Vijay Pal Rao, Judicial Member
1. This appeal by the assessee is directed against the order dated 8.8.2012 of CIT(A) for A.Y. 2005-06. The assessee has raised following grounds:-
"1. The learned (ld) CIT(A) erred in confirming the action of the Assessing Officer (AO) under section 143(3) r.w.s. 147 of the Income-Tax Act, 1961 (the Act), for the year under consideration.
2. The ld. CIT(A) erred in not appreciating the fact that the reassessment having been made on the basis of same records as was available at the time of original assessment, the reassessment proceedings was based merely on change of opinion which is not permissible in law.
3 (a) The ld. CIT(A) erred in confirming the action of the AO of increasing the book profits by Rs. 9,07,59,966 computed under section 115J8 of the Act.
3 (b) The learned CIT(A) failed to appreciate that section 115JB mandates certain adjustments to the book profit of a company and the assessing officer is not allowed to carry out any adjustments beyond the ones mandated under the Act.
3 (c) The Id. CIT(A) erred in ignoring the detailed submissions made by the appellant, vide their letters dated 14.7.2011 and 12.6.2012."
2. Ground no. 1 is regarding validity of reopening of assessment.
3. The assessee filed its return of income on 31.10.2005, declaring total loss of Rs. 2,36,77,306/-. The assessment was completed u/s 143(3)/115JB on 31.12.2007, whereby, the Assessing Officer accepted the returned loss and book profit of Rs. 1,35,21,987/-. Subsequently, the Assessing Officer reopened the assessment by issuing a notice u/s 148 on 18.03.2010 on the ground that there was a significant change in the accounting policy regarding depreciation, as during the previous year, the assessee company revised the rate of depreciation which are higher than the rate prescribed under schedule VI of the Companies Act, in respect of all fixes assets resulting increased depreciation charged at Rs. 9,07,59,966/-. Thus in view of the Assessing Officer, during the year the assessee had not prepared its P&L account in accordance with part II and III of schedule VI of Companies Act., 1956 as such the profit should have been increased by Rs. 9,07,59,966/- while computing book profit u/s 115JB resulting escapement of book profit from assessment u/s 115JB. The reassessment was completed vide order dated 31.11.2010, whereby, the Assessing Officer made the addition to the book profit to the tune of Rs. 9,07,59,966/- on account of applying the reduced rate of depreciation.
4. The assessee challenged the action of Assessing Officer before CIT(A) and contended that there was no fresh material in the possession of the Assessing Officer in forming the belief that the income assessable to tax has escaped assessment by issuing notice u/s 148 which is totally invalid and bad in law. The CIT(A) did not accept the contention of the assessee and held that there is no infirmity either legal or technical in the order passed by the Assessing Officer.
5. Before us, the Ld. Authorized Representative of the assessee has submitted that the reopening is based on the same material which is available on record with the Assessing Officer. He has referred to the reasons of reopening and submitted that the Assessing Officer has reopened the assessment only on the basis of notes on accounts wherein the assessee has declared change in the accounting policy regarding the rate of depreciation for the year under consideration. The Ld. Authorized Representative has submitted that even, otherwise, the Assessing Officer has no jurisdiction to tinker with the accounts of the assessee which are duly audited by the auditors and found to be in conformity with schedule VI of the Companies Act. The Ld. Authorized Representative has further contended that there is no provision under section 115JB to make any adjustment on account of depreciation rate applied by the assessee when the accounts are prepared as per the provisions of Companies Act. He has referred the audit report and submitted that the auditor has not raised any query or objection regarding the accounting policy and information required under the Companies Act to give a true and fair view in conformity with the accounting principles accepted. The auditor has given the certificate that the balance sheet, P&L account and cash flow statements are in conformity with the accounting standards (refer to section 211(3C) of the Act. He has referred the accounting standards (AS) on depreciation accounting and submitted that where the management's estimate of the useful life of an asset of the enterprise is shorter than that envisaged under the provisions of the relevant statute, the depreciation provision is appropriately computed by applying a higher rate. If the management's estimate of the useful life of the asset is longer than that envisaged under the statue, deprecation rate lower than that envisaged by the statue cane be applied only in accordance with requirements of the statute as provided in para 13 of the Accounting Standards (AS) 6. The Ld. Authorized Representative thus submitted that the requirement of statute is only in the case when the management decided to apply the depreciation rate lower than that envisaged by the statute and not in the case of higher rate of depreciation applied by the management. The Ld. Authorized Representative has relied upon the Judgment of Hon'ble Supreme Court in the case of Apollo Tyres Ltd. v. CIT  255 ITR 273/122 Taxman 562 and submitted that the accounts are prepared as per the provisions of part II and III of the Companies Act then the Assessing Officer has to accept the authenticity of the account that with reference to the provisions of the Companies Act and has no jurisdiction or power to embark a fresh enquiry in regard to the entries made to the Books of Accounts of the company while computing the book profit u/s 115J. Thus the Assessing Officer has no jurisdiction to go beyond the net profit shown in the P&L account except to the extent of profit u/s 115J. When the books of accounts are certified by the authorities under the Companies Act., as having been properly maintained in accordance with Companies Act. He has also relied upon the following decisions:-
(i) Dy. CIT v. Maharashtra State Electricity Board (IT Appeal No. 1568 (Mum.) of 2013]
(ii) Royal Construction Co. v. ACIT (IT Appeal No. 4717(Mum.) of 2012]
(iii) Patel Plastics Corporation v. ACIT (IT Appeal No. 914(Mum.) of 2009]
(iv) Kinetic Motor Co. Ltd. v. Dy. CIT  262 ITR 330/133 Taxman 956 (Bom.)
6. On the other hand, the Ld. DR has submitted that there is no change of opinion at the time of reopening of the assessment because there was no enquiry conducted by the Assessing Officer during the course of assessment proceedings so far as the higher rate of depreciation rate applied by the assessee for the year under consideration which is in a complete departure of the accounting policy of the assessee regarding the depreciation of the earlier years. He has further contended that the assessee has not explained the reason for change in the accounting policy and, therefore, when the Assessing Officer has overlooked a material fact at the time of the original assessment, the reopening is justified. He has relied upon the judgment of Hon'ble Jurisdictional High Court in the case Export Credit Guarantee Corporation of India Ltd. v Addl. CIT  350 ITR 651/30 taxmann.com 211/ 228 Taxman 28 (Bom.) (Mag.).
7. We have considered the rival submissions as well as relevant material on record. There is no dispute on the point that at the time of reopening of the assessment framed u/s 143(3), the Assessing Officer is not permitted to review or revise its own assessment order even if there is no proper enquiry conducted during the original assessment. This legal proposition is applied only when the issue on which the Assessing Officer has a discretion and, therefore, even if the Assessing Officer has allowed the claim of the assessee without conducting the enquiry while framing the assessment u/s 143(3), the Assessing Officer is not permitted to reopen the assessment to revise his own assessment order on such an issue where the Assessing Officer was having discretion. Therefore, in a case where a claim which is not permissible under the law is allowed by the Assessing Officer without applying the mind and ignoring the crucial facts than the legal proposition barring the jurisdiction of the Assessing Officer on the issue where the Assessing Officer can exercise his discretion is not applicable because in such cases, the Assessing Officer has no discretion either to allow or disallow the claim. In the case in hand, the change of policy with respect to the higher rate of depreciation applied by the assessee during the year under consideration. It is a significant departure of the accounting policy followed by the assessee consistently in past. Thus it is manifest from the record that such a significant fact whereby the assessee has increased the rate of depreciation resulting decrease of profit by an amount of Rs. 9,07,59,966/- was completely ignored by the Assessing Officer while passing the assessment order u/s 143(3). Further this fact has not been disclosed by the assessee in the return of income or any explanation furnished before the Assessing Officer but it was only the part of the audit report and note no. 13 of the notes forming parts of the accounts. There is no dispute that neither any query was raised nor any explanation was furnished by the assessee during the original assessment. Therefore, there was no enquiry on this aspect. The assessee contend that the accounts are prepared as per part II and III of the Companies Act., and, therefore, the Assessing Officer has no jurisdiction to tinker with the accounts prepared in accordance with the Companies Act. It is pertinent to note that part II and III of Schedule- VI of the Companies Act mandates the accounts to be prepared by following the accounting standards. On the point of change of depreciation method para 21 of the AS 6 is relevant which reads as under:-
"21. The depreciation method selected should be applied consistently from period to period. A change from one method of providing depreciation to another should be made only if the adoption of the new method is required by statute or for compliance with an accounting standard or if it is considered that the change would result in a more appropriate preparation or presentation of the financial statements of the enterprise. When such a change in the method of depreciation is made, depreciation should be recalculated in accordance with the new method from the date of the asset coming into use. The deficiency or surplus arising from retrospective recomputation of depreciation in accordance with the new method should be adjusted in the accounts in the year in which the method of depreciation is changed. In case the change in the method results in deficiency in depreciation in respect of past years, the deficiency should be charged in the statement of profit and loss. In case the change in the method results in surplus, the surplus should be credited to the statement of profit and loss. Such a change should be treated as a change in accounting policy and its effect should be quantified and disclosed."
8. As per para 21 of the AS 6, it is contemplated that depreciation method selected should be applied consistently from period to period. Any change from one method should be made only if adoption of new method was required by statute or for compliance of the accounting standards or if it is considered that the change would result in a more appropriate preparation or presentation of financial statement of enterprise. It further requires that when such change in method of depreciation is made, it should be treated as a change in accounting policy and its affect should be quantified and disclosed. Thus the change in the accounting policy regarding the method of depreciation and rate of depreciation should be based on a proper evaluation of useful life of an asset. Such a decision should be based on a proper report in respect of useful life of the asset and should be taken by the board of directors through the proper resolution as per the requirement under the Companies Act. Such a decision of board of director is also required to be approved under the general body meeting. In the case in hand, the assessee has not furnished such record based on which the decision of change of policy regarding the method of depreciation and increase of rate of depreciation during the year has been taken by the board of Directors. Even the assessee has not produced any resolution of board of Directors. Only disclosure of the assessee is in the form of notes on accounts, which also does not indicate any decision taken by the board of Directors or any resolution passed in this respect. Thus merely taking note of the fact that the assessee has changed the accounting policy in respect of method of depreciation and rate of deprecation which has resulted reduction in the profit of the year by a sum of Rs. 9,07,59,966 would not ipso facto prove that the accounts are prepared in accordance with Schedule VI of the Companies Act. As we have discussed that there is no quarrel on the aspect that if the accounts of the assessee company were prepared in conformity with part II and III of the Schedule VI of the Companies Act, the Assessing Officer has no power or jurisdiction to tinker with such accounts for the purpose of computation of book profit u/s 115JB. However, in the case in hand, the assessee has not produced the requisite record to show that the change of policy is in conformity with the accounting standards as required under the provisions of Companies Act and further this is a very relevant and crucial fact to be taken into account while computing the book profit u/s 115JB which has been ignored by the Assessing Officer. The Hon'ble High Court in the case of Export Credit Guarantee Corporation of India Ltd. (supra) has held in para 9 & 10 as under:-
"9. We have considered it appropriate to emphasise this aspect because much of the submission on behalf of the petitioner in these proceedings has focused on the merits of the assessment. At this stage, the test to be applied is whether there was reason to believe that income had escaped assessment and whether the Assessing Officer has tangible material before him for the formation of that belief. A reason to believe is what is relevant not an established fact of the escapement of income.
10. The salient aspect of the case that merits emphasis is that the order of assessment that was passed by the Assessing Officer under section 143(3) is completely silent in respect of each one of the five points on the basis of which the assessment is sought to be reopened. There is merit in the contention which has been urged on behalf of the Revenue that no query had been raised during the course of the assessment and the assessment order would ex facie disclose that the Assessing Officer has not applied his mind at all to any of the points on the basis of which the assessment is now sought to be reopened. That there exists tangible material for the Assessing Officer to reopen the assessment in the present case is evident from the record. For instance, as we have noted earlier, in respect of one of the grounds, ground (ii), the reasons which have been disclosed to the assessee would indicate that reliance has been placed on paragraph 6.1 of the notes forming part of the accounts in Schedule 17. Paragraph 6.1 posits that an amount of Rs. 27.96 crores is the estimated amount of recovery expected out of the claims paid or payable by the assessee which had been recognized on an individual assessment/estimate basis on the basis of the accounting practice followed by the assessee. During the year in question, there was a change in accounting policy as a result of which the provision for estimated recovery in respect of claims paid and outstanding for recovery for a period of three years or more as on the balance-sheet date has been estimated at Rs. 100 for each claim in substitution of the individual assessment/estimate made earlier. The assessee has stated that the change in policy has the effect of the existing provision for estimated recovery being written off by about Rs. 20 crores to the revenue account and reducing the profit of the accounting year consequently. Evidently, the Assessing Officer had not considered paragraph 6.1 of the notes forming part of the accounts. At this stage, it would be necessary for the court to record that we have not been called upon to decide as to whether any addition to the income would have to be made on that ground since that is a matter which has to be decided after the assessment is reopened. All that is relevant at this stage is whether there is reason to believe on the part of the Assessing Officer that income had escaped assessment. The answer is in the affirmative. It would not be appropriate for this court to preempt an enquiry whatsoever by the Assessing Officer, once a tangible basis has been disclosed for reopening the assessment. Similarly, in respect of the revision of pay scales, the Assessing Officer has sought to reopen the assessment on the ground that the liability had not crystallized before the balance-sheet date. Here again, it is apparent that there has been no application of mind to the relevant facts by the Assessing Officer during the course of the assessment proceedings. As regards the first ground, on the basis of which the assessment is sought to be reopened, it has been sought to be urged that under section 44 read with rule 5(a), it would not be open to the Assessing Officer to make an income addition. Moreover, it has been urged that in the past, the same practice had been accepted by the Revenue. These are matters which
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on the merits will be considered by the Assessing Officer and it would be inappropriate for this court to express any opinion on the merits of issue. Moreover, once the court has come to the conclusion that even a single ground on the basis of which the assessment is sought to be reopened is valid and within jurisdiction, the notice for reopening of the assessment would have to be upheld. Consequently, we clarify that though the submissions have been urged on the merits of each of the grounds, we keep all rights and contentions of the parties open to be urged before the Assessing Officer, once the assessment is reopened in exercise of the power conferred by section 147. The Assessing Officer has acted within jurisdiction in reopening the assessment." 9. Following the decision of Hon'ble Jurisdictional High Court, we hold that the reopening in this case is proper as the Assessing Officer has exercised the power conferred u/s 147 of fulfillment of requirements in the said section. On merits the assessee has not produced the requisite records and evidence to show the basis on which such a change in accounting policy was taken by the board of Directors. Even the resolution of board of Directors was not produced by the assessee either before the Assessing Officer or before us. Thus, the issue requires a proper verification and examination of the relevant facts and records. Accordingly, we set aside the issue on merits to the record of Assessing Officer for deciding afresh after verification and examination of relevant record. The assessee is directed to produce the evaluation report, board's resolution as well as the approval of the board's decision in the general body meeting in support of its claim that the change of method of depreciation as well as rate of depreciation is in conformity with the requirement of provisions of Companies Act as well as Accounting Standard. 10. In the result, appeal of the assessee is partly allowed for statistical purposes.