ACIT, CIRCLE-10(2), KOLKATA, KOLKATA vs. M/S ORIENTAL CARBON & CHEMICALS LTD., KOLKATA

1 ITA No.1682/Kol/2016 Oriental Carbon & Chemicals Ltd.,AY- 2009-10 आयकर अपील�य अधीकरण, �यायपीठ – “C” कोलकाता, IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH: KOLKATA (सम�)Before �ी पी.एम .जगताप, लेखा सद�य एवं/and �ी ऐ. ट�. वक�, �यायीक सद�य) [Before Shri P. M. Jagtap, AM & Shri A. T. Varkey, JM]

I.T.A. No. 1682/Kol/2016 Assessment Year: 2009-10

Assistant Commissioner of Income-tax, Vs. M/s. Oriental Carbon & Chemicals Ltd. Circle-10(2), Kolkata. (PAN: AAACO3006F) Appellant Respondent

Date of Hearing 05.03.2018 Date of Pronouncement 23.03.2018 For the Appellant Shri Saurabh Kumar, Addl. CIT, Sr. DR For the Respondent Shri Manish Tiwari, AR

ORDER Per Shri A.T.Varkey, JM This appeal preferred by revenue is against the order of Ld. CIT(A)-15, Kolkata dated 30.06.2016 for AY 2009-10. The grounds of appeal raised by the revenue are as under:

“1. Whether the Ld. CIT(A) was correct in relying upon the decision in the case of M/s. NRC Limited Vs. CIT (A) as decided by the Hon’ble B Bench of the ITAT, Mumbai as the facts of the case is different from the case of M/s. NRC Limited? 2. Whether the Ld. CIT(A) was correct in not appreciating the fact that the assessee company did not advance the loans to the parties for commercial consideration about 15 years ago and that there is no material on record to suggest that it had ever received any interest from them ? 3. Whether the Ld. CIT (A) was correct in not examining the fact there is no material on record that the assessee company had actually received any interest from the debtors on account of the loans advanced to them and that whether he was correct in not seeking a remand report from the A.O. who could have examined the vital issues? 4. Whether the Ld. CIT(A) was correct in holding that writing off the loans in the books of account was sufficient condition for accepting that bad debts have actually taken place without looking into the surrounding circumstances.

2 ITA No.1682/Kol/2016 Oriental Carbon & Chemicals Ltd.,AY- 2009-10 5. That the appellant craves to add, delete or modify any of the grounds of appeal before or at the time of hearing.” 2. At the outset itself, the Ld. Counsel for the assessee brought to our notice that in the appeal preferred by the assessee before the Ld. CIT(A) the assessee company had raised the legal ground that the AO’s action of reopening the assessment originally completed under 143(3) tantamount to “change of opinion” which ground has been upheld by the Ld. CIT(A) who therefore held the reopening itself ab-initio void. And this decision of ld CIT(A) has not been challenged by Revenue in this appeal, and therefore even if for argument sake Revenue succeeds on merit/ground raised before us in the instant appeal, the Revenue appeal cannot be allowed as long as the decision of ld CIT(A) on legal issue stands not disturbed. For buttering this fact ld AR drew our attention to the grounds of appeal of assessee before the Ld. CIT(A) which are ground no. 1 and ground no. 2 are reproduced as under:

“1. For that on the facts and in the circumstances of the case, the Assessing Officer erred in law in reopening the assessment holding that any income had escaped assessment in the original assessment u/s. 143(3) of the Income Tax Act. 2. On the facts and in the circumstances of the case the reopening of the original assessment is bad in law as it is based on change of opinion on same set of facts which were examined and accepted by the AO earlier and so, the impugned order u/s. 143(3)/147 needs to be annulled.” In order to substantiate that the AO in the original assessment proceedings had infact enquired about the very same issue on which the AO has based his reason to reopen the assessment order, drew the attention of Ld. CIT(A) to question no. 13 of notice u/s. 142(1) dated 20.06.2011 which is as under:

“Detail regarding the bad debt and provision for doubtful debt debited to P/L A/c. with name and address.” 3. For the aforesaid question of AO in the original assessment completed u/s. 143(3) of the Act, the Ld. CIT(A) takes note of assessee’s detailed reply to AO which have been reproduced from page 3 to 6 of his order and thereafter the Ld. CIT(A) held in the impugned order as under at page 9 of his order:

3 ITA No.1682/Kol/2016 Oriental Carbon & Chemicals Ltd.,AY- 2009-10 “It meant that the AO had allowed the bad debt after proper application of mind. Thus, there was a "Change of opinion" on the part of the AO while issuing the notice u/s. 148. This is not allowable under the provisions of section 147. From the perusal of the records, it is noted that the reassessment proceedings were initiated by the AO with reference to reasons which were formed on reappraisal of facts already available on record and upon mere change of opinion with reference thereto. Copy of notice u/s 142(1) dated 20.06.2011 and the reply of the assessee dated 17.08.2011 were on record at the time of passing of the order u/s 143(3). Thus the reasons to believe have been based on reappraisal of facts information and details which were on record at the time of passing the order u/s 143(3). No new material or information was gathered or came in possession of the AO so as to justify the formation of belief. The reasons to believe that income has escaped assessment were formed after examining the assessment records which were available to the predecessor AO and have been thus formed on mere change of opinion on the facts already available on record. It was not a case where subsequent to completion of the regular assessment, some new information or material was gathered or was made available to the AO from or by some independent source; consequent to which reason to believe that income chargeable to tax for A.Y. 2009-10 had escaped assessment was formed. Reliance in this regard is placed on the decision of Supreme Court in the case of ACIT Vs ICICI Securities Primary Dealership Ltd. [2012] 348 ITR 299 (SC); 78 DTR 153 (SC) wherein the Apex Court held that reopening of assessment on change of opinion is not maintainable. There are a number of judgements of the Apex Court and High Courts which support the aforesaid view. CIT Vs Kelvinator of India Ltd. [2010] 320 ITR 561 (SC), NYK Line (India) Ltd. Vs Dy.CIT [2012] 346 ITR 361 (Born), CIT Vs ICICI Bank Ltd. [2012] 349 ITR 482 (Born) : 74 DTR 251 (Bom) Bombay High Court in the case of Rabo India Finance Ltd. Vs DCIT [2012) 346 ITR 528 (Bom) NDT Systems Vs ITO [2013] 81 DTR 1 (Born) Similar views were expressed by the Bombay and Delhi High Courts in the following cases: (1) Moser Baer India Ltd. Vs DCIT - [2013] 81 DTR 10 (Del) (ii) Aventis Pharma Ltd. Vs ACIT - [2010J 323 ITR 570 (Bom) `(iii) CIT Vs Jagson International Ltd - [201 OJ 321 ITR 544 (Del) (iv) Asteroids Trading and Investments P. Ltd. Vs DCIT - [2009] 308 ITR 190 (Bom) From the aforesaid judgements it can be seen that even in cases of reopening of assessment within a period of four years from the end of the relevant assessment year, the AO has to have some new or fresh tangible material, which would warrant taking a view different from the one taken during the regular assessment proceedings. Otherwise, the reopening of the assessment will not be sustainable.

4 ITA No.1682/Kol/2016 Oriental Carbon & Chemicals Ltd.,AY- 2009-10 Hence, the technical objection raised by the assessee is upheld and the issue of notice u/s. 148 is held to be illegal. Since, the notice u/s. 148 was illegal, the subsequent assessment order framed is void ab-initio. Thus, grounds no 1 & 2 raised by the assessee are allowed.” 4. We therefore note that the Ld. CIT(A) has given relief to the assessee in the impugned order by holding that the action of AO to reopen itself was vitiated because the basis on which the AO reopened the original assessment was nothing but change of opinion and consequently held to be ab initio void, which action of the Ld. CIT(A) has not been challenged by the revenue before the Tribunal is obvious on perusal of the grounds of appeal reproduced above. Therefore, even if for argument sake, we hold that the grounds raised by the revenue is adjudicated in favour of the revenue, still the Ld. CIT(A)’s decision in holding the notice issued to reopen the reassessment u/s. 148 of the Act itself as void ab initio cannot be disturbed. In the light of the aforesaid facts and circumstance, we find force in the argument of the Ld. AR that adjudication of this appeal will be academic, without Revenue challenging the impugned order which held the notice to reopen itself as void ab initio and we, therefore, dismiss this appeal of the revenue because it will be only academic in nature.

Order is pronounced in the open court on 23.03.2018 Sd/- Sd/- (P. M. Jagtap) (Aby. T. Varkey) Accountant Member Judicial Member Dated : 23rd March, 2018 Jd.(Sr.P.S.) Copy of the order forwarded to: 1. Appellant – ACIT, Circle-10(2), Kolkata 2 Respondent – M/s. Oriental Carbon & Chemicals Ltd., 31, Netaji Subhas Road, Kolkata-700 001. 3. The CIT(A) Kolkata

Sr. Pvt. Secretary