DCIT-3(1)(1), MUMBAI, AAYAKAR BHAWAN vs. SANGAM (INDIA) LIMITED, ANDHERI

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 1130/MUM/2026 (AY: 2013-14) (Hybrid hearing) DCIT -3(1)(1), Mumbai Sangam (India) Limited 607, Aayakar Bhawan, vs B-306/309, Andheri-Kurla Road, Mumbai – 400020. Dynasty Business Park, J.B. Nagar, S.O. Mumbai – 400059. [PAN: AACCS0486K] Appellant / Revenue Respondent / Assessee Assessee by Shri S.S. Nagar, CA (virtually) & Shri Basant Maheshwari, CA Revenue by Shri Surendra Mohan, Sr. DR. Date of hearing 19.05.2026 Date of pronouncement 18.08.2026 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by Revenue is directed against the order of ld. CIT(A)/ NFACdated 30.11.2025 for Assessment Year (AY) 2013-14. The Revenue has raised following grounds of appeal: 1. Whether on the fact and circumstance of the case, the Ld. CIT(A) is justified in deleting the initiation of reassessment proceedings and passing of the impugned order u/s 147 dated 29.03.2022, however, the income chargeable to tax escaped assessment due to the assessee’s omission in respect of incorrect claims of bad debts, repairs and maintenance, and excess MAT credit, attracting the provisions of section 147 read with Explanation 1." 2. "Whether on the fact and circumstance of the case, the Ld. CIT(A) is justified in deleting the disallowance of bad debts of Rs.38,03,074/-, which was not reflected in the Profit and Loss Account, nor were details furnished to show the year in which the corresponding income had been offered to tax." 3. "Whether on the fact and circumstance of the case, the Ld. CIT(A) is justified in deleting the disallowance of expenses of Rs.5,97,00,000/- however, the assessee has failed to substantiate their revenue nature or justify non-capitalization." 4. "The Appellant craves leave to amend or alter any ground or to submit additional new ground, which may be necessary before or during the course of hearing." 2. Brief facts of the case are that the assessee-company is engaged in the business of manufacturing yarn fabrics, flock fabric, generation of power and toll plaza, filed its return of income for AY 2013-14 on 23.11.2013 declaring income of Rs. 83,86,25,090/-. The case was selected for scrutiny and assessment was completed on 28th October 2016. The assessing officer (AO) while passing the assessment order made disallowance under section 14A. Subsequently, the case of assessee was reopened under section 147 on 31st March 2021. The Notice under section 148 dated 31st March 2021 was served upon the assessee. The reasons recorded for reopening were provided to the assessee. As per reasons recorded, the AO noted that from the record he has seen that the assessee claimed a deduction of ₹ 38,03,074/- under the head bad debts. The said debt was not reflected in the profit and loss account. No details with regard to the financial years in which the corresponding income is offered to tax, which is claimed as bad debt is filed by the assessee. It was not sufficient to claim irrecoverable debts by whatever nomenclature assigned as bad debts,by writing off the same without identifying the financial year in which corresponding income /revenue was offered to tax. The AO was of the view that bad debts of ₹ 38,03,074/- is remained to be disallowed. The AO further noted that on perusal of details of other expenses as per note No. 36 of note to financial statement it was noted that ₹ 5.20 crore has been shown as repairs and maintenance. The assessee has been claimed such expenses as revenue every year. The details of the expenses claimed in the years were recorded by AO in para 2.2 of reasons recorded. The AO was of the view that from the record of the assessee it was noted that no submission was made by assessee to justify its claim for expenditure incurred as revenue in nature and has not been capitalised such expenditure. The AO was of the view that the total additions to the fixed asset are amounting to ₹ 38.75 crore made during the year under consideration, out of which addition of ₹ 11.40 crores to land and factory building, Rs. 21.93 crore to plant and machinery and ₹ 5.42 crore to the assets i.e. computers, vehicles etc. There are other additions to the fix the said during the year as well as repair and maintenance thereon claim to have been incurred in the year under consideration therefore the quantification as well as characterisation if the expenditure as capital or revenue in nature remained and verified. The AO further noted that on verification of tax computation, he find that tax was levied under normal provision and assessee was allowed set off of MAT credit of ₹ 11.97 crore against the available MAT credit of ₹ 9.84 crore. He calculated such different from the computation of income statement furnished by the assessee. Such working was recorded in para 2.3 of reasons recorded. On the basis of such details, the AO was of the view that from the figure tabulated in reasons recorded the unutilised MAT credit available in AY ide 2013 -14 was ₹ 9.84 crore against MAT Credit of ₹ 11.97 crore was granted to the assessee which has resulted in incorrect grant of MAT credit to the extent of ₹ 2.12 crore. On the basis of aforesaid three reasons the AO was of the view that income of assessee has escaped assessment within the meaning of section 147 of Income Tax Act. The case of assessee is squarely covered under the provisions of Explanation 1 to section 147. In response to notice under section 148, the assessee filed its return of income on 30th April 2021 declaring income of ₹ 42.68 crore after set off of brought forward losses of ₹ 7.92 crore from total income of Rs. 50.61 Crore. 3. The assessment was completed by National Faceless Assessment Unit (NFAC) hereinafter referred as AO vide its order dated 29thMarch 2022. The AO while passing the assessment order made addition by disallowing repair and maintenance expenses of ₹ 5.97 crore. The AO also disallowed bad debts of ₹ 38,03,074 /-while passing the assessment order on 29thMarch 2022. Though, in response to the show cause notice by AO the assessee in its reply contended that during original assessment the AO examined the issue of bed debts and after considering the detailed reply dated 07.12.2021 and 11.03.3022 and the material provided allowed such bed debts. The AO held that the assessee failed to furnish the documentary evidence to substantiate the claim that such bad debts has already been added to the computation of income in respective years. No details were provided by the assessee. On the issue of repair and maintenance, the assessee also contended that during original assessment the issue was examined by issuing detailed show cause notice. In response the show cause notices, the assessee filed its reply dated 07.12.2021 and 11.03.3022 and the AO allowed the expenses on verification of facts. The reply of the assessee was not accepted by AO by holding that the assessee has not furnished evidence to substantiate that the expenditure was revenue in nature. 4. Aggrieved by the additions in the assessment order as well as against the validity of reopening the assessee filed appeal before ld. Commissioner (Appeals). Before ld. Commissioner (Appeals) the assessee filed detailed written submission on validity of reassessment under section 147 as well as against various additions /disallowances. In the written submission, against the validity of reopening, the assessee submitted that there was no failure on the part of assessee to disclose fully and truly all the material facts. The issue forming part of reasons recorded which relates to bad debts and repair and maintenance was specifically examined in the original scrutiny assessment completed on 28thOctober 2026. The reassessment is nothing but a merely a change of opinion. The assessee along with its submissions filed copy of various notices issued during the original assessment proceeding and the reply filed by assessee. 5. The learned Commissioner (Appeals)while deciding the appeal, extractedthe gist of reasons recorded on page 9,10 and 11 of his order. The learned Commissioner (Appeals) also referred the provision of section 147 as existed during the relevant time. The learned Commissioner (Appeals) recorded that as per reasons recorded the income escaped assessment consist of number (i) bad debts of ₹ 38.03 lacs claimed in computation and not in profit and account, number (ii) repair and maintenance of ₹ 5.97 crore allegedly capital in nature. And (iii) excess grant of MAT credit of ₹ 2.12 crore. The ld Commissioner (Appeals) summarised the issues and noted that as per the reasons recorded the AO contended that bad debts are not passed through profit and loss account and there are no details of the year when these bad apps were advanced. The AO also contended that repair and maintenance are high and they may possibly be capital in nature and the excess MAT credit has been granted thereby he invoked Explanation 1 to section 147 and asserted failure on the part of assessee. 6. The learned Commissioner (Appeals) recorded that it is the case of assessee that all primary facts were disclosed in the original assessment. The assessee relied on query (question) No. 38 raised during original assessment, which specifically covered repair and maintenance, bed debts and reconciliation were filed in 2016, MAT working formed part of return of income and computation thereof. No new tangible material is shown in the reasons recorded; thus, it is nothing but a change of opinion. On perusal of material in the form of submission which includes notice under section 142 (1) dated 12thOctober 2015, issued during the original assessment proceeding, the learned Commissioner (Appeals) find that all required details were furnished including party-wise details of repairs and maintenance in the prescribed format and extensive detail of debtors /creditors, expenses and other heads clearly putting repair and debtors related matters in issue during the original assessment. The relevant part of questions raised by the then AO was extracted at page no. 13 of his order. The learned Commissioner (Appeals) by referring the reply of assessee dated 25thFebruary 2016 filed during the original assessment, held that specific note on bad debts claim of ₹ 38 lakhs was asked and it was explained by the assessee. The extract of reply of assessee dated 25th of February 2016 is also extracted by ld Commissioner (Appeal) in his order. The learned Commissioner (Appeals) on appreciation of facts summarise all the issues in para 11 of his order and noted; (i) whether the assessment having been initiated after 4 years from the end of relevant assessment year, the proviso to section 147 is attracted; and if so, (ii) whether there was failure on the part of assessee to disclose fully and truly all material facts necessary for its assessment, in respect of the issues cited in the reasons namely bad debts, repair and maintenance and MAT credit and (iii) whether the reopening is based on mere re-examination/change of opinion on the same primary facts. The learned Commissioner (Appeals) on examination of such issues held that during the original assessment, notice under section 142(1) 12.10.2015 was issued to the assessee wherein party- wise details of repair and maintenance including nature of amount and TDS were required. This shows that issue was put indirect focus during original scrutiny assessment. The record indicates that details of bills were furnished and examined by AO and accepted the same during the original assessment. So far as bad debts in is concerned, the assessee in its reply dated 25thFebruary 2016 provided note on bad debts of ₹ 38 lakhs, explaining thepolicy of adding back provision in prior year and claiming actual write off against provision in the year of irrecoverablealong with reconciliation. On the basis of such observation, the learned Commissioner (Appeals) was of the view that those primary facts regarding existence and tax treatment were disclosed in the original assessment proceedings. There is no failure on the part of assessee in disclosing fully and truly. On the MAT, the learned Commissioner (Appeals) held that reasons recording concerning excess MAT credit arises from the assesses own computation metrics available in the original assessment. The reassessment order tabulates earlier year MAT credit well as excess set-off. When the MAT credit working flow from the return of the computation filed and available with AO, there is no allegation of suppression of primary facts; at the best there is difference in computation of appreciation of this difference by the AO later. The course of level to AO in such situation was rectification under section 154. This cannot be called failure to disclose fully on the part of assessee. The learned Commissioner (Appeals) was of the view that reasons recorded do not specify any concrete instances of non-disclosure; rather the AO re-evaluate the availability of nature of expenditure and computation already examined during the course of assessment which has been proved from the various notices issued during the original assessment proceeding. The learned Commissioner (Appeals) in para 16 of his order held that there was no failure on the part of assessee to disclose fully and truly all material facts necessary for assessment. Thus, the assumption of jurisdiction is invalid and subsequent reassessment was quashed being mare change of opinion. Aggrieved by the order of learned Commissioner (Appeals), the revenue has filed present appeal before the Tribunal. 7. We have heard the rival submission of the parties and have gone through the orders of lower authorities carefully. The learned Senior departmental representative (Sr DR) for the revenue supported the order of AO. The learned SR DR for the revenue submits that while recording reasons the AO clearly a specified that income of assessee has escaped assessment thereby, he invoked Explanation 1 to section 147. The learned Commissioner (Appeals) quashed the assessment order by taking view that there is no failure on the part of assessee in disclosing all the material necessary for assessment. The ld Commissioner (Appeals) has not considered the merits of the case. At the time of recording reasons, the sufficiency of reasons it not to be adjudged. 8. On the other the learned authorised representative (AR) of the assessee supported the order of ld. Commissioner (Appeals). The learned AR of the assessee submitted that assessee public company engaged in the business of manufacturing and trading of yarn and textile fabric. Original return of income was filed in November 2013, which was subsequently revised. The case was selected for scrutiny and assessment was completed under section 143 (3) on 28 October 2016. The case of assessee was thereafter, reopened on 31stMarch 2021. Notice under section 148 was issued on 31stMarch 2021. The AO passed reassessment order on 29thMarch 2022 by making total addition of ₹ 6.35 crore which consist bad debts of ₹ 38 lakhs and repair and maintenance expenses of Rs. 5.97 crore. The learned AR of the assessee submits that admittedly the case of assessee was reopened beyond the four- year from the end of relevant assessment year. These no failure on the part of assessee in not disclosing truly and fully all material facts necessary for assessment. All three issues, which were made basis for reopening were examined during the original assessment. During the original assessment the AO examined all three issues extensively. Notice under section 142()1) dated 12thOctober 2016, wherein the AO raised question with regard to all three issues, on the basis of which reopening was made is placed on record. The reassessment proceeding initiated by AO was nothing but it was merely a change of opinion. The ld AR of the assessee by reading the contents of reasons recorded would submits that the language of reasons recorded clearly shows that all the material is available on record at the time of original assessment including financial statements, note on account and computation of income. The detailed reply of assessee in response to the show cause notice was already on record. No fresh tangible material or external information has been brought on record to justify reopening. The issue relating to bed debts, repair and maintenance excess MAT credit were part of record. The assessee already disclosed all the information and material necessary for assessment, which was examined during the original assessment proceedings. The reopening is nothing but a change of opinion. The learned Commissioner (Appeals) while allowing relief to the assessee has categorically held that there was no failure on the part of assessee to disclose fully and truly all the material facts necessary for assessment and quashed the reassessment proceeding. The learned AR of the assessee submitted that he fully supports the order of ld. Commissioner (Appeals). To support all his submissions he also relied upon the decision of Hon’ble Supreme Court in CIT versus Kelvinator of India Ltd(2010) Taxman 312(SC), Hindustan Mills Ltd versus DCIT (2023) 152 taxmann.com 628(Bombay), German Remedies Ltd versus DCIT(2006) 287 ITR 494(Bombay), Bhavesh Developers Vs AO (2010) 229 CTR 160(Bombay), Asian Paints Ltd versus DCIT(2009) 308 ITR 195(Bombay) and decision of Delhi Tribunal in Vedanta Limited versus ACIT in ITA No. 22405/Delhi/2019 and 2407/Delhi 2019 dated 20.02.2026.The ld AR of the assessee prayed for dismissal of the appeal. 9. We have considered the rival submission about the parties and have gone through the orders of lower authorities carefully. We have also deliberated on various case laws relied by the learned AR of the assessee. On careful perusal of the notice issued under Section 142(1) dated 12.10.2015 and the reply of the assessee dated 25.02.2016, we find that there is no reference to the repair and maintenance expenses of Rs. 5.97 crore, either in the said notice or in reply thereto. Thus, there was no examination of the issue of repair and maintenance expenses by the AO during regular assessment. We find that the learned Commissioner (Appeals) , while allowing relief to the assessee, erroneously held that the issue of repair and maintenance expenses was the subject matter of examination during the scrutiny assessment. Thus, in our considered view, the case of the assessee clearly falls within Explanation 1 to the proviso to Section 147, as it existed during the relevant period. Accordingly, in our considered view, the reopening clearly falls within the exception carved out by Explanation 1 to Section 147, as it existed at the relevant time. Hence, we find merit in the submission of the learned Senior DR for the Revenue that the present case falls within the exception carved out by Explanation 1 to Section 147. And reopening is not based on change of opinion. In the result, the grounds of appeal raised by the Revenue are allowed. The ratio of various case laws relied by ld AR of the assessee are not applicable on the peculiar facts of the case in hand. 10. We further find that the learned Commissioner (Appeals) has not decided various issues on merits. Therefore, the matter is restored to the file of the learned Commissioner (Appeals) to decide all the issues raised by the Revenue on merits, in accordance with law. The learned Commissioner (Appeals) is directed to pass an order on merits. Needless to direct that learned Commissioner (Appeals) shall allow a fair and reasonable opportunity of being heard to the assessee. 11. In the result, the appeal filed by Revenue is allowed. Order was pronounced in open court on 18/08/2026 Sd/- Sd/- GIRISH AGRAWAL PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER

MUMBAI, Dated:18/08/2026 Biswajit Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file.

By Order

Assistant Registrar ITAT, Mumbai