 M/S LIVING MEDIA INDIA LTD. 2 01. ASSESSMENT IN THIS CASE WAS COMPLETED UNDER SE CTION 143(3) ON 26-12-2008 AT AN INCOME OF RS. 16,73,26,0 15/- AS AGAINST THE RETURNED INCOME OF RS. 16,67,22,015/-. SCRUTINY OF INCOME TAX ASSESSMENT RECORDS REVEALED THAT IN THE COMPUTATION OF INCOME THE ASSESSEE HAD DEDUCTED RS. 1,87,41,755 /- ON ACCOUNT OF PROVISION FOR DOUBTFUL DEBTS NO LONGER R EQUIRED WRITTEN BACK BUT IN P&L ACCOUNT THIS AMOUNT WAS NOT ADDED TO THE OTHER INCOME. THE MISTAKE RESULTED IN UNDER ASS ESSMENT OF INCOME BY RS. 1,87,41,755/- INVOLVING TAX EFFECT OF RS. 63,08,473/-. 02. IN VIEW OF THE ABOVE, I HAVE REASONS TO BELIEVE THAT THE INCOME OF RS. 1,87,41,755/- CHARGEABLE TO TAX HAS E SCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147/148 O F THE INCOME TAX ACT, 1961. 3. THEREAFTER NOTICE U/S 148 OF THE ACT WAS ISSUED ON 19-1-2010. THEREAFTER ASSESSEE FILED LETTER DATED 25-02-2010 R EQUESTING THE ASSESSING OFFICER TO TREAT THE RETURN ORIGINALLY FILED AS RE TURN IN RESPONSE TO NOTICE U/S 148. DURING REASSESSMENT PROCEEDINGS, ADDITIONAL RE ASONS WERE RECORDED BY LD. ASSESSING OFFICER, COPY OF WHICH IS PLACED AT P AGE 83 OF THE PAPER BOOK, WHEREIN IT HAS BEEN RECORDED THAT UNABSORBED DEPREC IATION SHOULD HAVE BEEN SET OFF AGAINST LONG TERM CAPITAL GAINS AND DISALLO WED EXPENDITURE U/S 14A RELATED TO EXEMPT INCOME, WHICH IS NOT A CORRECT FI GURE. 4. DETAILED REPLY WAS FILED BEFORE ASSESSING OFFICE R IN RESPECT TO BAD DEBT CLAIMED. RECONCILIATION WAS ALSO FILED, COPY O F WHICH IS PLACED AT PAGES 79 TO 81 OF THE PAPER BOOK. ACCORDINGLY, IT WAS SUB MITTED THAT ASSESSEE HAD NOT CLAIMED ANY BAD DEBT ON ACCOUNT OF PROVISION OF BAD DEBT, AS OUT OF TOTAL CLAIM ON ACCOUNT OF BAD DEBT, THIS AMOUNT HAS BEEN REDUCED AND THEREAFTER ASSESSEE HAS CLAIMED ONLY RS. 46,37,814/-. RECONCIL IATION CHART WAS ALSO FILED. HOWEVER, ASSESSING OFFICER WAS NOT SATISFIE D WITH THE EXPLANATION FILED ON BEHALF OF THE ASSESSEE. ASSESSING OFFICER NOTED THAT AS PER RECORD, ITA 4399 & 4406/DEL/11 M/S LIVING MEDIA INDIA LTD. 3 THE ASSESSEE HAS CLAIMED BAD DEBT OF RS. 1,87,41,75 5/-. ACCORDINGLY HE MADE ADDITION OF THIS AMOUNT. ASSESSING OFFICER HAS ALS O MADE DISALLOWANCE ON ACCOUNT OF SET OFF OF THE BROUGHT FORWARDED DEPRECI ATION AGAINST LOG TERM CAPITAL GAINS AND ON ACCOUNT OF EXPENDITURE CLAIMED U/S 14A. 5. BEFORE CIT(A) THE ASSESSEE CHALLENGED THE REOPE NING OF THE ASSESSMENT AS WELL AS THE ADDITION MADE BY ASSESSIN G OFFICER IN REASSESSMENT ORDER. CIT(A) REJECTED THE LEGAL GROU ND. HOWEVER, AFTER ASCERTAINING THE FACTUAL ASPECT, HE DELETED THE ADD ITION MADE BY ASSESSING OFFICER ON ACCOUNT OF PROVISION FOR BAD DEBT AT RS . 1,87,41,755/-. 6. CIT(A) ALSO DIRECTED THE ASSESSING OFFICER FOR ADJUSTMENT OF CARRIED FORWARD UNABSORBED DEPRECIATION OF RS. 4,61,24,493/ - FROM LONG TERM CAPITAL GAINS. 7. NOW ASSESSEE IS OBJECTING AGAINST REJECTION OF THE LEGAL GROUND AND DIRECTING THE ASSESSING OFFICER FOR ADJUSTMENT OF CARRY FORWARD UNABSORBED DEPRECIATION FROM LONG TERM CAPITAL GAINS. THE DEPA RTMENT IS OBJECTING DELETION OF ADDITION OF RS. 1,87,41,755/- ON ACCOU NT OF PROVISION FOR DOUBTFUL DEBT. 8. DETAILED ARGUMENTS WERE ADVANCED BY LD. A.R. IN RESPECT OF LEGAL GROUND. IT WAS SUBMITTED THAT ASSESSING OFFICER WH ILE COMPLETING ORIGINAL ASSESSMENT U/S 143(3) HAVE INQUIRED IN DETAIL, AS DETAILED QUESTIONNAIRE WAS ISSUED AND DETAILED REPLY WAS FILED. ATTENTION OF T HE BENCH WAS DRAWN ON PAGE 56 OF THE PAPER BOOK WHERE LETTER DATED 25-11- 2008 IS PLACED BY WHICH DETAIL OF BAD DEBT WRITTEN OFF WERE FILED AS PER AN NEXURE 11. THIS ITEM IS APPEARING AT SL. NO. 11 OF THE REPLY FILED BY THE A SSESSEE. IT WAS FURTHER SUBMITTED THAT ASSESSING OFFICER ISSUED DETAILED Q UESTIONNAIRE DATED 21-11- 2008, COPY OF WHICH IS PLACED AT PAGES 46 & 47 OF T HE PAPER BOOK. IT WAS FURTHER SUBMITTED THAT THEREAFTER CERTAIN OTHER REQ UIREMENTS WERE ASKED BY ITA 4399 & 4406/DEL/11 M/S LIVING MEDIA INDIA LTD. 4 THE ASSESSING OFFICER INCLUDING DETAIL OF BAD DEBT . ASSESSEE HAS FILED THE SAME VIDE LETTER DATED 25-11-2008, COPY OF WHICH IS PLACED AT PAGES 55 & 56 OF THE PAPER BOOK. IT WAS FURTHER SUBMITTED THAT DU RING THE REASSESSMENT PROCEEDINGS ITSELF, THE ASSESSEE HAS FILED AGAIN DE TAILED REPLY AND IT WAS SUBMITTED THAT ASSESSEE HAS NOT CLAIMED ANY DEDUCT ION ON ACCOUNT OF PROVISION FOR BAD DEBT AND A RECONCILIATION CHART W AS ALSO FILED BEFORE ASSESSING OFFICER . HOWEVER, ASSESSING OFFICER WAS NOT SATISFIED, THEREFORE, HE MADE THE ADDITION. 9. BEFORE LD. CIT(A) SAME DETAILS WERE FILED AND A FTER CONSIDERING THOSE DETAILS, LD. CIT(A) DELETED THE ADDITION BY OBSERV ING THAT ASSESSEE HAS NOT CLAIMED ANY DEDUCTION ON ACCOUNT OF PROVISION FOR B AD DEBT. ACCORDINGLY, IT WAS SUBMITTED THAT THERE WAS NO MATERIAL BEFORE ASS ESSING OFFICER TO ARRIVE AT A CONCLUSION THAT ASSESSEE HAD CLAIMED DEDUCTION ON ACCOUNT OF PROVISION FOR BAD DEBT. RELIANCE WAS PLACED ON THE RATIO OF D ECISIONS IN THE CASES OF SATNAM OVERSEAS LTD. & ANOTHER VS. ADDL. CIT (2010) 329 ITR 237/ 238 (DEL); & CIT VS. KELVINATOR OF INDIA LTD. (2002) 25 6 ITR 1 (DEL.) (FB), WHICH HAS BEEN CONFIRMED BY HONBLE SUPREME COURT I N 320 ITR 561. RELIANCE WAS ALSO PLACED ON 63 DTR 212. 10. ON THE OTHER HAND, LD. DR STRONGLY OPPOSED THE CONTENTION OF LD. AR. IT WAS SUBMITTED THAT THE ASSESSEE HAS RAISED CERTA IN OBJECTIONS BEFORE ASSESSING OFFICER AND THOSE OBJECTIONS WERE DISPOS ED OF BEFORE COMPLETING THE ASSESSMENT VIDE ORDER DATED 26-11-2010. IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER WHO DISPOSED OF THE OBJECTION S RAISED BY ASSESSEE AGAINST REOPENING OF THE ASSESSMENT, HAS TAKEN INTO CONSIDERATION THE PROVISIONS OF SEC. 147, THEN THE DECISION OF THE HO NBLE SUPREME COURT IN THE CASE OF PHOOL CHAND BAJRANG LAL 203 ITR 456; A ND DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF BAWA ABHAI SINGH VS . DCIT (2002) 253 ITA 4399 & 4406/DEL/11 M/S LIVING MEDIA INDIA LTD. 5 ITR 82. THEREAFTER LD. ASSESSING OFFICER, TAKEN IN TO CONSIDERATION THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF GRUH FINANCE LTD. VS. JCIT (ASSESSMENT) (2000) 243 ITR 482, WHEREIN IT IS HELD THAT IF NO CONSCIOUS CONSIDERATION OF THE MATERIAL AVAILABLE O N RECORD IS MADE AND A MISTAKE HAS BEEN COMMITTED IT WILL NOT PREVENT THE COMPETENT OFFICER TO EXERCISE POWERS U/S 147. DECISION OF HONBLE SUPREM E COURT IN THE CASE OF ASSTT. CIT VS. RAJESH JHAVERI STOCK BROKERS P. LTD. (2007) 291 ITR 500 (SC) WAS ALSO TAKEN INTO CONSIDERATION ALONG WITH T HE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CONSOLIDATED PHOTO & FINVEST LTD. VS. ACIT (2006) 281 ITR 394 (DEL) AND THEN ONLY IT WAS FOUND THAT INCOME HAS ESCAPED TO ASSESSMENT AND THEREFORE INITIATION OF P ROCEEDINGS U/S 147/ 148 WAS VALID. CIT(A) HAS ALSO CONFIRMED THESE OBSERVA TIONS OF THE ASSESSING OFFICER WHILE REJECTING THE LEGAL GROUND OF THE AS SESSEE. IT WAS SUBMITTED THAT THERE SHOULD BE SOME REASON TO BELIEVE THAT AN Y INCOME HAS ESCAPED AND THIS REASON TO BELIEVE IS THERE BECAUSE IT WAS NOT CLEAR THAT HOW THE ASSESSEE HAS NOT CLAIMED DEDUCTION ON ACCOUNT OF PROVISION F OR BAD DEBT AND THEREFORE ASSESSING OFFICER WAS RIGHT IN ASSUMING JURISDICTI ON. RELIANCE WAS PLACED ON THE ORDER OF ASSESSING OFFICER PASSED IN RESPEC T OF DISPOSING THE PETITION AGAINST INITIATION OF PROCEEDINGS, COPY OF WHICH IS PLACED AT PAGE 86 TO 93 OF THE PAPER BOOK, FILED BY THE ASSESSEE. 11. ON THE OTHER HAND, LD. A.R. AGAIN STRESSED UPON THE ARGUMENT THAT LD. DR FAILED TO ESTABLISH AS TO WHAT WAS THE MATERIAL ON WHICH BASIS THE PROCEEDINGS U/S 147 HAVE BEEN INITIATED. AS THERE W AS NO MATERIAL AT ALL, THEREFORE, THE DECISION REPORTED IN 329 ITR 237 IS SQUARELY APPLICABLE, WHICH IS DIRECTLY ON THE ISSUE. 12. WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THEM CAREFULLY, AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD ALONG ITA 4399 & 4406/DEL/11 M/S LIVING MEDIA INDIA LTD. 6 WITH VARIOUS CASE LAWS, RELIED UPON BY BOTH THE PAR TIES, WE FIND THAT THE ASSESSEE DESERVES TO SUCCEED ON ITS LEGAL GROUND. T HERE IS NO DISPUTE THAT ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3), COPY OF WHICH IS PLACED AT PAGES 61 & 62 OF THE PAPER BOOK. A DETAILED QUESTIO NNAIRE WAS ISSUED BY THE ASSESSING OFFICER , COPY OF WHICH IS PLACED AT PAGE S 46 & 47 OF THE PAPER BOOK. THEREAFTER VARIOUS REPLIES WERE FILED BY THE ASSESSEE I.E. 6-2-2008; 11- 8-2008; 4-11-2008; 25-11-2008; 3-12-2008; 19-12-200 8; 22-12-2008, COPIES OF THESE LETTERS ARE PLACED AT PAGES 48 TO 60 OF TH E PAPER BOOK. VIDE LETTER DATED 25-11-2008 IT WAS INFORMED TO ASSESSING OFFIC ER THAT DETAILS OF BAD DEBT ARE ALSO PLACED AND IT IS MENTIONED THAT ANNEX URE 11 IN RESPECT OF THIS CLAIM IS ENCLOSED AND THESE DETAILS ARE MENTIONED I N SL. NO. 11 OF LETTER DATED 25-11-2008, COPY OF WHICH IS PLACED AT PAGES 55 & 5 6 OF THE PAPER BOOK. IT ESTABLISHED THAT ASSESSEE HAS FILED DETAILS IN RESP ECT OF CLAIM OF BAD DEBT. IT IS FURTHER SEEN THAT DURING REASSESSMENT PROCEEDINGS T HE ASSESSEE HAS FILED AGAIN DETAIL OF BAD DEBT VIDE LETTER DATED 29-4-201 0, COPY OF WHICH IS PLACED AT PAGE 79 OF THE PAPER BOOK. YEAR WISE DETAIL OF B AD DEBTS WRITTEN OFF IS PLACED AT PAGE 81 OF THE PAPER BOOK. TOTAL OF THESE DETAILS ON ACCOUNT OF BAD DEBT FROM A.Y. 1995-96 TO A.Y. 2006-07 IS 2,28,89,5 05/-. THEREAFTER ADVANCES WRITTEN OFF AND MUSIC TODAY OLD SALE WRITT EN OFF IS ALSO ADDED AND AFTER ADDING THESE TWO AMOUNTS TOTAL OF BAD DEBT CO MES TO RS. 2,33,79,569/-. THEREAFTER PROVISION FOR DOUBTFUL DEBTS WRITTEN BAC K HAS BEEN REDUCED WHICH IS AT RS. 1,87,41,755/-. AFTER REDUCING THIS AMOUNT TOTAL DEDUCTION ARRIVED AT IS RS. 46,37,814/-, WHICH HAS BEEN CLAIMED BY THE A SSESSEE. THIS NET AMOUNT IS APPEARING IN SCHEDULE 16 OF THE BALANCE-SHEET AL SO. AT PAGE 80, THE DETAIL OF OPENING BALANCE ON ACCOUNT OF DOUBTFUL DEBTS AND CLOSING BALANCE AS ON 31-3-2006 IS ALSO GIVEN AND IN THESE DETAILS IT IS CLEARLY INDICATED THAT ASSESSEE HAS REDUCED PROVISION FOR DOUBTFUL DEBTS W HICH NO LONGER WRITTEN ITA 4399 & 4406/DEL/11 M/S LIVING MEDIA INDIA LTD. 7 BACK I.E. RS. 1,87,41,755/-. COPY OF SCHEDULE 16 WH ICH IS A PART OF BALANCE- SHEET IS PLACED AT PAGE 20 OF THE PAPER BOOK. IN TH IS REGARD IT IS SEEN THAT BAD DEBT WRITTEN OFF IS ONLY OF RS. 46,37,814/-. AFTER CONSIDERING ALL THESE DETAILS IT IS NO WHERE APPEARING THAT FROM WHERE ASSESSING OFFICER PICKED THE AMOUNT OF RS. 1,87,41,755/-. NO WHERE, EITHER FROM THE P&L A/C OR FROM THE BALANCE-SHEET IT IS APPEARING THAT ASSESSEE HAD CLA IMED DEDUCTION ON ACCOUNT OF BAD DEBT OVER AND ABOVE RS. 46,37,814/-. IF ASSE SSEE HAD CLAIMED PROVISION FOR BAD DEBT OF RS. 1.87 CRORES AND ODD T HEN FIGURE OF BAD DEBTS SHOULD HAVE BEEN MORE THAN RS. 2 CRORES. HOWEVER, T HE ASSESSEE HAD CLAIMED ONLY DEDUCTION OF RS. 46.37 LACS AND ODD AS STATED ABOVE. THEREFORE, FOR THIS REASON ALONE, WE ARE OF THE CONSIDERED VIEW THAT AS SESSING OFFICER HAS NEITHER APPLIED HIS MIND NOR FROM THE RECORD AVAILA BLE IT IS APPEARING THAT ASSESSEE HAD CLAIMED ANY DEDUCTION OF RS. 1.87 CROR ES AND ODD. AT LEAST THERE SHOULD BE ANY REASON TO BELIEVE THAT ASSESSEE HAD CLAIMED THIS DEDUCTION BUT FROM THE RECORD ITSELF IT IS FOUND TH AT ASSESSEE HAS NOT CLAIMED ANY SUCH DEDUCTION. EVEN LD. CIT(A) HAS DELETED TH IS ADDITION ON MERIT BY GIVING A FINDING OF FACT THAT ASSESSEE HAD CLAIMED ONLY DEDUCTION OF RS. 46.37 LACS AND ODD. IN CASE OF SATNAM OVERSEAS LTD. & ANOTHER VS. ADDL. CIT 329 ITR 237, THE HONBLE DELHI HIGH COURT ALLOW ED THE PETITION OF THE ASSESSEE THAT THERE WAS NO REASON ON WHICH BASIS TH E ASSESSMENT COULD BE REOPENED, OBSERVING: HELD, ALLOWING THE PETITION, THAT THE ONLY REASON WHICH HAD BEEN GIVEN SEEKING REOPENING OF THE ASSESSMENT FOR THE YEARS 1997-98 AND 1998-99 WAS THAT SUPPRESSION OF SALES H AD TAKEN PLACE ON ACCOUNT OF THE FACT THAT WHEN THE AVERAGE PRICE OF THE CLOSING STOCK WAS MULTIPLIED BY THE QUANTITY OF THE SALES IN THE YEAR THEN THE VALUE OF THE SALES WOULD BE AT A HIGH ER FIGURE THAN THAT DECLARED BY THE ASSESSEE. THERE WAS NO NEW MAT ERIAL WHICH WAS ALLEGED TO HAVE COME TO THE NOTICED OF THE ASSE SSING ITA 4399 & 4406/DEL/11 M/S LIVING MEDIA INDIA LTD. 8 OFFICER WHICH HAD CAUSED HIM TO SEEK REOPENING OF THE ASSESSMENT . THE REASONS GIVEN FOR SEEKING REOPENIN G OF THE ASSESSMENT CONTAINED THE EXPRESSION PERUSAL OF TH E CASE RECORD REVEALS CLEARLY SHOWING THAT IT WAS ON THE BASIS OF THE SAME ASSESSMENT RECORD AS WAS FILED BY THE ASSESSE E, DURING THE RELEVANT ASSESSMENT YEARS AND ALSO SCRUTINIZED BY THE ASSESSING OFFICER BEFORE PASSING THE ORDERS UNDER SECTION 14 3(3)THAT THE ASSESSMENT WAS REOPENED. FURTHER, THE NEW OPINION WHICH HAD BEEN FORMED BY THE ASSESSING OFFICER FOR SEEKING R EOPENING OF THE ASSESSMENT WAS NOTHING BUT A CHANGE OF OPINION AND A NEW APPROACH TO THE EXISTING FACTS AND MATERIAL WHICH T HE ASSESSING OFFICER COULD WELL HAVE DONE DURING THE REGULAR AS SESSMENT PROCEEDINGS OF THE RELEVANT ASSESSMENT YEARS. THE F ACT THAT THE ASSESSING OFFICER FEELS THAT HE HAD FAILED TO DO W HAT HE OUGHT TO HAVE DONE COULD NOT BE A VALID GROUND FOR SEEKIN G INITIATION OF REASSESSMENT UNDER SECTION 147/148 OF THE ACT. THE NOTE ON THE CLAIM FOR DEPRECIATION FOR TARPAULIN CLEARLY GA VE THE REASON THAT THESE TARPAULIN COVERS WERE SUBJECT TO ELEMENT S SUCH AS DUST, RAIN AND SUN AND CONSEQUENTLY 100 PER CENT DE PRECIATION WAS CLAIMED BECAUSE THEY GOT TORN ON ACCOUNT OF FRE QUENT USE. FOR THE ASSESSMENT YEAR 2000-01, A SPECIFIC NOTE WI TH REGARD TO DELAY IN PAYMENT OF PROVIDENT FUND WAS GIVEN TO THE ASSESSING OFFICER . ALL THESE DOCUMENTS MADE IT CLEAR THAT IN ALL THESE ASSESSMENT YEARS THE REASONS REFERRED NOT TO ANY CO NCEALMENT OF FACTS WHATSOEVER BUT IN FACT SIMPLY RELIED UPON THE RECORD WHICH WAS ALREADY AVAILABLE BEFORE THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT PROCEEDINGS UNDER SECTIO N 143(3) OF THE ACT. THERE WAS NO SCOPE FOR REASSESSMENT PROCEE DINGS UNDER SECTION 147 OF THE ACT BY ISSUE OF NOTICE UND ER SECTION 148 THEREOF. THE NOTICE UNDER SECTION 148 WAS TO BE QUASHED. 13. IN THE CASE OF KELVINATOR OF INDIA LTD. 256 ITR 1, THE FULL BENCH OF THE HONBLE DELHI HIGH COURT HAS HELD THAT WHEN A R EGULAR ORDER OF ASSESSMENT IS PASSED IN TERMS OF SUB-SECTION (3) O F SECTION 143, A PRESUMPTION CAN BE RAISED THAT SUCH AN ORDER HAS BE EN PASSED ON APPLICATION OF MIND. IT IS WELL KNOWN THAT A PRESUMPTION CAN AL SO BE RAISED TO THE EFFECT THAT IN TERMS OF CLAUSE (E) OF SEC. 114 OF INDIAN E VIDENCE ACT, 1872, JUDICIAL ITA 4399 & 4406/DEL/11 M/S LIVING MEDIA INDIA LTD. 9 AND OFFICIAL ACTS HAVE BEEN REGULARLY PERFORMED. IF IT BE HELD THAT AN ORDER WHICH HAS BEEN PASSED PURPORTEDLY WITHOUT APPLICATI ON OF MIND, WOULD ITSELF CONFER JURISDICTION UPON THE ASSESSING OFFICER TO REOPEN THE PROCEEDINGS WITHOUT ANYTHING FURTHER, THE SAME WOULD AMOUNT TO GIVING A PREMIUM TO AN AUTHORITY EXERCISING QUASI JUDICIAL FUNCTION TO TAK E BENEFIT OF ITS OWN WRONG. HENCE, IT IS CLEAR THAT SECTION 147 OF THE ACT DOES NOT POSTULATE CONFERMENT OF POWER UPON THE ASSESSING OFFICER TO INITIATE RE ASSESSMENT PROCEEDINGS UPON A MERE CHANGE OF OPINION. THIS DECISION OF THE FULL BENCH HAS BEEN AFFIRMED BY THE HONBLE SUPREME COURT IN 320 ITR 56 1. THE HONBLE DELHI HIGH COURT HAS ALSO TAKEN INTO CONSIDERATION THE SC OPE OF EFFECT OF SEC. 147 AS SUBSTITUTED W.E.F. 1-4-1989. FURTHER, THE BOARD CIRCULAR NO. 549 DATED 31- 10-1989 AND ON PERUSAL OF THE SAID CIRCULAR IT WAS MADE CLEAR THAT THE AMENDMENTS HAD BEEN CARRIED OUT ONLY WITH A VIEW TO ALLY FEARS THAT THE OMISSION OF THE EXPRESSION REASON TO BELIEVE FROM SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO REOPE N PAST ASSESSMENTS ON A MERE CHANGE OF OPINION. ACCORDINGLY, IT WAS FOUND T HAT EVEN ACCORDING TO THE CBDT A MERE CHANGE OF OPINION CANNOT FORM THE B ASIS FOR REOPENING A COMPLETED ASSESSMENT. 14. IN THE PRESENT CASE, THE ASSESSMENT HAS BEEN CO MPLETED U/S 143(3) ORIGINALLY. THE DETAILS IN RESPECT OF BAD DEBTS WER E FILED AND THEREAFTER THE ASSESSMENT WAS COMPLETED. THEREFORE, IT CANNOT B E SAID THAT ASSESSING OFFICER HAS NOT APPLIED HIS MIND. EVEN OTHERWISE, AS WE HAVE DISCUSSED ABOVE IN DETAIL, NO SUCH CLAIM ON ACCOUNT OF PROVIS ION FOR BAD DEBT HAS BEEN CLAIMED BY THE ASSESSEE. FROM WHERE THIS FIGURE HAS BEEN PICKED BY THE ASSESSING OFFICER IT IS NOT KNOWN. EVEN DURING THE COURSE OF APPELLATE PROCEEDINGS, THE BENCH ASKED TO THE DEPARTMENTAL RE PRESENTATIVE THAT AT LEAST IT SHOULD BE ON RECORD THAT FROM WHERE HE PICKED TH E FIGURE ON ACCOUNT OF ITA 4399 & 4406/DEL/11 M/S LIVING MEDIA INDIA LTD. 10 PROVISION FOR BAD DEBT THAT ASSESSEE HAD CLAIMED TH IS DEDUCTION. COPY OF BALANCE SHEET ALONG WITH SCHEDULE 16 IS PLACED ON R ECORD AND AS PER SCHEDULE 16, THE ONLY CLAIMS HAVE BEEN MADE OF RS. 46 LACS AND ODD. RECONCILIATION CHART WAS FILED BEFORE ASSESSING OFF ICER. FROM THAT ALSO IT IS APPEARING THAT ASSESSEE HAD NOT CLAIMED ANY DEDUCTI ON ON ACCOUNT OF PROVISION FOR BAD DEBT. LD. CIT(A) HAS CONSIDERED THIS ASPECT AND HAS GIVEN A FINDING OF FACT THAT ASSESSEE HAD NOT CLAIMED ANY DEDUCTION ON THIS ACCOUNT AND THEREFORE HE DELETED THE ADDITION. NO DOUBT THE ASSESSING OFFICER CAN REOPEN THE ASSESSMENT BY EXERCISING JURISDICTION U/ S 147 BUT THERE SHOULD BE SOME MATERIAL FOR ASSUMING THE JURISDICTION AND IN RECORDING THE REASONS THERE SHOULD BE SOME REASON TO BELIEVE AND THAT REA SON TO BELIEVE CAN BE BASED ON ANY MATERIAL. FROM THE RECORD OF THE ASSES SMENT COMPLETED ORIGINALLY NO WHERE IT IS COMING OUT THAT ASSESSEE HAD CLAIMED ANY DEDUCTION ON ACCOUNT OF PROVISION FOR BAD DEBT. THEREFORE, IN OUR CONSIDERED VIEW THE ASSESSING OFFICER ASSUMED JURISDICTION WITHOUT ANY MATERIAL AND THEREFORE IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAS ASSU MED VALID JURISDICTION. ACCORDINGLY, WE HOLD THAT THERE WAS NO VALID JURISD ICTION FOR RECORDING REASONS AND ACCORDINGLY WE QUASH THE ASSESSMENT. FO R THE SAKE OF CLARIFICATION BEFORE ISSUING NOTICE U/S 148, THE RE ASONS RECORDED BY ASSESSING OFFICER WERE ON ACCOUNT OF ONLY FOR PROVISION OF BAD DEBT, COPY OF WHICH IS PLACED AT PAGE 78 OF THE PAPER BOOK. OTHER ADDITIO NAL REASONS WERE RECORDED DURING ASSESSMENT PROCEEDINGS. SINCE WE HAVE ALREAD Y HELD THAT ASSUMPTION OF JURISDICTION, RECORDING OF REASONS ORIGINALLY WE RE NOT VALID, THEREFORE, ENTIRE ASSESSMENT IS QUASHED. 15. EVEN ON MERIT, WE FIND THAT LD. CIT(A) RIGHTLY DELETED THE ADDITION. FINDINGS OF CIT(A) HAVE BEEN RECORDED AT PAGE 4 OF HIS ORDER IN PARA 4.2 WHICH ARE AS UNDER: ITA 4399 & 4406/DEL/11 M/S LIVING MEDIA INDIA LTD. 11 I HAVE CAREFULLY CONSIDERED THE WRITTEN SUBMISSION MADE ON BEHALF OF THE APPELLANT, THE FINDINGS OF THE ASSESS ING OFFICER IN THE RE-ASSESSMENT ORDER AND THE FACTS ON RECORD. T HE PERUSAL OF THE DETAILS AND RECONCILIATION OF PROVISION FOR DOU BTFUL DEBTS REVEALS THAT A SUM OF RS. 2,33,79,569/- HAS BEEN WR ITTEN OFF AND A SUM OF RS. 1,87,41,755/- BEEN WRITTEN BACK. THERE FORE, THE ASSESSING OFFICER HAS DEBITED A SUM OF RS. 46,37,8 14/- (RS. 2,33,79,569/- MINUS RS. 1,87,41,755/-) IN ITS PROF IT AND LOSS ACCOUNT AS BAD DEBTS WRITTEN OFF. REGARDING THE AMO UNT OF RS. 2,33,79,569/- ON ACCOUNT OF BAD DEBTS WRITTEN OFF, IN ACCORDANCE WITH THE PROVISIONS OF SECTION 36(2) OF THE ACT THA T SUCH DEBT OR PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTI NG THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHIC H THE AMOUNT OF SUCH DEBT OR PART THEREOF IS WRITTEN OFF OR OF AN EARLIER PREVIOUS YEAR, THE DETAILS HAVE BEEN FURNISHED SHOW ING THE YEARS IN WHICH THE BAD DEBTS WRITTEN OFF HAVE BEEN SHOWN AS INCOME. THEREFORE, IT CAN BE SAFELY CONCLUDED THAT THE REQUIREMENT IN TERMS OF THE PROVISIONS OF SECTION 3 6(1)(VII) READ WITH SECTION 36(2) OF THE ACT HAVE BEEN FULFILLED S O AS TO ENABLE THE CLAIM OF THE APPELLANT REGARDING THE DEDUCTION OF BAD DEBTS WRITTEN OFF TO THE EXTENT OF RS. 2,33,79,569/- TO B E ALLOWABLE. ON THE OTHER HAND, THE AMOUNT OF RS. 1,87,41,755/- HAS ALREADY BEEN ADDED BACK TO THE TAXABLE INCOME ON ACCOUNT OF PROVISION FOR DOUBTFUL DEBT WRITTEN BACK AND THE SAME WAS NOT CLAIMED AS EXPENDITURE BY THE APPELLANT DURING THE YEAR UNDER APPEAL. HENCE, THE AMOUNT OF R. 1,87,41,755/- CANNOT BE ADD ED BACK TO THE TOTAL INCOME DURING THE YEAR UNDER CONSIDERATIO N. IN VIEW OF THE DISCUSSION MADE ABOVE, IT IS HELD THAT THE ADDI TION OF RS. 1,87,41,755/- ON ACCOUNT OF PROVISION FOR DOUBTFUL DEBTS NO LONGER REQUIRED WRITTEN BACK IS NOT JUSTIFIED & THE APPELLANT SUCCEEDS IN RESPECT OF GROUND OF APPEAL NO. 2. 16. THE ABOVE FINDING OF CIT(A) REMAINED UNCONTROV ERTED. DEPARTMENTS MAIN ARGUMENT IS THAT ASSESSING OFFICER WAS NOT AL LOWED OPPORTUNITY BEFORE CONSIDERING THE ADDITIONAL EVIDENCE FILED BEFORE C IT(A). WE NOTE THAT DETAILED REPLY WAS FILED BEFORE ASSESSING OFFICER DURING REASSESSMENT PROCEEDINGS, COPY OF WHICH IS PLACED AT PAGE 79, WH ICH IS LETTER DATED 29-4- ITA 4399 & 4406/DEL/11 M/S LIVING MEDIA INDIA LTD. 12 2010. IT IS CLEAR THAT RECONCILIATION OF PROVISION OF DOUBTFUL DEBT AND ADVANCES IS ENCLOSED ALONG WITH BALANCE-SHEET AND R ECONCILIATION IS PLACED AT PAGES 80 TO 82 OF THE PAPER BOOK. YEAR-WISE DETAILS OF BAD DEBT WRITTEN OFF IS GIVEN AT PAGE 81, WHICH WE HAVE ALREADY DISCUSSE D AND FROM THIS DETAIL IT IS CLEARLY ESTABLISHED THAT ASSESSEE HAS CLAIMED ON LY DEDUCTION OF BAD DEBT WRITTEN OFF OF RS. 46,37,814/- WHICH IS THE SAME F IGURE MENTIONED IN SCHEDULE 16 OF THE BALANCE-SHEET. THEREFORE, IT CAN NOT BE SAID THAT THESE DETAILS WERE NOT AVAILABLE BEFORE ASSESSING OFFICER . THE MAIN REASON FOR REOPENING OF THE ASSESSMENT WAS ON ACCOUNT OF CLAI M OF PROVISION FOR BAD DEBT AND IT CANNOT BE SAID THAT NO DETAILS WERE FIL ED DURING REASSESSMENT PROCEEDINGS. CIT(A) HAS CONSIDERED THE SAME. EVEN DURING THE APPELLATE PROCEEDINGS THE DEPARTMENT COULD NOT BRING ANY DETA IL HOW THESE FINDINGS ARE NOT CORRECT AND HOW THE RECONCILIATION CONSIDERED B Y LD. CIT(A) IS NOT CORRECT. THEREFORE, IN OUR VIEW, THERE IS NO POINT IN SENDING THE MATTER BACK TO THE FILE OF ASSESSING OFFICER FOR AFFORDING OPP ORTUNITY AND IT WILL BE FUTILE EXERCISE. ACCORDINGLY, WE CONFIRM THE FINDING OF C IT(A) ON MERITS. 17. ONLY GROUND LEFT IS AGAINST DIRECTING THE ASSES SING OFFICER FOR ADJUSTMENT OF CARRY FORWARD OF UNABSORBED DEPRECIAT ION AMOUNTING TO RS. 4,61,24,493/- FROM LONG TERM CAPITAL GAIN IN APPEAL OF THE ASSESSEE. IN VIEW OF THE PROVISIONS OF SEC. 71 AND 72, THE ASSESSING OFFICER SET OFF THE BROUGHT FORWARD LOSSES ON ACCOUNT OF DEPRECIATION A GAINST LONG TERM CAPITAL GAINS AT RS. 14,34,71,150/-. THE ASSESSEE HAS OFFER ED THIS LONG TERM CAPITAL GAIN FOR TAXATION IN ITS COMPUTATION AND ASSESSING OFFICER HAS ACCEPTED THE CONTENTION OF THE ASSESSEE BY PASSING THE ORIGINAL ASSESSMENT THAT DEPRECIATION AND OTHER BUSINESS LOSSES CARRIED FORW ARD BY ASSESSEE CAN BE SET OFF AGAINST ONLY BUSINESS INCOME. SPECIFICALLY COMP UTATION HAS BEEN COMPUTED BY THE ASSESSING OFFICER WHILE COMPLETING THE ORIGINAL ITA 4399 & 4406/DEL/11 M/S LIVING MEDIA INDIA LTD. 13 ASSESSMENT . NOW AFTER RECORDING ADDITIONAL REASONS , THE ASSESSING OFFICER HAS SET OFF THE BROUGHT FORWARD DEPRECIATION AGAINS T LONG TERM CAPITAL GAINS. BEFORE CIT(A) IT WAS SUBMITTED THAT THE AMOUNT OF UNABSORBED DEPRECIATION WAS RS. 8,95,84,795/-. THE ASSESSEE COMPANY DID NOT ADJUST THE LONG TERM CAPITAL GAINS FROM UNABSORBED DEPRECATION AS ASSESS EE COMPANY HAD PAID THE TAX ON CAPITAL GAINS WITHOUT CLAIMING DEPRECATION. THEREFORE THERE IS NO LOSS OF REVENUE. IT WAS FURTHER EXPLAINED THAT SUB-SECT ION (2) OF SECTION 72 USES THE EXPRESSION MAY BE. THEREFORE, IT WAS THE CHO ICE OF THE ASSESSEE TO CLAIM OR NOT TO CLAIM. RELIANCE WAS PLACED ON THIRD MEMBER DECISION OF ITAT MUMBAI IN THE CASE OF ADDL. CIT VS. C.J. SHAH 10 ITD 151 (T.M) (BOM.); AND THE DECISION OF HONBLE GUJARAT HIGH CO URT IN THE CASE OF CIT VS. MAHENDRA KANAIYALAL (HUF) 202 ITR 701 (GUJ.). H OWEVER, CIT(A) WAS NOT SATISFIED WITH THE EXPLANATION. IN HIS VIEW THE ASSESSING OFFICER WAS RIGHT IN SETTING OFF THE UNABSORBED DEPRECIATIO N AGAINST THE LONG TERM CAPITAL GAINS. AFTER EXAMINING THE DETAILS ASSESSI NG OFFICER WAS DIRECTED TO SET OFF UNABSORBED DEPRECATION TO THE EXTENT OF RS. 4.61 CRORES AND ODD AGAINST THE LONG TERM CAPITAL GAINS. 18. LEARNED COUNSEL FOR THE ASSESSEE REITERATED TH E CONTENTION RAISED BEFORE LOWER AUTHORITIES. IT WAS FURTHER SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE ITAT MUMBAI DATED 8 -2-2012 IN THE CASE OF ITL & FABRIC P. LTD. VS. ACIT (OSD) RENDERED IN ITA NO. 3276/M/2009. IT WAS FURTHER EXPLAINED THAT THIS CASE BEFORE THE MUM BAI BENCH WAS ON REVERSE FACTS AS ASSESSEE HAD CLAIMED SET OFF OF BR OUGHT FORWARD DEPRECIATION AGAINST LONG TERM CAPITAL GAINS AND THE TRIBUNAL IN PARA 8 HAS GIVEN ITS FINDING THAT IN VIEW OF THE DECISION OF THE SPECIAL BENCH THEY WERE OF THE VIEW THAT CIT(A) WAS JUSTIFIED IN UPHOLDING THE OR DER OF THE ASSESSING OFFICER IN REJECTING THE CLAIM OF THE ASSESSEE FOR SET OFF OF SHORT TERM CAPITAL ITA 4399 & 4406/DEL/11 M/S LIVING MEDIA INDIA LTD. 14 GAIN AGAINST CARRIED FORWARD BUSINESS LOSS/ UNABSOR BED DEPRECIATION OF EARLIER YEARS. THE DECISION OF THE SPECIAL BENCH DATED 9-12-2011 WAS RENDERED IN THE CASE OF M/S NANDI STEELS LTD. VS. ACIT IN ITA NO. 546/BANG/08. IN THIS DECISION OF SPECIAL BENCH, THE PROVISIONS OF SECTIONS 71 AND 72 HAVE BEEN CONSIDERED IN DETAIL AND THEN IT W AS HELD THAT THE ASSESSEE WAS NOT ENTITLED FOR SET OFF OF SHORT TERM CAPITAL GAINS AGAINST CARRIED FORWARD BUSINESS LOSS/ UNABSORBED DEPRECIATION OF EARLIER Y EARS. HEAR THE SITUATION IS ON REVERSE FACTS, ASSESSEE HAS NOT CLAIMED ANY SET OFF ON ACCOUNT OF BROUGHT FORWARD DEPRECATION OF EARLIER YEAR AGAINST LONG TE RM CAPITAL GAIN BUT DEPARTMENT WANTS TO ADJUST THE SAME. 19. THE LD. D.R. HAS ALSO RELIED ON TWO DECISIONS I.E. IN THE CASES OF CIT VS. BRITISH INSULATED CALENDERS LTD. (1993) 202 IT R 354 (BOM.); AND CIT VS. MAHENDRA CO. LTD. 269 ITR 12 (RAJ.). 20. LD. A.R. STATED THAT FACTS ARE TOTALLY DIFFEREN T IN THESE TWO CASES AS THEY RELATED TO BUSINESS LOSSES AND NOT TO DEPRECIA TION WHEREAS SPECIAL BENCH OF THE TRIBUNAL HAS CONSIDERED THIS ASPECT IN DETAIL IN RESPECT OF DEPRECIATION WHICH IS A DECISION TAKEN IN THE YEAR OF 2012. 21. WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THEM CAREFULLY. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERI AL ON RECORD WE FIND THAT ASSESSEE DESERVES TO SUCCEED ON THIS GROUND ON MERI T. THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE MUMBAI BENCH IN THE CASE OF ITL & FABRIC P. LTD. (SUPRA), WHERE ON IDENTICAL FACTS THE ISSUE HA S BEEN DECIDED FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE ITAT IN TH E CASE OF M/S NANDI STEELS LTD. (SUPRA). VARIOUS OTHER DECISIONS OF VAR IOUS HIGH COURTS HAVE ALSO BEEN CONSIDERED BY THE SPECIAL BENCH. THE MUMBAI BE NCH HELD THAT CIT(A) WAS JUSTIFIED IN UPHOLDING THE ORDER OF ASSE SSING OFFICER REJECTING THE CLAIM OF THE ASSESSEE FOR SET OFF OF SHORT TERM CAPITAL GAIN AGAINST CARRIED ITA 4399 & 4406/DEL/11 M/S LIVING MEDIA INDIA LTD. 15 FORWARD BUSINESS LOSS/ UNABSORBED DEPRECIATION OF E ARLIER YEARS. AS STATED ABOVE, THE FACTS ARE REVERSE HERE AS ASSESSEE HAS N OT CLAIMED ANY SET OFF ON ACCOUNT OF BROUGHT FORWARD DEPRECATION OF EARLIER Y EAR AGAINST LONG TERM CAPITAL GAIN BUT DEPARTMENT WANTS TO ADJUST THE SAM E. AS HELD BY THE MUMBAI BENCH OF THE TRIBUNAL THAT BROUGHT FORWARD D EPRECIATION CANNOT BE SET OFF AGAINST CAPITAL GAINS, THEREFORE, WE HOLD T HAT CIT(A) WAS NOT JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO SET OFF THE BROUGHT FORWARD DEPRECIATION OF EARLIER YEARS AGAINST LONG TERM CAP ITAL GAINS. ACCORDINGLY WE ALLOW THIS GROUND OF THE ASSESSEE. 22. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D AND THAT OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 01-08-2012. SD/- SD/- ( B.C. MEENA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 01-08-2012. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR ITA 4399 & 4406/DEL/11 M/S LIVING MEDIA INDIA LTD. 16