AMERICAN EXPRESS BANK LTD,MUMBAI vs. DDIT (IT) RG 1(1), MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद�य सद�य राजे�� राजे�� केकेकेके अनुसार अनुसार PER RAJENDRA, AM- लेखा लेखा लेखा सद�य सद�य राजे�� राजे�� अनुसार अनुसार Challenging the order dt.17/11/2009 of the Dispute Resolution Panel-I (DRP),Mumbai the assessee has filed the present appeal. Assessee-bank filed its return of income 31.10.02 declaring income of Rs. 1,17,56,72,600/-, revised return was filed on 31.3.04 showing income of Rs.1,00,02,78,360/-.The Assessing officer( AO)completed the assessment on 30.03.2005,u/s. 143(3) of the Act,determining the income of the assessee at Rs.1,30,96,88,997/-.Later on a notice u/s. 148 was issued on 12.6.08 by the AO and the case was reopened as per provisions of s.147 of the Act.In response of the letter of the assessee ,dated18.6.08, he furnished the reasons recorded by him for re-opening the case to the assessee.Vide its letter dt.23.10.08 the assessee raised objection against the reopening of the assessment.The AO dismissed the objections and completed the assessment u/s.143(3) r.w.s.147 and 144C(13 )of the Act,determining the income of the assessee at Rs.1,25,78,01,197/-. The DRP,vide its order dt.17.09.10,held that re-opening by the AO was as per the provisions of Section 147. 2.During the course of hearing before us,the Authorised Representative(AR)of the assessee stated that assessment was reopened after four years, that there was no failure on part of the assessee to disclosed necessary details, that the assessment was bad in law.The Departmental Representative (DR)supported the order of the DRP and stated that procedure laid down by the Hon’ble Supreme Court in the case of G.K. & DriveShaft was followed. 3.We have heard the rival submissions and perused the materials before us.We find that the notice u/s.148 was issued after 4 years.Before proceeding further, we would like to reproduce the reasons recorded by the AO for re-opening the assessment for the year under appeal and same reads as under :-

8494/10 American Express Bank Ltd. “It was noticed that the assessee had opening credit balance of Rs.6,20,24,764/- in the provision for bad and doubtful debts account and at the end of year a further provision of Rs.6,88,85,615/- was made as per section 36(1)(viia). During the year under consideration, the assessee has written off bad debt of Rs.21,48,66,273/-. In the assessment order, the assessee was allowed deduction of Rs.15,28,41,509/- (21,48,66,273 – 6,20,24,764) under section 36(1)(vii) whereas the deduction allowable is only Rs.8,39,55,894/- (21,48,66,273 – 6,20,24,764 – 6,88,85,615) resulting in excess deduction of Rs.6,88,85,615/- resulting in underassessment to that extent. Secondly, it is observed that the assessee was allowed deduction of Rs.6,88,85,615/- in respect of HO expenses u/s. 44C of the Act but the expenditure is not reflected in the Profit & Loss A/c resulting in irregular allowance of Rs.6,88,85,615/- leading to under assessment to this extent.” From the reasons recorded,it is clear that the AO has not mentioned the failure of the assessee to disclose truly and fully the material facts necessary to complete the assessment. Proviso to s.147 of the Act stipulates that if an assessment is reopened after a period of four years, not only the failure of the assessee has to be highlighted but the manner in which it led to escapement of income has to be mentioned. The Hon’ble Bombay High Court,in the case of Hindustan Lever Ltd. (268ITR332) has held as under “Where an assessment under sub-section (3) of section 143 of the Income-tax Act, 1961, has been made for an assessment year, no action can be taken under section 147 after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to disclose all material facts necessary for his assessment for that assessment year. The reasons recorded for issuing notice provide the link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material not disclosed by the assessee fully and truly was necessary for assessment of that assessment year, so as to establish the vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment.” As,in the case under consideration,there was no failure on the part of the assessee to disclose material facts truly and fully,therefore,we are of the opinion that assessment reopened by the AO was not as per the provisions of the Act.Reversing the direction of DRP,we decide effective Ground of appeal in favour of the assessee.