(Per : HONOURABLE MR.JUSTICE V. M. SAHAI) 1. We have heard Mr. S.N. Soparkar, learned Senior Counsel assisted by Mr. Bandish Soparkar for the petitioner and Ms. Mauna M. Bhatt, learned Central Government Standing Counsel appearing for the respondents.
2. Though this petition has been listed for admission hearing, since the legal question on the admitted facts is involved, with the consent of learned counsel for the parties, this petition is taken up for final disposal at the admission stage. Rule. Ms. Manua M. Bhatt, learned Central Government Standing Counsel waives service of rule on behalf of respondent.
3. The brief facts are that return of income for the assessment year 2005-06 was filed by the assessee Company on 30.10.2005 declaring total income at Rs.NIL. Thereafter, the assessee filed revised return on 6.6.2006 declaring total income at Rs.NIL after adjusting the carried forward losses. The return filed by the assessee was processed under Section 143(1) of the Income-tax Act, 1961 (for short 'the Act'), The book profit under Section 115JB of the Act was computed by the assessee Company at Rs. NIL which was duly accepted by the Assessing Officer by order dated 30.12.2008.
3.1 After expiry of four years, on 30.8.2010, the Deputy Commissioner of Income-tax, Circle-4, Ahmedabad recorded reasons for initiating proceedings under Section 148 of the Act on the ground that the records revealed that during the course of assessment proceedings under Section 143(3) of the Act, the Assessing Officer had accepted the book profit declared by the assessee at Rs. NIL. The assessee Company had debited an amount aggregating to Rs.4,29,07,000/- as provision for diminution in value of assets such as provision for doubtful debts, provision for doubtful advances etc. The Deputy Commissioner of Income-tax came to the conclusion that as there was no certainty regarding amount of bad debt, the provision for doubtful debt was not allowable. Therefore, owing to the failure on the part of the assessee to fully and truly disclose all material facts relevant for it's assessment, income chargeable to tax has escaped assessment, as a result of not adding back the said provision for doubtful debts to the book profit computed under Section 115JB of the Act at the time of original assessment. In the reasons recorded by the Deputy Commissioner of Income-tax, insertion of Explanation (1)(i) to Section 115JB(2) of the Act which has been inserted with retrospective effect was applied as well as Circular No.05/2010 dated 3.6.2010 clarifying the provisions of Finance Act (2) of 2009 was relied on and the Deputy Commissioner of Income-tax came to the conclusion that Explanation added to Section 115JB was clarificatory in nature and, therefore, there was failure on the part of the assessee to fully and truly disclose all material facts necessary for its assessment and the Assessing Officer had reason to believe that the assessed income has escaped the assessment within the meaning of Section 147 of the Act. After recording the above reasons on 30.8.2010, the Deputy Commissioner of Income-tax issued the impugned notice under Section 148 of the Act on 1.3.2011.
4. The law is well settled that if a retrospective amendment has been made in the Act, that could not furnish a ground for reopening the assessment as held by the Division Bench of this Court in Sadbhav Engineering v. Deputy Commissioner of Income-tax (2011) 333 ITR 483 (Gujarat) wherein a Division Bench of this Court has held that notice issued under Section 148 of the Act beyond the period of four years from the end of the relevant assessment year to reopen the assessments on the ground that some retrospective amendment has taken place, is not permissible and notice would be invalid as there was no dispute that there was failure on the part of the assessee to disclose fully and truly all material facts.
5. We are in agreement with the view taken by the Division Bench and we do not find that there was any failure on the part of the assessee to disclose fully and truly all material facts to the Assessing Officer. Therefore, we are of the considered opinion that the impugned notice issued by the Assessing Officer dated 1.3.2011 under Section 148 of the Act was illegal and deserves to be quashed.
11. In the result, this petition succeeds and is allowed. The notice dated 1.3.2011 issued by the Assessing Officer under Section 148 of the Act to the petitioner (Annexure A to the petition) is quashed. Rule is made absolute. The parties shall bear their own costs.
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[V. M. SAHAI, J.] Sd/-
[N. V. ANJARIA, J.] Savariya