DCIT CORPORATE CIRCLE 1, COIMBATORE vs. CHIRANJEEVI WIND ENERGY LIMITED, COIMBATORE

Aforesaid appeal by Revenue for Assessment Year (AY) 2011-12 arises out of the order of learned Commissioner of Income Tax (Appeals)-1, Coimbatore [CIT(A)] dated 01-03-2018 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s.143 r.w.s. 147 of the Act on 16-12-2016. The grounds taken by the Revenue read as under: - “1. The order of the Id. CIT(A), Coimbatore is against the facts and circumstances of the case and is erroneous by law.

The assessee being resident corporate assessee is stated to be engaged in assembling and sale of windmills. An assessment was framed u/s 143(3) on 31.03.2014. However, the case was reopened within 4 years and notice u/s 148 was issued on 29.03.2016. The same stem from the observation of Ld. AO that the assessee paid sum of Rs.420.88 Lacs to M/s Sucheta Consultancy Private Ltd. as advance towards purchase of land. This amount was claimed as bad-debts. Since it was capital expenditure and wrongly allowed as revenue expenditure, the case was reopened. The assessee opposed reopening on the ground that AO had already verified the claim and reopening was without any tangible and new material. The reopening tantamount to review of existing available material and on mere change of opinion. The Ld. AO rejected the same on the ground that the said claim was not expressely allowed and the issue was not discussed in the assessment order. Only part of the claim was discussed and disallowed which was upheld by first appellate authority. As per Explanation 2(c)(iii) to Sec.147, it would be case of deemed escapement where an assessment was made and income was subject to excessive relief under the act. Accordingly, assessee’s objection was rejected and write-off of Rs.420.88 Lacs was held to be not allowable as bad debts.

The Ld. CIT(A) noted that the assessee debited bad debts for Rs.641.77 Lacs under the head Administration and Selling expenses. During the course of original assessment proceedings, the assessee had given a note regarding advances written off, separately for purchase of land and advance for import of machinery. The AO after analyzing the material has assessed part of the bad debts written off as not an admissible loss being capital in nature. The AO had picked up a single entry of Profit & Loss Account for Rs.641.77 Lacs and assessed a portion amounting to Rs.204.26 Lacs which clearly establishes that AO had considered the matter, applied his mind and took a conscious decision to assess it. In assessment, generally an AO proceeds on the assumption that the accounts are correct and only discusses issue of expenditure not allowed. Hence, it would be incorrect to conclude that the issued was not considered by AO while completing the original assessment. It could thus be concluded that the action of AO was nothing but mere change of opinion and there was no tangible material to come to the conclusion that there was escapement of income. The ratio of decision of Hon’ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd. (320 ITR 561) would apply and it was to be held that action of AO was nothing but a change of opinion and reappraisal of the already available facts. Therefore, the assessment was held to be invalid and finally cancelled. Aggrieved, the revenue is in further appeal before us.

From the fact, it emerges that the assessee has debited bad debts written off for Rs.641.77 Lacs in the Profit & Loss Account. The details of the same were called for by Ld. AO during the course of original assessment proceedings. The assessee had supplied the requisite details. After considering the assessee’s reply, Ld. AO disallowed bad debts to the extent of Rs.204.26 Lacs and chose not to make any further addition on this account. There is no further discussion whatsoever in the assessment order, in this regard. However, when the complete details were asked for and the same were duly furnished by the assessee and Ld. AO chose to disallow a part of the same, it could rightly be concluded that the issue was duly considered by AO with due application of mind and a conscious decision was taken in the matter. To reopen the already concluded assessment on the same very issue would be nothing but review of the order and on mere change of opinion which is impermissible as per the decision of Hon’ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd. (320 ITR 561). Therefore, impugned order could not be faulted with and we concur with the same.

The appeal stands dismissed. Order pronounced on 27th June, 2023