INTELENET GLOBAL SERVICES P.LTD, MUMBAI V. DCIT 1(2), MUMBAI

ITA 6644/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88152 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 30-03-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 01-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K VED; N A PATADE SHRI SACH
• Keywords: Reopening of assessment; Depreciation; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 115JB; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO.6644/MUM/2012 ASSESSMENT YEAR: -2005-06 M/S INTELENET GLOBAL SERVICES PVT. LTD. INTELENET TOWERS, MINDSPACE, MALAD (W) MUMBAI 400 090. VS.` DY. CIT -1(2), MUMBAI. APPELLANT RESPONDENT ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 8.8.2012 OF CIT(A) FOR A.Y. 2005-06. THE ASSESSEE HAS RAISED FO LLOWING GROUNDS:- 1. THE LEARNED (ID) CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER (AO) UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME- TAX ACT, 1961 (THE ACT), FOR THE YEAR UNDER CONSIDERATION. 2. THE ID. CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE REASSESSMENT HAVING BEEN MADE ON THE BASIS OF SAME RECORDS AS WAS AVAIL ABLE AT THE TIME OF ORIGINAL ASSESSEE BY SHRI K.K. VED AND SHRI N.A. PATADE REVENUE BY SHRI SACHIDANAND DUBEY DATE OF HEARING 31.12.2014 DATE OF PRONOUNCEMENT 21.01.2015 ITA NO.6644/MUM/2012 ASSESSMENT YEAR: -2005-06 2 | P A G E ASSESSMENT, THE REASSESSMENT PROCEEDINGS WAS BASED MERELY ON CHANGE OF OPINION WHICH IS NOT PERMISSIBLE IN LAW. 3 (A) THE ID. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO OF INCREASING THE BOOK PROFITS BY RS. 9,07,59,966 COMPUTED UNDER SECTION 1 15J8 OF THE ACT. 3 (B) THE LEARNED CIT(A) FAILED TO APPRECIATE THAT SECTION 115JB MANDATES CERTAIN ADJUSTMENTS TO THE BOOK PROFIT OF A COMPANY AND THE ASSESSING OFFICER IS NOT ALLOWED TO CARRY OUT ANY ADJUSTMENTS BEYOND THE ONE S MANDATED UNDER THE ACT. 3 (C) THE ID. CIT(A) ERRED IN IGNORING THE DETAILED SUBMISSIONS MADE BY THE APPELLANT, VIDE THEIR LETTERS DATED 14.7.2011 AND 12. 6.2012. 2. GROUND NO. 1 IS REGARDING VALIDITY OF REOPENING OF ASSESSMENT. 3. THE ASSESSEE FILED ITS RETURN OF INCOME ON 31.10 .2005, DECLARING TOTAL LOSS OF RS. 2,36,77,306/-. THE ASSESSMENT WAS COMPLETED U/S 143(3)/115JB ON 31.12.2007, WHEREBY, THE ASSESSING OFFICER ACCEPTED THE RETURNED LOSS AND BOOK PROFIT OF RS. 1,35,21,987/-. SUBSEQUENTLY, THE ASSE SSING OFFICER REOPENED THE ASSESSMENT BY ISSUING A NOTICE U/S 148 ON 18.03.201 0 ON THE GROUND THAT THERE WAS A SIGNIFICANT CHANGE IN THE ACCOUNTING POLICY R EGARDING DEPRECIATION, AS DURING THE PREVIOUS YEAR, THE ASSESSEE COMPANY REVI SED THE RATE OF DEPRECIATION WHICH ARE HIGHER THAN THE RATE PRESCRIBED UNDER SCH EDULE VI OF THE COMPANIES ACT, IN RESPECT OF ALL FIXES ASSETS RESULTING INCR EASED DEPRECIATION CHARGED AT RS. 9,07,59,966/-. THUS IN VIEW OF THE ASSESSING OFFICE R, DURING THE YEAR THE ASSESSEE HAD NOT PREPARED ITS P&L ACCOUNT IN ACCORDANCE WITH PART II AND III OF SCHEDULE VI OF COMPANIES ACT., 1956 AS SUCH THE PROFIT SHOUL D HAVE BEEN INCREASED BY RS. 9,07,59,966/- WHILE COMPUTING BOOK PROFIT U/S 115JB RESULTING ESCAPEMENT OF BOOK PROFIT FROM ASSESSMENT U/S 115JB. THE REASSESS MENT WAS COMPLETED VIDE ORDER DATED 31.11.2010, WHEREBY, THE ASSESSING OFFI CER MADE THE ADDITION TO THE ITA NO.6644/MUM/2012 ASSESSMENT YEAR: -2005-06 3 | P A G E BOOK PROFIT TO THE TUNE OF RS. 9,07,59,966/- ON AC COUNT OF APPLYING THE REDUCED RATE OF DEPRECIATION. 4. THE ASSESSEE CHALLENGED THE ACTION OF ASSESSING OFFICER BEFORE CIT(A) AND CONTENDED THAT THERE WAS NO FRESH MATERIAL IN THE P OSSESSION OF THE ASSESSING OFFICER IN FORMING THE BELIEF THAT THE INCOME ASSES SABLE TO TAX HAS ESCAPED ASSESSMENT BY ISSUING NOTICE U/S 148 WHICH IS TOTAL LY INVALID AND BAD IN LAW. THE CIT(A) DID NOT ACCEPT THE CONTENTION OF THE ASSESSE E AND HELD THAT THERE IS NO INFIRMITY EITHER LEGAL OR TECHNICAL IN THE ORDER PA SSED BY THE ASSESSING OFFICER. 5. BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT THE REOPENING IS BASED ON THE SAME MATERIAL WH ICH IS AVAILABLE ON RECORD WITH THE ASSESSING OFFICER. HE HAS REFERRED TO THE REASONS OF REOPENING AND SUBMITTED THAT THE ASSESSING OFFICER HAS REOPENED T HE ASSESSMENT ONLY ON THE BASIS OF NOTES ON ACCOUNTS WHEREIN THE ASSESSEE HAS DECLARED CHANGE IN THE ACCOUNTING POLICY REGARDING THE RATE OF DEPRECIATI ON FOR THE YEAR UNDER CONSIDERATION. THE LD. AUTHORIZED REPRESENTATIVE HA S SUBMITTED THAT EVEN, OTHERWISE, THE ASSESSING OFFICER HAS NO JURISDICTIO N TO TINKER WITH THE ACCOUNTS OF THE ASSESSEE WHICH ARE DULY AUDITED BY THE AUDITORS AND FOUND TO BE IN CONFORMITY WITH SCHEDULE VI OF THE COMPANIES ACT. T HE LD. AUTHORIZED REPRESENTATIVE HAS FURTHER CONTENDED THAT THERE IS NO PROVISION UNDER SECTION 115JB TO MAKE ANY ADJUSTMENT ON ACCOUNT OF DEPRECIA TION RATE APPLIED BY THE ASSESSEE WHEN THE ACCOUNTS ARE PREPARED AS PER THE PROVISIONS OF COMPANIES ACT. HE HAS REFERRED THE AUDIT REPORT AND SUBMITTED THAT THE AUDITOR HAS NOT ITA NO.6644/MUM/2012 ASSESSMENT YEAR: -2005-06 4 | P A G E RAISED ANY QUERY OR OBJECTION REGARDING THE ACCOUNT ING POLICY AND INFORMATION REQUIRED UNDER THE COMPANIES ACT TO GIVE A TRUE AND FAIR VIEW IN CONFORMITY WITH THE ACCOUNTING PRINCIPLES ACCEPTED. THE AUDITOR HAS GIVEN THE CERTIFICATE THAT THE BALANCE SHEET, P&L ACCOUNT AND CASH FLOW STATEMENTS ARE IN CONFORMITY WITH THE ACCOUNTING STANDARDS (REFER TO SECTION 211(3C) OF T HE ACT. HE HAS REFERRED THE ACCOUNTING STANDARDS (AS) ON DEPRECIATION ACCOUNTI NG AND SUBMITTED THAT WHERE THE MANAGEMENTS ESTIMATE OF THE USEFUL LIFE OF AN ASSET OF THE ENTERPRISE IS SHORTER THAN THAT ENVISAGED UNDER THE PROVISIONS OF THE RELEVANT STATUTE, THE DEPRECIATION PROVISION IS APPROPRIATELY COMPUTED BY APPLYING A HIGHER RATE. IF THE MANAGEMENTS ESTIMATE OF THE USEFUL LIFE OF THE ASSET IS LONGER THAN THAT ENVISAGED UNDER THE STATUE, DEPRECATION RATE LOWER THAN THAT ENVISAGED BY THE STATUE CANE BE APPLIED ONLY IN ACCORDANCE WITH REQU IREMENTS OF THE STATUTE AS PROVIDED IN PARA 13 OF THE ACCOUNTING STANDARDS (AS ) 6. THE LD. AUTHORIZED REPRESENTATIVE THUS SUBMITTED THAT THE REQUIREMENT OF STATUTE IS ONLY IN THE CASE WHEN THE MANAGEMENT DECIDED TO APPLY THE DEPRECIATI ON RATE LOWER THAN THAT ENVISAGED BY THE STATUTE AND NOT IN THE CASE OF HIG HER RATE OF DEPRECIATION APPLIED BY THE MANAGEMENT. THE LD. AUTHORIZED REPR ESENTATIVE HAS RELIED UPON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE O F APOLLO TYRES LTD. V/S. CIT (2002) 255 ITR 273 (SC) AND SUBMITTED THAT THE ACCOUNTS ARE PREPARED AS PER THE PROVISIONS OF PART II AND III OF THE COMPAN IES ACT THEN THE ASSESSING OFFICER HAS TO ACCEPT THE AUTHENTICITY OF THE ACCOU NT THAT WITH REFERENCE TO THE PROVISIONS OF THE COMPANIES ACT AND HAS NO JURISDIC TION OR POWER TO EMBARK A FRESH ENQUIRY IN REGARD TO THE ENTRIES MADE TO THE BOOKS OF ACCOUNTS OF THE COMPANY WHILE COMPUTING THE BOOK PROFIT U/S 115J. T HUS THE ASSESSING OFFICER HAS NO JURISDICTION TO GO BEYOND THE NET PROFIT SHO WN IN THE P&L ACCOUNT EXCEPT TO THE EXTENT OF PROFIT U/S 115J. WHEN THE BOOKS OF ACCOUNTS ARE CERTIFIED BY THE ITA NO.6644/MUM/2012 ASSESSMENT YEAR: -2005-06 5 | P A G E AUTHORITIES UNDER THE COMPANIES ACT., AS HAVING BEE N PROPERLY MAINTAINED IN ACCORDANCE WITH COMPANIES ACT. HE HAS ALSO RELIED U PON THE FOLLOWING DECISIONS:- (I) DCIT VS. MAHARASHTRA STATE ELECTRICITY BOARD (IT A NO. 1568/MUM/2013) (II) ROYAL CONSTRUCTION CO. V/S. ACIT (ITA NO. 4717/M UM/2012) (III) PATEL PLASTICS CORPORATION V/S. ACIT ( ITA NO. 914/MUM/2009) (IV) KINETIC MOTOR CO. LTD. V/S. DCIT (2003) 262 ITR 330 ( BOMBAY ) 6. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THERE IS NO CHANGE OF OPINION AT THE TIME OF REOPENING OF THE ASSESSMENT BECAUSE THERE WAS NO ENQUIRY CONDUCTED BY THE ASSESSING OFFICER DURING THE COURS E OF ASSESSMENT PROCEEDINGS SO FAR AS THE HIGHER RATE OF DEPRECIATION RATE APPL IED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WHICH IS IN A COMPLETE DEPARTUR E OF THE ACCOUNTING POLICY OF THE ASSESSEE REGARDING THE DEPRECIATION OF THE EARL IER YEARS. HE HAS FURTHER CONTENDED THAT THE ASSESSEE HAS NOT EXPLAINED THE R EASON FOR CHANGE IN THE ACCOUNTING POLICY AND, THEREFORE, WHEN THE ASSESSIN G OFFICER HAS OVERLOOKED A MATERIAL FACT AT THE TIME OF THE ORIGINAL ASSESSMEN T, THE REOPENING IS JUSTIFIED. HE HAS RELIED UPON THE JUDGMENT OF HON'BLE JURISDICTIO NAL HIGH COURT IN THE CASE EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LTD VS , ADDITIONAL CIT (350 ITR 651) . 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE ON THE POINT THAT AT TH E TIME OF REOPENING OF THE ITA NO.6644/MUM/2012 ASSESSMENT YEAR: -2005-06 6 | P A G E ASSESSMENT FRAMED U/S 143(3), THE ASSESSING OFFICER IS NOT PERMITTED TO REVIEW OR REVISE ITS OWN ASSESSMENT ORDER EVEN IF THERE IS NO PROPER ENQUIRY CONDUCTED DURING THE ORIGINAL ASSESSMENT. THIS LEGAL PROPOSIT ION IS APPLIED ONLY WHEN THE ISSUE ON WHICH THE ASSESSING OFFICER HAS A DISCRETI ON AND, THEREFORE, EVEN IF THE ASSESSING OFFICER HAS ALLOWED THE CLAIM OF THE ASSE SSEE WITHOUT CONDUCTING THE ENQUIRY WHILE FRAMING THE ASSESSMENT U/S 143(3), TH E ASSESSING OFFICER IS NOT PERMITTED TO REOPEN THE ASSESSMENT TO REVISE HIS OW N ASSESSMENT ORDER ON SUCH AN ISSUE WHERE THE ASSESSING OFFICER WAS HAVING DIS CRETION. THEREFORE, IN A CASE WHERE A CLAIM WHICH IS NOT PERMISSIBLE UNDER THE LA W IS ALLOWED BY THE ASSESSING OFFICER WITHOUT APPLYING THE MIND AND IGN ORING THE CRUCIAL FACTS THAN THE LEGAL PROPOSITION BARRING THE JURISDICTION OF T HE ASSESSING OFFICER ON THE ISSUE WHERE THE ASSESSING OFFICER CAN EXERCISE HIS DISCRE TION IS NOT APPLICABLE BECAUSE IN SUCH CASES, THE ASSESSING OFFICER HAS NO DISCRET ION EITHER TO ALLOW OR DISALLOW THE CLAIM. IN THE CASE IN HAND, THE CHANGE OF POLI CY WITH RESPECT TO THE HIGHER RATE OF DEPRECIATION APPLIED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. IT IS A SIGNIFICANT DEPARTURE OF THE ACCOUNTING POLICY FOLLOWED BY THE ASSESSEE CONSISTENTLY IN PAST. THUS IT IS MANIF EST FROM THE RECORD THAT SUCH A SIGNIFICANT FACT WHEREBY THE ASSESSEE HAS INCREASED THE RATE OF DEPRECIATION RESULTING DECREASE OF PROFIT BY AN AMOUNT OF RS. 9, 07,59,966/- WAS COMPLETELY IGNORED BY THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER U/S 143(3). FURTHER THIS FACT HAS NOT BEEN DISCLOSED BY THE ASS ESSEE IN THE RETURN OF INCOME OR ANY EXPLANATION FURNISHED BEFORE THE ASSESSING O FFICER BUT IT WAS ONLY THE PART OF THE AUDIT REPORT AND NOTE NO. 13 OF THE NOT ES FORMING PARTS OF THE ACCOUNTS. THERE IS NO DISPUTE THAT NEITHER ANY QUER Y WAS RAISED NOR ANY EXPLANATION WAS FURNISHED BY THE ASSESSEE DURING TH E ORIGINAL ASSESSMENT. THEREFORE, THERE WAS NO ENQUIRY ON THIS ASPECT. THE ASSESSEE CONTEND THAT THE ITA NO.6644/MUM/2012 ASSESSMENT YEAR: -2005-06 7 | P A G E ACCOUNTS ARE PREPARED AS PER PART II AND III OF TH E COMPANIES ACT., AND, THEREFORE, THE ASSESSING OFFICER HAS NO JURISDICTIO N TO TINKER WITH THE ACCOUNTS PREPARED IN ACCORDANCE WITH THE COMPANIES ACT. IT I S PERTINENT TO NOTE THAT PART II AND III OF SCHEDULE- VI OF THE COMPANIES ACT MAN DATES THE ACCOUNTS TO BE PREPARED BY FOLLOWING THE ACCOUNTING STANDARDS. ON THE POINT OF CHANGE OF DEPRECIATION METHOD PARA 21 OF THE AS 6 IS RELEVANT WHICH READS AS UNDER:- 21. THE DEPRECIATION METHOD SELECTED SHOULD BE APPL IED CONSISTENTLY FROM PERIOD TO PERIOD. A CHANGE FROM ONE METHOD OF PROVIDING DE PRECIATION TO ANOTHER SHOULD BE MADE ONLY IF THE ADOPTION OF THE NEW METHOD IS R EQUIRED BY STATUTE OR FOR COMPLIANCE WITH AN ACCOUNTING STANDARD OR IF IT IS CONSIDERED THAT THE CHANGE WOULD RESULT IN A MORE APPROPRIATE PREPARATION OR P RESENTATION OF THE FINANCIAL STATEMENTS OF THE ENTERPRISE. WHEN SUCH A CHANGE IN THE METHOD OF DEPRECIATION IS MADE, DEPRECIATION SHOULD BE RECALCULATED IN ACCORD ANCE WITH THE NEW METHOD FROM THE DATE OF THE ASSET COMING INTO USE. THE DEF ICIENCY OR SURPLUS ARISING FROM RETROSPECTIVE RECOMPUTATION OF DEPRECIATION IN ACCO RDANCE WITH THE NEW METHOD SHOULD BE ADJUSTED IN THE ACCOUNTS IN THE YEAR IN W HICH THE METHOD OF DEPRECIATION IS CHANGED. IN CASE THE CHANGE IN THE METHOD RESULT S IN DEFICIENCY IN DEPRECIATION IN RESPECT OF PAST YEARS, THE DEFICIENCY SHOULD BE CHARGED IN THE STATEMENT OF PROFIT AND LOSS. IN CASE THE CHANGE IN THE METHOD RESULTS IN SURPLUS, THE SURPLUS SHOULD BE CREDITED TO THE STATEMENT OF PROFIT AND LOSS. SUCH A CHANGE SHOULD BE TREATED AS A CHANGE IN ACCOUNTING POLICY AND ITS EFFECT SHOULD B E QUANTIFIED AND DISCLOSED. 8. AS PER PARA 21 OF THE AS 6, IT IS CONTEMPLATED T HAT DEPRECIATION METHOD SELECTED SHOULD BE APPLIED CONSISTENTLY FROM PERIOD TO PERIOD. ANY CHANGE FROM ONE METHOD SHOULD BE MADE ONLY IF ADOPTION OF NEW M ETHOD WAS REQUIRED BY STATUTE OR FOR COMPLIANCE OF THE ACCOUNTING STANDAR DS OR IF IT IS CONSIDERED THAT THE CHANGE WOULD RESULT IN A MORE APPROPRIATE PREPA RATION OR PRESENTATION OF FINANCIAL STATEMENT OF ENTERPRISE. IT FURTHER REQUI RES THAT WHEN SUCH CHANGE IN METHOD OF DEPRECIATION IS MADE, IT SHOULD BE TREATE D AS A CHANGE IN ACCOUNTING ITA NO.6644/MUM/2012 ASSESSMENT YEAR: -2005-06 8 | P A G E POLICY AND ITS AFFECT SHOULD BE QUANTIFIED AND DISC LOSED. THUS THE CHANGE IN THE ACCOUNTING POLICY REGARDING THE METHOD OF DEPRECIAT ION AND RATE OF DEPRECIATION SHOULD BE BASED ON A PROPER EVALUATION OF USEFUL LI FE OF AN ASSET. SUCH A DECISION SHOULD BE BASED ON A PROPER REPORT IN RESPECT OF US EFUL LIFE OF THE ASSET AND SHOULD BE TAKEN BY THE BOARD OF DIRECTORS THROUGH T HE PROPER RESOLUTION AS PER THE REQUIREMENT UNDER THE COMPANIES ACT. SUCH A DEC ISION OF BOARD OF DIRECTOR IS ALSO REQUIRED TO BE APPROVED UNDER THE GENERAL BODY MEETING. IN THE CASE IN HAND, THE ASSESSEE HAS NOT FURNISHED SUCH RECORD BA SED ON WHICH THE DECISION OF CHANGE OF POLICY REGARDING THE METHOD OF DEPRECIATI ON AND INCREASE OF RATE OF DEPRECIATION DURING THE YEAR HAS BEEN TAKEN BY THE BOARD OF DIRECTORS. EVEN THE ASSESSEE HAS NOT PRODUCED ANY RESOLUTION OF BOARD O F DIRECTORS. ONLY DISCLOSURE OF THE ASSESSEE IS IN THE FORM OF NOTES ON ACCOUNTS , WHICH ALSO DOES NOT INDICATE ANY DECISION TAKEN BY THE BOARD OF DIRECTORS OR ANY RESOLUTION PASSED IN THIS RESPECT. THUS MERELY TAKING NOTE OF THE FACT THAT T HE ASSESSEE HAS CHANGED THE ACCOUNTING POLICY IN RESPECT OF METHOD OF DEPRECI ATION AND RATE OF DEPRECATION WHICH HAS RESULTED REDUCTION IN THE PROFIT OF THE Y EAR BY A SUM OF RS. 9,07,59,966/- WOULD NOT IPSO FACTO PROVE THAT THE ACCOUNTS ARE PREPARED IN ACCORDANCE WITH SCHEDULE VI OF THE COMPANIES ACT. A S WE HAVE DISCUSSED THAT THERE IS NO QUARREL ON THE ASPECT THAT IF THE ACCOU NTS OF THE ASSESSEE COMPANY WERE PREPARED IN CONFORMITY WITH PART II AND III OF THE SCHEDULE VI OF THE COMPANIES ACT, THE ASSESSING OFFICER HAS NO POWER O R JURISDICTION TO TINKER WITH SUCH ACCOUNTS FOR THE PURPOSE OF COMPUTATION OF BOO K PROFIT U/S 115JB. HOWEVER, IN THE CASE IN HAND, THE ASSESSEE HAS NOT PRODUCED THE REQUISITE RECORD TO SHOW THAT THE CHANGE OF POLICY IS IN CONFORMITY WITH THE ACCOUNTING STANDARDS AS REQUIRED UNDER THE PROVISIONS OF COMPANIES ACT A ND FURTHER THIS IS A VERY RELEVANT AND CRUCIAL FACT TO BE TAKEN INTO ACCOUNT WHILE COMPUTING THE BOOK ITA NO.6644/MUM/2012 ASSESSMENT YEAR: -2005-06 9 | P A G E PROFIT U/S 115JB WHICH HAS BEEN IGNORED BY THE ASSE SSING OFFICER. THE HONBLE HIGH COURT IN THE CASE OF EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LTD VS, ADDITIONAL CIT (SUPRA) HAS HELD IN PARA 9 & 10 AS U NDER:- 9. WE HAVE CONSIDERED IT APPROPRIATE TO EMPHASISE THIS ASPECT BECAUSE MUCH OF THE SUBMISSION ON BEHALF OF THE PETITIONER IN THESE PROCEEDINGS HAS FOCUSED ON THE MERITS OF THE ASSESSMENT. AT THIS STAGE, THE TEST T O BE APPLIED IS WHETHER THERE WAS REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMEN T AND WHETHER THE ASSESSING OFFICER HAS TANGIBLE MATERIAL BEFORE HIM FOR THE FO RMATION OF THAT BELIEF. A REASON TO BELIEVE IS WHAT IS RELEVANT NOT AN ESTABLISHED F ACT OF THE ESCAPEMENT OF INCOME. 10. THE SALIENT ASPECT OF THE CASE THAT MERITS EMPH ASIS IS THAT THE ORDER OF ASSESSMENT THAT WAS PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) IS COMPLETELY SILENT IN RESPECT OF EACH ONE OF THE FIV E POINTS ON THE BASIS OF WHICH THE ASSESSMENT IS SOUGHT TO BE REOPENED. THERE IS MERIT IN THE CONTENTION WHICH HAS BEEN URGED ON BEHALF OF THE REVENUE THAT NO QUERY H AD BEEN RAISED DURING THE COURSE OF THE ASSESSMENT AND THE ASSESSMENT ORDER W OULD EX FACIE DISCLOSE THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND AT ALL T O ANY OF THE POINTS ON THE BASIS OF WHICH THE ASSESSMENT IS NOW SOUGHT TO BE REOPENED. THAT THERE EXISTS TANGIBLE MATERIAL FOR THE ASSESSING OFFICER TO REOPEN THE AS SESSMENT IN THE PRESENT CASE IS EVIDENT FROM THE RECORD. FOR INSTANCE, AS WE HAVE N OTED EARLIER, IN RESPECT OF ONE OF THE GROUNDS, GROUND (II), THE REASONS WHICH HAVE BE EN DISCLOSED TO THE ASSESSEE WOULD INDICATE THAT RELIANCE HAS BEEN PLACED ON PAR AGRAPH 6.1 OF THE NOTES FORMING PART OF THE ACCOUNTS IN SCHEDULE 17. PARAGR APH 6.1 POSITS THAT AN AMOUNT OF RS. 27.96 CRORES IS THE ESTIMATED AMOUNT OF RECOV ERY EXPECTED OUT OF THE CLAIMS PAID OR PAYABLE BY THE ASSESSEE WHICH HAD BEEN RECO GNIZED ON AN INDIVIDUAL ASSESSMENT/ESTIMATE BASIS ON THE BASIS OF THE ACCOU NTING PRACTICE FOLLOWED BY THE ASSESSEE. DURING THE YEAR IN QUESTION, THERE WAS A CHANGE IN ACCOUNTING POLICY AS A RESULT OF WHICH THE PROVISION FOR ESTIMATED RECOVER Y IN RESPECT OF CLAIMS PAID AND OUTSTANDING FOR RECOVERY FOR A PERIOD OF THREE YEAR S OR MORE AS ON THE BALANCE- SHEET DATE HAS BEEN ESTIMATED AT RS. 100 FOR EACH C LAIM IN SUBSTITUTION OF THE INDIVIDUAL ASSESSMENT/ESTIMATE MADE EARLIER. THE AS SESSEE HAS STATED THAT THE CHANGE IN POLICY HAS THE EFFECT OF THE EXISTING PRO VISION FOR ESTIMATED RECOVERY BEING WRITTEN OFF BY ABOUT RS. 20 CRORES TO THE REVE NUE ACCOUNT AND REDUCING THE PROFIT OF THE ACCOUNTING YEAR CONSEQUENTLY. EVIDENT LY, THE ASSESSING OFFICER HAD NOT CONSIDERED PARAGRAPH 6.1 OF THE NOTES FORMING PART OF THE ACCOUNTS. AT THIS STAGE, IT WOULD BE NECESSARY FOR THE COURT TO RECORD THAT WE HAVE NOT BEEN CALLED UPON TO DECIDE AS TO WHETHER ANY ADDITION TO THE INCOME WOU LD HAVE TO BE MADE ON THAT GROUND SINCE THAT IS A MATTER WHICH HAS TO BE DECID ED AFTER THE ASSESSMENT IS REOPENED. ALL THAT IS RELEVANT AT THIS STAGE IS WHE THER THERE IS REASON TO BELIEVE ON THE PART OF THE ASSESSING OFFICER THAT INCOME HAD E SCAPED ASSESSMENT. THE ANSWER ITA NO.6644/MUM/2012 ASSESSMENT YEAR: -2005-06 10 | P A G E IS IN THE AFFIRMATIVE. IT WOULD NOT BE APPROPRIATE FOR THIS COURT TO PREEMPT AN ENQUIRY WHATSOEVER BY THE ASSESSING OFFICER, ONCE A TANGIBLE BASIS HAS BEEN DISCLOSED FOR REOPENING THE ASSESSMENT. SIMILARLY, IN RESPECT OF THE REVISION OF PAY SCALES, THE ASSESSING OFFICER HAS SOUGHT TO REOPEN THE ASSESSMENT ON THE GROUND THAT THE LIABILITY HAD NOT CRYSTALLIZED BEFORE THE BALANCE-SHEET DATE. HERE AGAIN, IT IS APPARENT THAT THERE HAS BEEN NO APPLICATION OF M IND TO THE RELEVANT FACTS BY THE ASSESSING OFFICER DURING THE COURSE OF THE ASSESSME NT PROCEEDINGS. AS REGARDS THE FIRST GROUND, ON THE BASIS OF WHICH THE ASSESSMENT IS SOUGHT TO BE REOPENED, IT HAS BEEN SOUGHT TO BE URGED THAT UNDER SECTION 44 READ WITH RULE 5(A), IT WOULD NOT BE OPEN TO THE ASSESSING OFFICER TO MAKE AN INCOME ADD ITION. MOREOVER, IT HAS BEEN URGED THAT IN THE PAST, THE SAME PRACTICE HAD BEEN ACCEPTED BY THE REVENUE. THESE ARE MATTERS WHICH ON THE MERITS WILL BE CONSIDERED BY THE ASSESSING OFFICER AND IT WOULD BE INAPPROPRIATE FOR THIS COURT TO EXPRESS AN Y OPINION ON THE MERITS OF ISSUE. MOREOVER, ONCE THE COURT HAS COME TO THE CONCLUSION THAT EVEN A SINGLE GROUND ON THE BASIS OF WHICH THE ASSESSMENT IS SOUGHT TO BE R EOPENED IS VALID AND WITHIN JURISDICTION, THE NOTICE FOR REOPENING OF THE ASSES SMENT WOULD HAVE TO BE UPHELD. CONSEQUENTLY, WE CLARIFY THAT THOUGH THE SUBMISSION S HAVE BEEN URGED ON THE MERITS OF EACH OF THE GROUNDS, WE KEEP ALL RIGHTS A ND CONTENTIONS OF THE PARTIES OPEN TO BE URGED BEFORE THE ASSESSING OFFICER, ONCE THE ASSESSMENT IS REOPENED IN EXERCISE OF THE POWER CONFERRED BY SECTION 147. THE ASSESSING OFFICER HAS ACTED WITHIN JURISDICTION IN REOPENING THE ASSESSMENT. 9. FOLLOWING THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT, WE HOLD THAT THE REOPENING IN THIS CASE IS PROPER AS THE ASSESSI NG OFFICER HAS EXERCISED THE POWER CONFERRED U/S 147 OF FULFILLMENT OF REQUIREME NTS IN THE SAID SECTION. ON MERITS THE ASSESSEE HAS NOT PRODUCED THE REQUISITE RECORDS AND EVIDENCE TO SHOW THE BASIS ON WHICH SUCH A CHANGE IN ACCOUNTING POLICY WAS TAKEN BY THE BOARD OF DIRECTORS. EVEN THE RESOLUTION OF BOARD OF DIRECTORS WAS NOT PRODUCED BY THE ASSESSEE EITHER BEFORE THE ASSESSING OFFICER OR BEFORE US. THUS, THE ISSUE REQUIRES A PROPER VERIFICATION AND EXAMINATION OF T HE RELEVANT FACTS AND RECORDS. ACCORDINGLY, WE SET ASIDE THE ISSUE ON MERITS TO TH E RECORD OF ASSESSING OFFICER FOR DECIDING AFRESH AFTER VERIFICATION AND EXAMINAT ION OF RELEVANT RECORD. THE ASSESSEE IS DIRECTED TO PRODUCE THE EVALUATION REPO RT, BOARDS RESOLUTION AS WELL ITA NO.6644/MUM/2012 ASSESSMENT YEAR: -2005-06 11 | P A G E AS THE APPROVAL OF THE BOARDS DECISION IN THE GENE RAL BODY MEETING IN SUPPORT OF ITS CLAIM THAT THE CHANGE OF METHOD OF DEPRECIATION AS WELL AS RATE OF DEPRECIATION IS IN CONFORMITY WITH THE REQUIREMENT OF PROVISIONS OF COMPANIES ACT AS WELL AS ACCOUNTING STANDARD. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUCNED IN THE OPEN COURT ON THIS 21 ST DAY OF JANUARY 2015. SD/- SD/- (R.C. SHARMA) (VIJAY PAL RAO) (ACCOUNTANT MEMBER) (JU DICIAL MEMBER)) MUMBAI DATED 21-01-2015 SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, I BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI