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Income Tax Appellate Tribunal, IN THE INCOME TAX APPELLATE TRIBUNAL
Before: SHRI & AND & SHRI KULDIP SINGH SHRI KULDIP SINGHSHRI KULDIP SINGH SHRI KULDIP SINGH
PER G.D. AGRAWAL, PER G.D. AGRAWAL, VICE PER G.D. AGRAWAL, PER G.D. AGRAWAL, VICE VICE PRESIDENT VICE PRESIDENT PRESIDENT :- PRESIDENT
This appeal by the assessee for the assessment year 2005-06 is directed against the order of learned CIT(A)-XVI, New Delhi dated 25th September, 2014.
The assessee has raised the following grounds :-
“1. That the learned Commissioner of Income Tax (Appeals) [hereinafter referred to as ‘CIT(A)’] erred in not holding that the order dated 22.03.2013 passed by the Assessing Officer u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 (‘the Act’) is beyond jurisdiction, bad in law and void-ab-initio.
2 ITA-6894/Del/2014
1.1 That the reassessment proceedings after the expiry of four years from the end of the relevant assessment year, without appreciating that the same were barred by limitation in terms of proviso to section 147 considering that : (a) the original assessment for impugned year was completed under section 143(3) of the Act, and (b) there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment.
1.2 That the impugned reassessment proceedings on mere change of opinion without forming a reasonable belief of escapement of income, which is sine qua non for assumption of valid jurisdiction.
1.3 That reassessment proceedings on the basis of audit objections, without any independent satisfaction regarding escapement of income.
1.4 That the proceeding u/s 147 of the Act having been initiated without there being ‘reason to believe’ that income of the appellant had escaped assessment, the impugned order is illegal and bad in law.
Without prejudice :
2. That the learned CIT(A) erred on facts and in law in confirming the disallowance of bad debts written off amounting to Rs.51,79,440/- which is otherwise allowable u/s 36(1)(vii) of the Act.
3. That the learned CIT(A) erred in law as well as on facts in charging interest u/s 234B of the Act.”
We have heard the arguments of both the sides and perused the material placed before us. The assessment year under consideration is 2005-06. The original assessment was complete under Section 143(3) vide order dated 28th March, 2007. Notice under Section 148 was issued on 27th March, 2012 which is admittedly beyond four years from the end of the relevant assessment year and therefore, proviso to Section 147 would be squarely applicable. As per proviso to Section 147, the assessment completed under Section 143(3) cannot be 3 ITA-6894/Del/2014 reopened beyond the period of four years unless there is failure on the part of the assessee to disclose fully and truly all material facts. Thus, the limited question in this appeal before us is whether there was any failure on the part of the assessee to disclose fully and truly all material facts which has led to the escapement of income. The reasons recorded for reopening of assessment read as under :-
“Reasons for reopening the case u/s 147 of the Income Tax Act, 1961 in the case of M/s NIS Sparta Ltd. – A.Y. 2005-06
Return of income in this case was filed on 30.10.2005 declaring income of Rs.95,57,850/- and the same was revised on 18.07.2006 at a total income of Rs.43,78,510/-. Assessment in this case was made u/s 143(3) of the IT Act on 28.03.2007 at an income of Rs.43,78,510/-.
The scrutiny of assessment revealed that the assessee has failed to disclose following facts in its computation of income and balance sheet:-
In revised return the total income reduced to Rs.43,78,510/- from an income of Rs.95,57,850/- due to deduction of “provision for bad and doubtful debts” from computation of income. As the amount was merely a provision and not an ascertained liability, the deduction should have been disallowed and added back to the income of the assessee. The same was also not found to be reversed/debited in profit and loss a/c moreover provisions cannot be reduced from computation directly. Hence deduction of provision resulted in under assessment of income of Rs.51,79,440/-.
Therefore, I have reasons to believe that income amounting to Rs.51,79,440/- has escaped assessment within the meaning of proviso to section 147 of the Act.”
From the above, it is evident that the Assessing Officer has formed an opinion of escapement of income because of allowance of the deduction of `51,79,440/- in respect of provision for bad and doubtful debts. From the reasons recorded itself, it is evident that in 4 ITA-6894/Del/2014 the original return filed under Section 139(1), the income was disclosed at `95,57,850/- which was revised by the assessee for claiming the deduction of provision for bad and doubtful debts and the revised total income at `43,78,510/- was accepted in the order passed under Section 143(3). Thus, when the return of income was revised for the purpose of claiming the deduction for provision of bad and doubtful debts, how can thereafter it be said that the assessee failed to disclose the fact of deduction being claimed for provision of bad debts. In the reasons recorded also, the Assessing Officer has not been able to point out how there is failure on the part of the assessee to disclose fully and truly all material facts. In view of the above, we hold that there was no failure on the part of the assessee to disclose fully and truly all material facts which has resulted in escapement of income and therefore, as per proviso to Section 147, the assessment cannot be reopened beyond the period of four years. The same is barred by limitation.
We may also mention that learned DR has filed the written submission in support of the Revenue’s stand in which various decisions have been relied upon. However, whether proviso to Section 147 is applicable or not would depend on the facts of the case and, on considering the facts of the assessee’s case, we are satisfied that there was no failure on the part of the assessee to disclose fully and truly all material facts. Therefore, none of the decisions relied upon by the learned DR is applicable. However, for the sake of completeness, the written submission filed by the learned DR is annexed to this order as Annexure Ann exure-1. Ann Ann exure exure
In view of our above finding that there was no failure on the part of the assessee to disclose fully and truly all material facts and the original assessment having been completed under Section 143(3), the 5 ITA-6894/Del/2014 notice under Section 148 beyond the period of four years is barred by limitation. The same is quashed.
In the result, the appeal of the assessee is allowed. Decision pronounced in the open Court on 23.05.2019.