3i INFOTECH LTD, NAVI MUMBAI v. ACIT RG 10(3), MUMBAI

ITA 2980/MUM/2011 | 2003-2004
Pronouncement Date: 11-10-2013 | Result: Allowed

Appeal Details

RSA Number 298019914 RSA 2011
Assessee PAN AAACI5205Q
Bench Mumbai
Appeal Number ITA 2980/MUM/2011
Duration Of Justice 2 year(s) 5 month(s) 26 day(s)
Appellant 3i INFOTECH LTD, NAVI MUMBAI
Respondent ACIT RG 10(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 11-10-2013
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted I
Tribunal Order Date 11-10-2013
Date Of Final Hearing 01-10-2013
Next Hearing Date 01-10-2013
Assessment Year 2003-2004
Appeal Filed On 15-04-2011
Judgment Text
3I INFOTECH LIMITED - 1 - VK;DJ VIHYH; VF/KDJ.K VKBZ U;K;IHB EQACBZ ESAA IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH MUM BAI JH JKTSUNZ FLAG YS[KK LNL; OA JH FOOSD OEKZ] U;KF; D LNL; DS LE{K BEFORE SHRI RAJENDRA SINGH ACCOUNTANT MEMBER AND SH RI VIVEK VARMA JUDICIAL MEMBER VK;DJ VIHY LA[;K /ITA NO. 2980/MUM/2011 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR: - 2003-04 3I INFOTECH LIMITED TOWER NO. 5 3 RD FLOOR TO 6 TH FLOOR INTERNATIONAL INFOTECH PARK VASHI NAVI MUMBAI - 400703 CUKE@ VS. THE ASSISTANT COMMISSIONER OF INCOME TAX RANGE 10(3) MUMBAI. PAN:-AAACI5205Q VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT VIHYKFKHZ DH VKSJ LS @ ASESSEE BY SHRI GIRISH DAVE JKTLO DH VKSJ LS @ REVENUE BY SHRI O.P. SINGH VKNS'K@ VKNS'K@ VKNS'K@ VKNS'K@ ORDER PER RAJENDRA SINGH AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 27.1.2011 OF CIT(A) FOR THE ASSESSMENT YEAR 2003-04 . THE DISPUTES RAISED IN THIS APPEAL RELATE TO ADDITION MADE BY AO IN THE RE-ASSESSMENT ON ACCOUNTS OF DEFERRED TAX INCOME PROVISIONS FOR BAD AND DOUBTFUL DEBTS AND INCOME EXEMPT U/S 10A WHILE COMPUTING THE BOOK PROFIT. THE ASSESSEE HAS ALSO CHALLENGED THE LEGAL VALIDITY OF REOPENING OF THE ASSESSMENT MADE BY AO U/S 147 OF THE IT ACT. LQUOKBZ DH RKJH[K @ DATE OF HEARING 1-10-2013 ?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT 11-10-2013 3I INFOTECH LIMITED - 2 - 2. WE FIRST TAKE UP THE DISPUTE RELATING TO LEGAL V ALIDITY OF REOPENING OF THE ASSESSMENT WHICH IS THE BASIC ISSUE HAVING BEAR ING ON VALIDITY OF ASSESSMENT ITSELF. 2.1 FACTS IN BRIEF ARE THAT THE ASSESSEE FOR THE AS SESSMENT YEAR 2002- 03 HAD FILED RETURN OF INCOME ON 1.12.2003 DECLARIN G THE LOSS OF RS. 20 45 57 310/- AND BOOK PROFIT U/S 115JB AT RS. 3 1 2 21 834/-. THE ASSESSMENT U/S 143(3) HAD BEEN COMPLETED ON 22.03.2 006 ASSESSING THE TOTAL LOSS AT RS 1 10 69 561/-. SUBSEQUENTLY ON 10 .03.2010 THE AO ISSUED NOTICE U/S 148 OF THE IT ACT REOPENING THE A SSESSMENT MADE EARLIER AFTER RECORDING THE REASONS FOR ESCAPEMENT OF INCOME WHICH ARE REPRODUCED BELOW:- THE ASSESSEE COMPANY HAS FILED ITS RETURN OF INCOM E ON 01.12.2003 DECLARING TOTAL LOSS OF RS. 20 45 57 3 10/-. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON22 .03.2006 DETERMINING THE NET LOSS AT RS. 1 10 69 561/-. HOWE VER WHILE PASSING THE ASSESSMENT ORDER THE BOOK PROFIT ASSES SABLE U/S 115JB OF THE ACT HAS NOT BEEN DETERMINED. FURTHER THE BOOK PROFIT SHOWN BY THE ASSESSEE HAS BEEN CONSIDERED I N ITNS 150A WHICH HAS NOT BEEN PROPERLY WORKED OUT BY THE ASSES SEE IN VIEW OF THE AMENDED PROVISIONS OF SECTION 115JB(2) EXPLA NATION 1 TO CLAUSE (I) W.R.E.F 01.04.2010. THEREFORE WHILE COM PUTING THE BOOK PROFIT THE ASSESSEE FAILED TO ADD BACK THE PROVISI ONS MADE FOR DOUBTFUL DEBTS OF RS. 1 09 42 910/- AS PER THE AMEN DED PROVISIONS AS WELL AS THE DEFERRED TAX ASSET OF RS. 5 07 78 495/- CREDITED TO PROFIT AND LOSS ACCOUNT WHICH WAS REDUC ED FROM THE NET PROFIT THOUGH NO SUCH PROVISION IS AVAILABLE U/ S 115JB(2) EXPLANATION 1 TO CLAUSE (I) OF THE ACT FOR SUCH ADJ USTMENT. ALSO THE PROFIT ELIGIBLE FOR EXEMPTION U/S 10A WAS RESTRICTE D TO 49% OF THE PROFIT OF STP UNIT WHEREAS ENTIRE BOOK PROFIT OF ST P UNIT WAS CLAIMED BY THE ASSESSEE AS EXEMPT U/S 10A OF THE AC T. THUS THE ASSESSEE HAS CLAIMED EXCESS DEDUCTION U/S 10A (BEIN G 51% OF 3I INFOTECH LIMITED - 3 - RS. 2 38 45 216/-) OF RS. 1 21 61 060/- WHILE COMPU TING THE BOOK PROFIT. THEREFORE THE BOOK PROFIT OF THE ASSESSEE HAS BEEN UNDER ASSESSED TO THE TUNE OF RS. 7 38 82 465/- 2.2 THE ASSESSEE OBJECTED TO THE ISSUE OF NOTICE U/ S 148 AND REQUESTED THE AO TO SUPPLY THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT. THE AO HOWEVER ASKED THE ASSESSEE TO THE FILE THE R ETURN OF INCOME IN LINE WITH THE PROCEDURE LAID DOWN BY THE HONBLE SU PREME COURT IN CASE OF GKN DRIVESHAFTS (INDIA) LTD. V. INCOME-TAX OFFICER (259 ITR 19 ). THE ASSESSEE THEREAFTER FILED THE RETURN DECLARING THE TOTAL LOS S OF RS. 20 45 57 314/- AND COMPUTING THE BOOK PROFIT U/S 115JB AT RS. 4 21 64 744/-. IN THE COMPUTATION OF BOOK PROFIT THE ASSESSEE HAD ADDED THE PROVISIONS FOR BAD AND DOUBTFUL DEBTS OF RS. 1 09 42 910/- IN VIEW OF THE RETROSPECTIVE AMENDMENT MADE TO THE PROVISIONS OF SECTION 115JB. THE AO THEREAFTER ISSUED NOTICES U/S 143(2) AND 142(1) FOR FRAMING TH E RE-ASSESSMENT. THE ASSESSEE RAISED VARIOUS OBJECTIONS AGAINST THE RE-O PENING OF THE ASSESSMENT AND THESE OBJECTIONS WERE DISPOSED OFF B Y THE AO VIDE ORDER DATED 14.10.2010 A COPY OF WHICH HAS BEEN PLACED AT PAGES 85 TO 89 OF THE PAPER BOOK. THE ASSESSEE IN THE OBJECTIONS RAIS ED SUBMITTED THAT ON THE SAME ISSUES WHICH HAD BEEN MENTIONED IN THE REA SONS RECORDED THE AO HAD ISSUED NOTICE U/S 154 WHICH HAD BEEN DULY RE PLIED BY THE ASSESSEE AND THE AO HAD NOT TAKEN ANY ACTION U/S 15 4 OF THE IT ACT AND THEREFORE NO ACTION WAS REQUIRED U/S 147. MOREOVER THE ASSESSEE ALSO POINTED OUT THAT THERE WAS NO FAILURE ON PART OF TH E ASSESSEE IN FILLING TRULY AND FULLY ALL PARTICULARS OF INCOME AND THER EFORE THE REOPENING WAS BASED ON CHANGE OF OPINION. THE AO CONSIDERED THESE OBJECTIONS AND REPLIED IN THE LETTER DATED 14.10.2010 THAT THOUGH THE AO HAD ISSUED NOTICE U/S 154 ON RECONSIDERATION THE AO FOUND T HAT ISSUES DID NOT FALL UNDER THE PURVIEW OF SECTION 154 AND IT WAS FELT TH AT THE ISSUE HAD TO BE PROPERLY DEALT WITH U/S 147 AND ACCORDINGLY THE NOT ICE U/S 148 WAS ISSUED. THE AO IN THE ORIGINAL ASSESSMENT HAD NOT C ONSIDERED THESE ISSUES AT ALL AND THEREFORE THERE WAS NO CHANGE O F OPINION INVOLVED. THE AO ALSO POINTED OUT THAT IT WAS OBLIGATORY ON THE P ART OF THE ASSESSEE TO 3I INFOTECH LIMITED - 4 - PRODUCE DETAILS AND EVIDENCES IN SUPPORT OF THE INC OME RETURNED WHICH HAD NOT BEEN DONE AND THEREFORE THERE WAS NO TRUE AND FULL DISCLOSURE OF MATERIAL FACTS NECESSARY FOR ASSESSMENT. THE AO ACCORDINGLY REJECTED THE OBJECTIONS RAISED BY THE ASSESSEE REGARDING REO PENING OF THE ASSESSMENT AND IN THE REASSESSMENT MADE ADDITION OF RS. 2 38 45 216/- IN RESPECT OF CLAIM U/S 10A; RS. 1 09 42 910/- IN RESPECT OF PROVISIONS FOR BAD AND DOUBTFUL DEBTS AND RS. 5 07 78 495/- IN RESPECT OF DEFERRED TAX INCOME WHILE COMPUTING BOOK PROFIT. 3. THE ASSESSEE FILED APPEAL AGAINST THE ORDER OF R EASSESSMENT BEFORE CIT(A) IN WHICH SPECIFIC GROUND WAS RAISED CHALLENG ING THE LEGAL VALIDITY OF REOPENING OF THE ASSESSMENT. THE ASSESSEE SUBMIT TED THAT THE REOPENING OF THE ASSESSMENT MADE BY AO WAS BASED ON CHANGE OF OPINION AS NO FRESH MATERIAL HAD BEEN BROUGHT ON RE CORD BY THE AO AND ADDITION HAD BEEN MADE ONLY ON THE BASIS OF DETAILS GIVEN IN ORIGINAL RETURN OF INCOME. IT WAS ALSO STATED THAT THE ASSES SEE HAD NEITHER UNDER STATED INCOME NOR MADE EXCESS CLAIM OF DEDUCTION AN D TRUE AND FULL DECLARATION HAD BEEN MADE AND THEREFORE REOPENING OF THE ASSESSMENT BY THE AO WAS NOT LEGALLY VALID. CIT(A) AFTER CONS IDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT IN VIEW OF THE RETROS PECTIVE AMENDMENT MADE BY THE FINANCE ACT 2010 W.E.F 1.4.2001 INSERT ING CLAUSE (I) IN THE EXPLANATION 1 TO SECTION 115JB(2) ANY AMOUNT SET A SIDE AS PROVISION FOR DIMINUTION IN THE VALUE OF ANY ASSET WAS REQUIRED T O BE ADDED TO THE BOOK PROFIT. THUS THE PROVISIONS FOR BAD AND DOUBTF UL DEBT WERE REQUIRED TO BE ADDED. THE ASSESSEE HOWEVER FAILED TO FILE RE VISE RETURN AND ADDITION WAS MADE ONLY IN RESPONSE TO RETURN FILED U/S 148. IN REGARD TO NOTICE U/S 154 ISSUED BY AO CIT(A) OBSERVED THAT THE ASSESSEE HAD OBJECTED TO THE ISSUE OF NOTICE U/S 154 AND THE AO ON REALIZATION THAT THE ISSUE WAS NOT COVERED U/S 154 ISSUED NOTICE U/S 14 7 WHICH WAS LEGALLY IN ORDER. AS REGARDS THE OBJECTION RELATING TO FAIL URE ON PART OF THE ASSESSEE TO FILE TRULY AND FULLY ALL MATERIAL FACTS CIT(A) OBSERVED THAT CONTENTIONS OF THE ASSESSEE THAT ALL MATERIAL FACTS WERE DISCLOSED DURING THE PROCEEDINGS U/S 154 COULD NOT BE ACCEPTED AS N O ORDER HAD BEEN 3I INFOTECH LIMITED - 5 - PASSED U/S 154. CIT(A) FURTHER OBSERVED THAT IN REO PENING OF THE ASSESSMENT THERE WAS NO CHANGE OF OPINION INVOLVED AS AO IN THE ORIGINAL ASSESSMENT ORDER DATED 23.2.2006 HAD NOT DISCUSSED ANY OF THE ISSUES ON WHICH ACTION U/S 147 HAD BEEN TAKEN. HE REFERRED TO THE JUDGMENT OF HONBLE HIGH COURT OF BOMBAY IN CASE OF PIAGGIO VEHICLES LTD ( 290 ITR 377) IN WHICH IT WAS HELD THAT THE ARGUMENT THAT THE AO HAD TAKEN THE CONSCIOUS DECISION WHILE ACCEPTING THE CLAIM COULD NOT BE ACCEPTED WHEN THERE WAS NO DISCUSSION IN THE ASSESSMENT ORDER REG ARDING INCONSISTENCIES IN THE AUDIT REPORT AND RETURN OF I NCOME. CIT(A) THEREFORE REJECTED THE GROUND RAISED BY THE ASSESS EE REGARDING THE REOPENING OF THE ASSESSMENT. AGGRIEVED BY THE DECIS ION OF CIT(A) THE ASSESSEE IS IN APPEAL BEFORE TRIBUNAL. 4. BEFORE US THE LEARNED AR FOR THE ASSESSEE SHRI DAVE SUBMITTED THAT THE ORIGINAL ASSESSMENT IN THIS CASE HAD BEEN COMPLETED U/S 143(3) ON 23.2.2006 AND THE NOTICE U/S 148 HAD BEEN ISSUED ON 10.3.2010. THEREFORE IT WAS OBVIOUS THAT NOTICE U/S 148 HAD B EEN ISSUED AFTER EXPIRY OF FOUR YEAR PERIOD FROM THE END OF RELEVANT ASSESSMENT YEAR. IT WAS POINTED OUT THAT IN VIEW OF THE PROVISO TO SECT ION 147 IN CASE ASSESSMENT HAS ALREADY BEEN MADE U/S 143(3) NOTICE U/S 148 COULD BE ISSUED ONLY IN CASES OF FAILURE ON PART OF THE ASSE SSEE TO FILE TRULY AND FULLY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. REFERRING TO THE REASONS RECORDED BY AO WHICH HAS BEEN REPRODUCED EA RLIER IN PARA 2.1 THE LEARNED AR SUBMITTED THAT THE AO HAD NOT POINTE D OUT ANY FAILURE ON PART OF THE ASSESSEE IN FILLING TRULY AND FULLY ALL MATERIAL EVIDENCE. THE ASSESSMENT HAD BEEN RE-OPENED ONLY ON THE BASIS OF RETROSPECTIVE AMENDMENT WHICH WAS NOT PERMISSIBLE IN CASES WHERE FOUR YEARS HAVE ELAPSED FROM THE END OF RELEVANT ASSESSMENT YEAR AN D THERE WAS NO FAILURE ON PART OF THE ASSESSEE TO FILE TRULY AND F ULLY ALL MATERIAL FACTS. IT WAS POINTED OUT THAT REOPENING OF THE ASSESSMENT BE YOND THE PERIOD OF FOUR YEARS WAS CONTRARY TO LAW AS THERE WAS NO REFE RENCE TO FORMATION OF BELIEF THAT THERE WAS FAILURE ON PART OF THE ASSESS EE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS IN THE REASONS RECORDED. R ELIANCE WAS PLACED ON 3I INFOTECH LIMITED - 6 - THE JUDGMENT OF HONBLE HIGH COURT OF BOMBAY IN CAS E OF DIL LTD. VS. ACIT(18 TAXMAN.COM 290). REFERENCE IN THIS REGARD W AS ALSO MADE TO THE JUDGMENT OF HONBLE HIGH COURT OF BOMBAY IN CASE OF TITANOR COMPONENTS V. ACIT ( 243 CTR 520). THE LEARNED AR F URTHER MADE REFERENCE TO THE JUDGMENT OF HONBLE HIGH COURT OF BOMBAY IN CASE OF 3I INFOTECH LTD. VS. ACIT (192 TAXMAN 133) IN WHICH T HE HIGH COURT HELD THAT VALIDITY OF REOPENING OF THE ASSESSMENT HAD TO BE DETERMINED WITH REFERENCE TO REASONS WHICH WEIGHED WITH THE AO AND THOSE NORMS COULD NOT BE ADDED TO OR SUPPORTED ON A BASIS WHICH WAS N OT PRESENT IN THE MIND OF THE ASSESSING OFFICER WHEN HE ISSUED THE NO TICE TO REOPEN THE ASSESSMENT. 4.1 THE LEARNED AR FURTHER ARGUED THAT THE AO HAD I SSUED NOTICE U/S 154 ON THE SAME ISSUES WHICH HAD BEEN WITHDRAWN BY HIM AND THEREFORE THE REOPENING OF THE ASSESSMENT ON THE S AME MATERIAL U/S 147 WAS NOT JUSTIFIED. RELIANCE WAS PLACED ON THE JUDGM ENT OF HONBLE HIGH COURT OF KOLKATA IN CASE OF BERGER PAINTS INDIA LTD (322 ITR 369). IT WAS ALSO POINTED OUT THAT THE AO WAS NOT CORRECT IN STA TING THAT IN THE ORIGINAL ASSESSMENT BOOK PROFIT HAD NOT BEEN DETERM INED BY THE AO. THE ASSESSEE HAD FILED COMPUTATION OF BOOK PROFIT AT RS 3 12 21 834/-WITH THE RETURN OF INCOME WHICH HAD BEEN ACCEPTED BY THE AO. IN FACT THE AO HIMSELF IN THE REASONS RECORDED MENTIONED THAT BOOK PROFIT SHOWN BY THE ASSESSEE HAD BEEN CONSIDERED IN ITNS 150A. THE AO S UBSEQUENTLY REOPENED THE ASSESSMENT BASED ON THE SAME MATERIAL AVAILABLE IN THE RETURN WHICH WAS NOT PERMISSIBLE AS ASSESSMENT U/S 143(3) HAD ALREADY BEEN MADE IN THIS CASE AND FOUR YEARS HAD ELAPSED F ROM THE END OF THE ASSESSMENT YEAR. 5. THE LEARNED DR ON THE OTHER HAND STRONGLY SUPPOR TED THE ORDERS OF AUTHORITIES BELOW. IT WAS ARGUED THAT THE ASSESSEE HAD NOT MADE TRUE AND FULL DISCLOSURE OF ALL MATERIAL FACTS AT THE TI ME OF ORIGINAL ASSESSMENT. IT WAS POINTED OUT THAT THE PROVISIONS FOR BAD AND DOUBTFUL DEBTS HAD BEEN DISCLOSED AND DETAILS HAD BEEN GIVEN ONLY AFTE R ISSUE OF NOTICE U/S 3I INFOTECH LIMITED - 7 - 148 OF THE IT ACT. IT WAS ALSO SUBMITTED THAT AT TH E TIME OF ORIGINAL ASSESSMENT THOUGH IT HAD BEEN MADE U/S 143(3) THE AO HAD NOT APPLIED MIND TO THE COMPUTATION OF BOOK PROFIT AS THE VARIO US ISSUES RELATING THERETO WERE NOT DISCUSSED AT ALL IN THE ASSESSMENT ORDER. THERE WAS THUS NO VIEW TAKEN BY THE AO ON THIS ISSUE AT THE T IME OF ORIGINAL ASSESSMENT AND REOPENING OF THE ASSESSMENT CANNOT B E CONSIDERED AS BASED ON CHANGE OF OPINION. IT WAS ALSO SUBMITTED T HAT DROPPING OF PROCEEDINGS BY AO FOR ACTION TAKEN U/S 154 OF THE I T ACT WAS NO BAR ON INITIATING PROCEEDINGS U/S 147 AS BOTH THE PROVISIO NS OPERATED IN DIFFERENT FIELD. IT WAS POINTED OUT THAT BASED ON T HE SAME MATERIALS ON WHICH ACTION U/S 154 WAS PROPOSED IF IT WAS POSSIB LE TO FORM A REASONABLE BELIEF FOR ESCAPEMENT OF INCOME ACTION COULD ALWAYS BE TAKEN U/S 147 OF THE IT ACT. IN SUPPORT OF REOPENING OF A SSESSMENT THE LEARNED DR PLACED RELIANCE ON THE JUDGMENT OF HONBLE HIGH COURT OF BOMBAY IN CASE OF PIAGGIO VEHICLES LTD VS. DCIT ( 290 ITR 377). REFERENCE WAS ALSO MADE TO THE JUDGMENT OF HONBLE SUPREME COURT IN CASE OF KALYAN JI MAVJI & CO. VS. CIT (102 ITR 287). 6. IN REJOINDER THE LEARNED AR FOR THE ASSESSEE SUB MITTED THAT THERE WAS NO FAILURE ON PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. THE AO IN FACT HAD INITIATED RE- ASSESSMENT PROCEEDINGS ONLY ON THE BASIS OF MATERIA L DISCLOSED IN THE ORIGINAL RETURN. IT WAS POINTED OUT THAT THE PROVIS IONS FOR BAD AND DOUBTFUL DEBTS HAD ALREADY BEEN ADDED BY THE ASSESS EE IN THE RETURN OF INCOME. BUT THE SAME HAD NOT BEEN ADDED WHILE COMPU TING THE BOOK PROFIT IN VIEW OF THE JUDGMENTS OF THE COURTS WHICH WERE IN FAVOUR OF THE ASSESSEE. HOWEVER IN THE RETURN FILED U/S 148 THE ASSESSEE WITHOUT PREJUDICE HAD ADDED THE PROVISIONS FOR BAD AND DOUB TFUL DEBTS IN VIEW OF THE RETROSPECTIVE AMENDMENT MADE IN THE ACT. IT WAS THEREFORE URGED THAT THE RE-ASSESSMENT PROCEEDINGS WHICH WERE WRONG LY INITIATED SHOULD BE QUASHED. 3I INFOTECH LIMITED - 8 - 7. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING LEGAL VALIDITY OF REOPENING OF THE ASSESSMENT MADE BY AO U/S 147 OF THE IT ACT. UNDER THE PROVISIONS OF SAID SECTION THE AO CAN REOPEN TAN ASSESSMENT IF HE HAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED A SSESSMENT. REASONABLE BELIEF HOWEVER SHOULD BE BASED ON SOME M ATERIAL AVAILABLE ON RECORD HAVING NEXUS WITH FORMATION OF BELIEF. IT IS A SETTLED LEGAL POSITION THAT ASSESSMENT CANNOT BE REOPENED ON THE BASIS OF CHANGE OF OPINION. THEREFORE IF ON ANY ISSUE THE AO HAD TAKE N A VIEW IN THE ASSESSMENT THE SAME CANNOT BE REOPENED BY THE ASSE SSING OFFICER ON THE GROUND THAT HE HAS DIFFERENT VIEW IN THE MATTER. HO WEVER IN CASE ASSESSMENT HAS ALREADY BEEN MADE U/S 143(3) OF THE IT ACT ASSESSMENT CANNOT BE REOPENED AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THERE IS FAILURE ON PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS NECESSARY FOR AS SESSMENT IN VIEW OF THE PROVISO TO SECTION 147. THEREFORE EVEN IF THERE IS NO CHANGE OF OPINION AND A PERIOD OF FOUR YEARS HAS EXPIRED FROM THE END OF THE RELEVANT ASSESSMENT YEAR IN CASES WHERE ASSESSMENT HAD BEEN MADE U/S 143(3) IT CAN BE REOPENED ONLY WHEN THERE IS FAILURE ON PA RT OF THE ASSESSEE TO FILE TRULY AND FULLY ALL MATERIAL FACTS. 7.1 FURTHER IN SUCH CASES REASONS RECORDED MUST ME NTION THE FACTS WHICH HAVE NOT BEEN FULLY AND TRULY DISCLOSED BY TH E ASSESSEE SO AS TO TAKE ACTION U/S 147 OF THE IT ACT. HONBLE HIGH COU RT OF BOMBAY IN CASE OF HINDUSTAN LEVER LTD. VS. R.B. WADKAR (268 ITR 33 2) HAVE HELD THAT THE AO MUST DISCLOSE IN THE REASONS RECORDED AS TO WHICH FACT OR THE MATERIAL WAS NOT DISCLOSED BY THE ASSESSEE TRULY AN D FULLY WHICH WAS NECESSARY FOR ASSESSMENT SO AS TO ESTABLISH THE VIT AL LINK BETWEEN THE REASONS AND EVIDENCE. FOLLOWING THE SAID JUDGMENT HONBLE HIGH COURT OF BOMBAY IN CASE OF TITANOR COMPONENTS V. ACIT ( 2 43 CTR 520) HAVE HELD THAT WHEN THE AO HAD NOT STATED IN THE NOTICE FOR REOPENING OF THE ASSESSMENT THAT THERE WAS FAILURE ON PART OF THE AS SESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIALS FACTS THE REOPENING O F THE ASSESSMENT WAS 3I INFOTECH LIMITED - 9 - BAD IN LAW. THE SAME VIEW WAS REITERATED BY THE HON BLE HIGH COURT OF BOMBAY IN CASE OF DIL LTD VS. ACIT ( 18 TAXMAN. COM 290). THE HONBLE HIGH COURT NOTED THAT THERE WAS NO REFERENCE WHATSO EVER FOR FORMATION OF AN OPINION THAT THERE WAS FAILURE ON PART OF THE AS SESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS NECESSARY FOR ASSESSME NT AND THEREFORE THE HIGH COURT HELD THAT REOPENING OF THE ASSESSMENT WA S BAD IN LAW. FURTHER HONBLE HIGH COURT OF BOMBAY IN CASE OF 3I INFOTECH LTD. VS. ACIT (192 TAXMAN 133) HAVE ALSO HELD THAT VALIDITY OF REOPENING OF THE ASSESSMENT HAS TO BE DETERMINED WITH REFERENCE TO R EASONS WHICH HAVE WEIGHED WITH THE ASSESSING OFFICER AND THOSE NORMS COULD NOT BE ADDED TO OR SUPPORTED ON A BASIS WHICH WAS NOT IN THE MIN D OF ASSESSING OFFICER WHEN HE ISSUED NOTICE TO REOPEN THE ASSESSMENT. WE HAVE THEREFORE TO EVALUATE THE LEGAL VALIDITY OF REOPENING OF THE ASS ESSMENT IN THE LIGHT OF JUDGMENTS AFORESAID. 8. COMING TO THE FACTS OF THE PRESENT CASE AN ASSE SSMENT U/S 143(3) HAD ALREADY BEEN MADE IN THIS CASE ON 22.3.2006. TH E AO ISSUED NOTICE U/S 148 ON 10.3.2010 WHICH WAS AFTER LAPSE OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2002- 03. THEREFORE IN THIS CASE IN VIEW OF THE PROVISO TO SECTION 147 THE REOP ENING OF THE ASSESSMENT CAN BE HELD VALID ONLY IF THERE WAS FAIL URE ON PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIAL F ACTS NECESSARY FOR ASSESSMENT AND BECAUSE OF SUCH FAILURE INCOME CHARG EABLE TO TAX HAD ESCAPED ASSESSMENT. THE AO IN THIS CASE HAD REOPENE D THE ASSESSMENT ON THREE DIFFERENT GROUNDS; (1) FAILURE TO ADD BACK PROVISIONS FOR BAD AND DOUBTFUL DEBTS OF RS. 1 09 42 910 TO THE BOOK PROFI T (II) REDUCTION OF DEFERRED TAX ASSETS OF RS. 5 07 78 495/- CREDITED T O THE P&L ACCOUNT FROM THE BOOK PROFIT. (III) REDUCTION OF THE ENTIRE PROFIT ALLOWABLE AS EXEMPTION U/S 10A AND NOT RESTRICTING THE SAME TO 4 9% WHICH ALONE WAS ELIGIBLE FOR EXEMPTION U/S 10A. THE AO IN THE REASO NS RECORDED WHICH HAS BEEN REPRODUCED IN PARA 2.1 IN THIS ORDER HAS N OT MENTIONED ANYWHERE REGARDING ANY FACTS BEING NOT DISCLOSED TR ULY AND FULLY BY THE ASSESSEE. 3I INFOTECH LIMITED - 10 - 8.1 IT IS CLEAR FROM THE REASONS RECORDED THAT THE AO HAD REOPENED THE ASSESSMENT ONLY ON ACCOUNT OF AMENDMENT TO THE EXPL ANATION 1 TO SECTION 115JB (2) BY THE FINANCE ACT 2009 WITH RETR OSPECTIVE EFFECT FROM 1.4.2001 AS PER WHICH ANY AMOUNT SET ASIDE AS PROVI SION FOR DIMINITION IN THE VALUE OF ASSETS HAS TO BE ADDED TO BOOK PROF IT. THUS IN VIEW OF THE SAID AMENDMENT PROVISION FOR BAD AND DOUBTFUL DEBT IS REQUIRED TO BE ADDED TO THE BOOK PROFIT. THE RETROSPECTIVE AMENDME NT NO DOUBT CAN BE MADE THE BASIS FOR REOPENING OF THE ASSESSMENT BUT IN CASES WHERE ASSESSMENT HAS ALREADY BEEN MADE U/S 143(3) AS IN T HIS CASE AND FOUR YEARS HAVE ELAPSED FROM THE END OF RELEVANT ASSESSM ENT YEAR REOPENING CAN BE MADE ONLY IF THERE IS FAILURE ON PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS. IN THIS CASE TH E AO HAS NOT MENTIONED ABOUT ANY SUCH FAILURE BY THE ASSESSEE. THE PROVIS IONS FOR BAD AND DOUBTFUL DEBTS OF RS. 1 09 42 910 HAVE BEEN ADDED B Y THE ASSESSEE IN THE COMPUTATION OF INCOME UNDER THE NORMAL PROVISIO NS WHICH IS CLEAR FROM THE DETAILS OF COMPUTATION OF INCOME GIVEN AT PAGE (4) OF THE PAPER BOOK WHICH WAS BEFORE THE AO. THESE DETAILS HAD BEE N GIVEN IN THE COMPUTATION OF INCOME ITSELF AND THEREFORE AO WAS NOT REQUIRED TO DISCOVER IT FROM EXAMINATION OF BOOK OF ACCOUNTS. IT CANNOT BE THEREFORE SAID THAT THERE WAS FAILURE ON PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS RELATING TO PROVISIONS FOR BAD AND DOUBTFUL DEBTS. THEREFORE REOPENING ON ACCOUNT OF FAILURE TO ADD B ACK THE PROVISIONS TO THE BOOK PROFIT CANNOT BE UPHELD. IT MAY ALSO BE PO INTED OUT HERE THAT THE DECISION OF AO TO NOT ADD THE PROVISIONS WAS IN ACCORDANCE WITH THE COURT RULING ON THE ISSUE WHICH HAS BEEN UPHELD BY THE HONBLE SUPREME COURT IN CASE OF HCL COMNET SYSTEMS & SERV ICES INC. ( 305 ITR 409). 8.2 THE SECOND REASON GIVEN BY THE AO IS THAT THE A SSESSEE HAD WRONGLY REDUCED THE DEFERRED TAX ASSETS OF RS. 5 07 78 495/- FROM THE BOOK PROFIT FOR WHICH THERE WAS NO PROVISION. THE C ASE OF THE ASSESSEE IS THAT DEFERRED TAX CREDIT WAS BECAUSE OF REVERSAL OF PROVISION MADE IN 3I INFOTECH LIMITED - 11 - EARLIER YEAR IT WAS ONLY AN ACCOUNTING ENTRY AND T HERE WAS NO REAL INCOME AND THEREFORE IT WAS REDUCED FROM THE PROF IT. THE DECISION OF THE AO IS SUPPORTED BY THE SUBSEQUENT AMENDMENT BY THE FINANCE ACT 2008 W.E.F 1.4.2001 AS PER WHICH AMOUNT OF DEFERRED TAX CREDITED TO THE P&L ACCOUNT IS REQUIRED TO BE REDUCED WHILE COMPUTING T HE BOOK PROFIT IN TERMS OF CLAUSE (VIII) OF EXPLANATION 1 TO SECTION 115JB(2). THE AO HAD REOPENED THE ASSESSMENT IN 2010 WHEN THIS PARTICULA R PROVISION WAS ALREADY ON THE STATUTE. THEREFORE THERE WAS NO ESC APEMENT OF INCOME ON THIS ACCOUNT AND REOPENING BASED ON THIS REASON CAN NOT BE JUSTIFIED. 8.3 THE THIRD REASON GIVEN BY THE AO IS REGARDING C LAIMING EXEMPTION OF THE ENTIRE PROFIT ELIGIBLE FOR EXEMPTION U/S 10A OF THE IT ACT AND NOT RESTRICTING THE SAME TO ONLY 49%. WE FIND FROM PERU SAL OF EXPLANATION 1 TO SECTION 115JB(2) THAT EXPENDITURE RELATABLE TO A NY INCOME TO WHICH SECTION 10A APPLIES IS REQUIRED TO BE ADDED TO THE BOOK PROFIT AS PER CLAUSE (F) AND INCOME TO WHICH SECTION 10A APPLIES IS REQUIRED TO BE REDUCED AS PER CLAUSE (II). THUS ANY INCOME WHICH I S ELIGIBLE FOR REDUCTION U/S 10A IS REQUIRED TO BE REDUCED AND EXPENSES RELA TING TO SUCH INCOME ARE REQUIRED TO BE ADDED. THUS IN TERMS OF THE PROV ISIONS ENTIRE INCOME WHICH IS ELIGIBLE FOR EXEMPTION U/S 10A IS REQUIRED TO BE REDUCED AND NOT ONLY THE INCOME WHICH IS ACTUALLY ALLOWABLE AS DEDU CTION U/S 10A. IN THIS CASE WE FIND THAT THE ASSESSEE HAS ACTED CLEARLY IN ACCORDANCE WITH PROVISIONS. THE ASSESSEE IN THE COMPUTATION OF BOOK PROFIT FILED ALONG WITH THE RETURN A COPY OF WHICH HAS BEEN PLACED ON RECORD HAS ADDED THE EXPENDITURE RELATING TO THE STPI UNIT OF RS. 61 91 10 941/- AND HAS REDUCED THE INCOME OF STPI UNIT OF RS. 64 29 56 15 7/-. THUS NET REDUCTION WHILE COMPUTING BOOK PROFIT ON ACCOUNT OF 10A UNIT WAS RS. 2 38 45 216/- WHICH IS QUITE IN ACCORDANCE WITH LAW . THE LANGUAGE USED IN CLAUSE (F) AND CLAUSE (II) MAKES IT CLEAR THAT T HE ENTIRE INCOME AND EXPENDITURE TO WHICH SECTION 10A APPLIES IS REQUIRE D TO BE REDUCED/ADDED AND NOT ONLY THE INCOME WHICH IS ALLO WABLE AS DEDUCTION. THE TREATMENT GIVEN BY THE ASSESSEE IS SUPPORTED BY THE JUDGMENT OF HONBLE SUPREME COURT IN CASE OF AJANTA PHARMA (194 TAXMAN 358). THE 3I INFOTECH LIMITED - 12 - CASE RELATED TO PROVISIONS OF SECTION 115JB AS PER WHICH PROFIT ELIGIBLE FOR DEDUCTION U/S 80HHC WAS REQUIRED TO BE REDUCED FROM BOOK PROFIT. IT WAS HELD THAT THE ENTIRE PROFIT ELIGIBLE FOR DED UCTION U/S 80HHC HAS TO BE CONSIDERED AND NOT ONLY THE PROFIT ACTUALLY ALLO WABLE AS DEDUCTION U/S 80HHC. THE COMPUTATION OF BOOK PROFIT AS GIVEN BY T HE ASSESSEE WAS AVAILABLE AT THE TIME OF ORIGINAL ASSESSMENT AND AO HAD ACTED AS PER THE SAID COMPUTATION WHICH IS QUITE IN ACCORDANCE WITH LAW. THERE WAS NO FAILURE ON PART OF THE ASSESSEE TO DISCLOSE TRULY A ND FULLY ALL MATERIAL FACTS RELATING TO SUCH INCOME. THE AO THEREFORE IS NOT ENTITLED TO REOPEN THE ASSESSMENT AFTER EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR WHEN THE ASSESSMENT HAD ALREADY BEEN MADE U/S 143(3) IN WHICH COMPUTATION OF BOOK PROFIT GIVEN BY THE ASSESSEE HA D BEEN ACCEPTED BY THE AO. THE JUDGMENTS RELIED UPON BY THE LEARNED DR ARE DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE . IN CASE OF PIAGGIO VEHICLES LTD VS. DCIT ( SUPRA) THE ASSESSEE IN THE RETURN OF INCOME FOR ASSESSMENT YEAR 1999-2000 HAD CLAIMED THAT THOUGH T HE GOODWILL HAD BEEN ACQUIRED UNDER THE AGREEMENT DATED 30 TH MARCH 1998 THE GOODWILL WAS EFFECTIVELY ACQUIRED ON 1.4.1998 AND TRANSFERRE D ON 25.6.1998. ACCORDINGLY IN THE ASSESSMENT DEPRECIATION ON THE G OODWILL WHICH HAD BEEN ACQUIRED AFTER 31.4.1998 THE DEPRECIATION HAD BEEN ALLOWED. HOWEVER SUBSEQUENTLY IT WAS FOUND FROM THE AUDIT R EPORT THAT GOODWILL HAS BEEN SHOWN AS PENDING STOCK IN THE BLOCK OF ASS ETS IN ASSESSMENT YEAR 1999-2000 AND THEREFORE IT WAS OBVIOUS THAT IT HAD BEEN ACQUIRED PRIOR TO 1.4.1998. THUS THE ASSESSEE HAD NOT TRULY STATED THE FACTS REGARDING ACQUISITION OF GOODWILL IN THE RETURN OF INCOME AND THEREFORE REOPENING OF ASSESSMENT HAD BEEN UPHELD. THE SAID C ASE IS OBVIOUSLY NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. SIMILA RLY THE JUDGMENT OF HONBLE SUPREME COURT IN CASE OF KALYANJI MAVJI & C O. VS. CIT (SUPRA) IS ALSO NOT APPLICABLE AS THE SAID CASE WAS IN RELATIO N TO OLD PROVISIONS OF SECTION 147 APPLICABLE TO ASSESSMENT YEARS PRIOR T O ASSESSMENT YEAR 1989-1990. 3I INFOTECH LIMITED - 13 - 9. IN VIEW OF THE FOREGOING DISCUSSION AND REASONS GIVEN EARLIER. WE ARE OF THE VIEW THAT THE REOPENING OF THE ASSESSMEN T ON THE FACTS OF THE CASE HAS TO BE HELD BAD IN LAW. WE ACCORDINGLY QUAS H THE RE-ASSESSMENT MADE BY THE AO. SINCE WE HAVE QUASHED THE RE-ASSESS MENT IT IS NOT NECESSARY FOR US TO GO INTO THE MERITS OF THE CASE. 4. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 11-10-2013 SD/- SD/- (VIVEK VARMA) (RAJENDRA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER SKS SR. P.S MUMBAI DATED 11-10-2013 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR I BENCH ITAT MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES MUMBAI