The Hindu Business Line : HC clears I-T Dept move to reopen assessment

The Madras High Court has ruled that there was no illegality or irregularity in the order dated May 22, 2007 of the Assistant Commissioner of Income-tax, Central Circle II(5), issued to Fire Challenger, Chennai to reopen the assessment order for 1998-99 on the ground that inclusion of bad debt account was “clearly impermissible”.

Even though the petitioner firm was a partnership, as the certificate issued by the auditors had shown that there was a prevailing dispute referable to the Court, inclusion of the bad debt account was not permissible, and notice was issued for reopening the assessment and no exception could be taken to it, Mr Justice K. Chandru held.

The petitioner had contended that there had been gross violation of laws and legal principles by the authorities and the power of the Appellate Commissioner under Section 246(a) of the Income-tax Act was also restricted.

The respondent (Assistant Commissioner of Income Tax) said in the proceedings dated February 22, 2007 that the assessee had filed return of income for 1998-99, declaring loss of Rs 50,25,668. The assessee had claimed bad debts of Rs 2.66 crore. The partner of the petitioner-firm had said that the Uttar Pradesh Government had paid less against the total sale price. According to the partner, arbitration was currently on between the firm and the UP government. The respondent said that in the circumstances, it was considered expedient to keep the matter alive by reopening assessment under section 148.

The Judge ruled that when documents were sought relating to the firm’s claim of bad debts they had not been furnished. Hence the amount had not become irrecoverable as provided in statute. There was no illegality or irregularity in the impugned order of the respondent. Hence, the writ petition would stand dismissed.

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