PER R.S. SYAL, AM: This appeal by the Revenue and the Cross Objections by the assessee arise out of the order passed by the CIT(A) on 17.1.2013 in relation to the assessment year 2006-07.

2. The only effective ground raised by the Revenue in its appeal is against the quashing of re-assessment by the CIT(A). In the Cross Objection, the assessee, apart from supporting the impugned order on quashing the reassessment, is aggrieved against the non-deletion of additions made by the AO by the CIT(A).

3. Briefly stated, the facts of the case are that the assessee filed its original return on 29.11.2006 declaring Nil income. Assessment u/s 143(3) of the Income-tax Act, 1961 (hereinafter also called `the Act) was completed on 31.12.2008 accepting the returned income. A notice u/s 147 of the Act was issued on 31.3.2011 after recording certain reasons. In the final assessment order passed by the AO u/s 143(3) read ITA No.2368/Del/2013 CO No.174/Del/2013 3 with section 147, total income was determined at Rs.2.31 crore by making an addition on account of provisions for and obsolescence in stock amounting to Rs.134.47 lac and not accepting the claim of the assessee of set off of the current years income amounting to Rs.96.62 lac against the brought forward business loss and depreciation. The assessee challenged the assessment order before the ld. CIT(A). The ld. first appellate authority quashed the assessment by holding that it was a case of mere change of opinion. The Revenue is aggrieved against the quashing of re-assessment.

4. We have heard the rival submissions and perused the relevant material on record. As the ld. CIT(A) has quashed the reassessment by opining that it was a case of mere change of opinion by the AO, let us examine the reasons recorded by the AO before issuing notice u/s 148 on 31.3.2011, which are as follows:-

It is revealed that as per Schedule-17(4) of the Notes to Accounts, the assessee has stated that the closing stock as at the end of the year is after adjustment of provisions @ 50% of their cost in accordance with the World Wide Policy of Stryker International aggregating to ITA No.2368/Del/2013 CO No.174/Del/2013 4 Rs.3,84,37,504/- as against Rs.2,49,89,862/- in the immediately preceding year. As the provision of Rs.1,34,47,642/- made on account of under valuation of closing stock was not an ascertained liability, the same should have been disallowed and added to the income of the assessee. Further, while completing the assessment, set off of loss of Rs.96,62,270/- and carried forward losses of Rs.3,87,40,318/- were allowed by the AO whereas as per the assessment orders for the A.Y. 2004-05 & 2005-06 there were no losses with the company to set off or carried forward.

5. Before proceeding further, it is relevant to note that the notice u/s 148 was issued in this case on 31.3.2011, which is well within a period of four years from the end of the relevant assessment year and as such the benefit of proviso to section 147 is not available to the assessee. The ld. CIT(A) has quashed the assessment by holding it to be change of opinion. In so far as the second reason is concerned, it is observed that the assessee earned profit for the year amounting to Rs.96.62 lac, which was set off against the brought forward loss of Rs.3.87 crore for the immediately preceding two years. On a specific query from the ld. AR during the course of proceedings before us, it was submitted that the said ITA No.2368/Del/2013 CO No.174/Del/2013 5 loss of Rs.3.87 crore was computed by the assessee as per the returns of income filed by the assessee for the earlier two years, but, the assessment made for such years converted such returned loss into positive income. The ld. AR contended that since the assesee had challenged the assessment for the AYs 2004-05 and 2005-06, it was necessary for it to continue with the loss of Rs.3.87 crore as declared in the returns of the earlier years. We are not disputing the fact that the assessee did return loss of Rs.3.87 crore for the earlier years. The fact of the matter is that when the assessments were framed by the AO for the earlier years, such returned loss stood reduced to Nil and was, in fact, converted into positive income. Notwithstanding the assessee filing return for the current year claiming set off the current years income with such brought forward loss, the AO, was obliged to reject the claim of the brought forward loss and proceed with the income as determined by him for the earlier years and eventually discard the set off of the current years income with the so called brought forward loss. This led ITA No.2368/Del/2013 CO No.174/Del/2013 6 to the under-assessment of income of Rs.96.62 lac earned during the year, by means of allowing excessive relief.

6. Explanation 2 to section 147 of the Act deems certain cases of escapement of income. Clause (c) of this Explanation deals with situations : `where an assessment has been made, but (i) income chargeable to tax has been under assessed; . or (iii) such income has been made the subject of excessive relief under this Act. In our considered opinion, the case of the assessee is squarely covered within clause (c) of Explanation 2 to section 147 inasmuch as the action of the AO in allowing set off of current years income against the so-called brought forward loss which was not at all existing, led to the under assessment of income for the current year.

7. The ld. AR candidly accepted the above position by stating that this was a mistake committed by the AO while finalizing the original assessment. He, however, submitted that this was a computational error made by the AO in the original assessment proceedings which was required to be rectified u/s 154 rather than taking recourse to section ITA No.2368/Del/2013 CO No.174/Del/2013 7

147. To buttress this contention, he relied on the judgment of the Honble Bombay High Court in Hindustan Unilever Ltd. vs. DCIT (2010) 325 ITR 102 (Bom) . In the opposition, the ld. DR supported the stand of the AO in rightly initiating the re-assessment proceedings on this score.

8. After considering the rival submissions and perusing the relevant material on record, we find that the Honble Bombay High Court in the case of Hindustan Unilever Ltd. (supra) has held that the computational error should be corrected by means of proceedings u/s 154, rather than the proceedings u/s 147. In that case, the AO, while passing his order of assessment, adopted the business income of Rs.1815.59 crore, which was computed by the assessee itself. However, while allowing deductions from the business income, the AO deducted a sum of Rs.10.84 crore as a loss arising from the plantation division which was a plain computational error on the part of the AO because the figure of business income at Rs.1815.59 crore was after the adjustment of loss from plantation division of Rs.10.84 crore. This was the computational ITA No.2368/Del/2013 CO No.174/Del/2013 8 error committed by the AO in once again deducting the amount of Rs.10.84 crore which had already been accounted for in the computation of business income at Rs.1815.59 crore. It was under such circumstances that the Honble High Court held that since time limit for rectification was still available, the AO ought to have corrected the position by making an amendment u/s 154 rather than making reassessment. When we advert to the facts of the instant case, we find that the position is explicitly different. Here is a case in which the AO during the course of original assessment proceedings failed to note that the assessee had set off the current years income against the brought forward business loss which was, in fact, not existing by means of the assessment orders passed for the assessment years 2004-05 and 2005-06. Admittedly, the time limitation for passing of rectification order for the instant case is now not available. Thus it is manifest that the ratio of the decision in Hindustan Unilever (supra) is not applicable to the facts under consideration. ITA No.2368/Del/2013 CO No.174/Del/2013 9

9. It is obvious that the action of the AO in erroneously allowing the benefit of non-existent brought forward business loss against the current years income could have been corrected even by the CIT treating the assessment order erroneous and prejudicial to the interest of the Revenue to this extent. This mistake could have been corrected by the AO himself u/s 154 also within the specified time limit. Alternatively, the AO could have set the things right by taking recourse to the proceedings u/s 147 because there were reasons to believe that income to this extent chargeable to tax has escaped assessment. We do not find any provision in section 154 prohibiting the AO from charging to tax the escaped income by means of proceedings u/s 147. Ordinarily, the rectification proceedings to correct such mistake were preferable, but the AO cannot be rendered remedyless in bringing to tax the escaped income, if the action is taken u/s 147.

10. The ld. AR submitted that he has no objection if the proceedings u/s 147 are dropped and the AO is allowed to carry out rectification. On a query whether now the time limit for rectification was available with ITA No.2368/Del/2013 CO No.174/Del/2013 10 the AO, he admitted that it was not statutorily available but the assessee will comply with the direction, if given by the tribunal, to rectify such a mistake u/s 154. We are unable to accept this contention. Once the time limit for taking action u/s 154 has expired, the tribunal cannot extend such time limit by directing the AO to now rectify the order beyond the time limit, even with the consent of the ld. AR. There can be no concession contrary to the law. Since the action of the AO in allowing set off of profits of the current year in the original assessment against the non-existing brought forward business loss has led to the under- assessment of income, which is nothing but escapement of income and the time limit at time of taking action was available u/s 147, we cannot find any fault with the AO in adopting the route of section 147 rather than that of section 154. It is more so, because the reassessment proceedings have not been initiated on this reason along, but also towards provision for inventory obsolescence.

11. Insofar as the view point of the ld. CIT(A) about change of the AOs opinion is concerned, we find that the original assessment order ITA No.2368/Del/2013 CO No.174/Del/2013 11 dated 31.12.2008, whose copy has been placed on page 25 of the paper book, is only a half-paged order. The returned income has been accepted as such. There is no discussion whatsoever on both the issues taken note of by the AO for initiating reassessment. When the AO has not formed any opinion, there can be no question of change of opinion. Be that as it may, the ld. AR has fairly accepted before us that the allowing of set off of current years income by the AO against the brought forward business losses , is not correct and the resultantly the assessee is not entitled to such set off.

12. Under such circumstances, we hold that the ld. CIT(A) was not justified in quashing the assessment by branding it as a change of opinion. Once the re-assessment order is held to be valid on this count, the matter requires adjudication by the ld. CIT(A) on the merits of all the additions which were made by the AO. Since the ld. CIT(A), after setting aside the assessment order passed u/s 143(3) read with section 147, did not deal with the merits of the additions, we vacate his findings ITA No.2368/Del/2013 CO No.174/Del/2013 12 of quashing the re-assessment order and restore the matter to his file for disposal of appeal on merits.

13. In the result, the appeal filed by the Revenue is allowed and the CO filed by the assessee is allowed for statistical purposes. The order pronounced in the open court on 17.09.2015. Sd/- Sd/- [C.M. GARG] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated, 17 th September, 2015. dk Copy forwarded to:

1. Appellant

2. Respondent

3. CIT

4. CIT (A)

5. DR, ITAT AR, ITAT, NEW DELHI.