Income Tax Appellate Tribunal - Ahmedabad
Hitachi Home & Life Solution (India) ... vs Acit, Cir.- 4, Ahmedabad on 17 January, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "B" BENCH AHMEDABAD
BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER
AND SHRI MANISH BORAD, ACCOUNTANT MEMBER
ITA Nos. 3045/Ahd/2013 & 104/Ahd/2014
(Assessment Year:2006-07)
Hitachi Home & Life Solutions (I) Ltd.,
9th Floor, Abhijit, Mithakhali Six Roads,
Ellis Bridge, Ahmedabad - 380 006 Appellant
Vs.
ACIT,
Circle-4, Ahmedabad Respondent / Cross Appellant
PAN: AABCA2392K
आवेदक क ओर से/By Assessee : Shri S. N. Soparkar with Parin
Shah, A.R.
राज
व क ओर से/By Revenue : Shri James Kurian, Sr. D.R.
सन
ु वाई क तार ख/Date of Hearing : 22.12.2016
घोषणा क तार ख/Date of
Pronouncement : 17.01.2017
ORDER
PER S. S. GODARA, JUDICIAL MEMBER
The assessee and Revenue have initiated the instant cross appeals for assessment year 2006-07 against CIT(A)-VIII, Ahmedabad's order dated 04.10.2013 passed in appeal no. CIT(A)-VIII/ACIT/Cir.4/161/11-12; in ITA Nos. 3045/Ahd/2013 & 104/Ahd/2014 (Hitachi Home & Life Solutions (I) Ltd. vs. ACIT) A.Y. 2006-07 -2- proceedings u/s. 143(3) r.w.s. 147 of the Income Tax Act, 1961; in short ' the Act'.
2. We come to rival pleadings first. The assessee's appeal ITA No.3045/Ahd/2013 raises two substantive grounds. First one challenges validity of the impugned reopening as upheld in the lower appellate proceedings. Latter substantive ground assails correctness of the CIT(A)'s order on merits deleting book profits addition from Rs.2,68,16,000/- in the nature of provision of doubtful debts to Rs.1,85,59,435/- thereby upholding the remaining component of the above provision of Rs.82,57,118/- involving corresponding sums of Rs.23,35,374/-, Rs.3,77,825/- & Rs.55,43,919/- as loss on assets held for disposal, doubtful advances and doubtful bad debts; respectively.
The Revenue's cross appeal ITA No.104/Ahd/2014 on the other hand seeks to revive the addition amount of Rs.1,85,59,435/- hereinabove pertaining to provision of obsolete stock in computing book profits as well as Section 234B & D interest levies as made by the Assessing Officer and deleted in the lower appellate proceedings.
3. We come to relevant facts first. This assessee is a company manufacturing/trading in air conditioners. It filed return on 20.12.2006 stating total income of Rs.15,62,01,340/-. It however returned nil income after adjusting carry forward losses. The Assessing Officer completed a regular/MAT assessment on 26.02.2010 assessing total income as Rs.28,02,009/- followed by computation of book profit amounting to Rs.5,34,29,578/-.
ITA Nos. 3045/Ahd/2013 & 104/Ahd/2014 (Hitachi Home & Life Solutions (I) Ltd. vs. ACIT)A.Y. 2006-07 -3-
4. We proceed further to notice that the Assessing Officer thereafter formed reasons to believe that assessee's taxable income liable to be assessed had escaped assessment. He thus issued Section 148 notice dated 25.08.2010 for the sole reason that the assessee had debited a provision of Rs.2,68,16,000/- in its P&L account without making a corresponding addition thereof in its book profits. He quoted Section 115JB(2) explanation 1(i) as amended by the Finance Act, 2009 with retrospective effect from 01.04.2001 prescribing that any amount set aside as a provision for diminution in the value of any asset and debit to P&L account leads to increase input profit to the extent of the very figure.
5. The assessee filed its reply to the above reopening notice on 17.09.2010. It sought to treat its original return as the one filed in furtherance to reopening notice. It would thereafter ask for a copy of reopening reasons. The Assessing Officer very fairly furnished the same. He then completed the impugned re-assessment on 17.10.2011 adding the above sum of Rs.2,68,16,000/- in assessee's book profits computation.
6. The assessee filed appeal inter alia raising three folded grounds challenging validity of reopening, correctness of the above book profits addition on merits followed by interest levied by the Assessing Officer u/s.234B and E of the Act. The CIT(A)'s order under challenge declines first of the above argument challenging validity of reopening by observing that although the Assessing Officer had duly called for all relevant details pertaining to the above MAT computation, he did not consider implication of assessee's provision of bad debts u/s.115JB explanation 1(i) of the Act. He further opines that the Assessing Officer did not apply his mind nor raised any specific query as per the above amended provision. He seeks to validate the same rather by concluding that the impugned reopening is well within ITA Nos. 3045/Ahd/2013 & 104/Ahd/2014 (Hitachi Home & Life Solutions (I) Ltd. vs. ACIT) A.Y. 2006-07 -4- four years from the end of the relevant previous year. This follows CIT(A)'s findings on remaining two issues (supra). He partly accepts assessee's challenge to the impugned additions on merit in restricting the above book profits addition of Rs.2.68crores to Rs.82,57,118/- thereby deleting the addition pertaining to provision of obsolete stock amounting to Rs.1,85,59,435/-. He further agrees with assessee's plea challenging the above interest levies by observing that the same are not sustainable as involving impugned assessment year 2006-07 sought to be covered under the amended provision made in the Finance Act, 2009 w.e.f. 01.04.2001. This leaves both parties aggrieved as indicated in their respective pleadings.
We first come to the legal issue of validity of reopening.
7. There is admittedly no dispute that the CIT(A) has been fair enough in agreeing to assessee's plea that the Assessing Officer had in fact called for all relevant detail pertaining to the impugned provision of bad debts whilst framing regular assessment in its case on 26.02.2010. The above retrospective amendment in Section 115JB explanation 1(i) (supra) had come very well by then vide Finance Act, 2009 w.e.f. 01.04.2001. It is rather manifest enough that the Assessing Officer computed assessee's book profits alongwith other disallowances / additions including the one pertaining to obsolete stock addition under normal provisions as sought to be revived in Revenue's cross appeal. It thus cannot be said that the Assessing Officer had not taken a conscious decision of not making the impugned addition. We now come to Revenue's argument that the Assessing Officer has reopened the above regular assessment as per the above statutory provision so as to make the impugned addition of provision of bad debts. We are not impressed with this argument. It is evidently not the Assessing Officer's case that he had some tangible material apart from assessee's details already on record ITA Nos. 3045/Ahd/2013 & 104/Ahd/2014 (Hitachi Home & Life Solutions (I) Ltd. vs. ACIT) A.Y. 2006-07 -5- forming reasons to believe that some taxable income had escaped assessment. The case file also does not indicate any such circumstance. We thus rely on hon'ble jurisdictional high court in General Motors India Pvt. Ltd. vs. DCIT (2013) 354 ITR 244 (Gujarat), Gujarat Power Corporation Ltd. vs. ACIT (2013) 350 ITR 266 and CIT vs. Kelwinator of India Ltd. (2010) 320 ITR 561 (SC) to observe that such a course of action amounts to mere change of opinion not sustainable in the eyes of law. Their lordships of hon'ble jurisdictional high court rather formulate the second question in General Motors decision that an assessing authority ought not to reopen regular assessment on the ground that it had not applied correct provision of law in finalizing scrutiny assessment in absence of tangible material as the same would amount to mere change of opinion in such circumstances. We further notice that the reopening therein was also within four years from the end of the impugned assessment year. We thus accept assessee's first argument challenging validity of the impugned reopening. The same stands quashed.
8. Learned counsel's next argument is that the Assessing Officer ought not to have reopened the above regular assessment in assessee's case by invoking Section 115JB Explanation 1(i) as per hon'ble jurisdictional high court's decision in CIT vs. Indian Petro Chemicals Corporation Ltd. (A.Y.2001-02) Tax appeal no.1775/2008 decided on 19.07.2016 following Karnataka high court's judgment in CIT vs. Kirloskar Systems Ltd. (2013) 40 taxmann.com 124 & CIT vs. Yokogawa India Ltd. (2012) 17 tamann.com 15 that such an addition is not to be made u/s.115JB explanation (c) of the Act. Shri Kurian however refers to hon'ble jurisdictional high court's latter order dated 23.08.2016 in Tax Appeal No.749/2012 CIT vs. Vodafone Essar Gujarat Ltd. recommending its earlier decision in IPCL case hereinabove to a larger bench. We are however of the opinion that the instant argument of both the parties is no more required to be adjudicated since the impugned ITA Nos. 3045/Ahd/2013 & 104/Ahd/2014 (Hitachi Home & Life Solutions (I) Ltd. vs. ACIT) A.Y. 2006-07 -6- reopening itself stands quashed in the preceding paragraphs on basic tenets of the relevant law. This argument is accordingly rendered infructuous. So is the outcome of all other grounds raised in the instant cross appeal on merits.
9. The assessee's appeal ITA No.3045/Ahd/2013 is accepted. Revenue's Cross Appeal ITA No.104/Ahd/2014 is dismissed.
[Pronounced in the open Court on this the 17th day of January, 2017.] Sd/- Sd/-
(MANISH BORAD) (S. S. GODARA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad: Dated 17/01/2017
True Copy
S.K.SINHA
आदे श क त ल
प अ े
षत / Copy of Order Forwarded to:-
1. राज
व / Revenue
2. आवेदक / Assessee
3. संबं धत आयकर आयु!त / Concerned CIT
4. आयकर आय!
ु त- अपील / CIT (A)
5. )वभागीय ,-त-न ध, आयकर अपील य अ धकरण, अहमदाबाद /
DR, ITAT, Ahmedabad
6. गाड3 फाइल / Guard file.
By order/आदे श से,
उप/सहायक पंजीकार
आयकर अपील य अ धकरण, अहमदाबाद ।