2011 (4) TMI 1441 - AT - Income Tax

Revenue's Appeals Dismissed, Reassessment Orders Quashed for Invalid Reopening

Deputy Commissioner of Income Tax Versus Gujarat Ambuja Cements Ltd.

The Tribunal dismissed the Revenue's appeals, upholding the CIT(A)'s decisions to quash the reassessment orders for both assessment years 1999-2000 and ... - Issues Involved:1. Validity of the reopening of assessment under Section 147/148.2. Allowability of deduction under Section 80HHC after reducing profits allowed as deduction under Section 80-IA.3. Time-barred nature of the reassessment proceedings.Issue-wise Detailed Analysis:1. Validity of the Reopening of Assessment under Section 147/148:The Revenue reopened the assessment of the assessee for the assessment years 1999-2000 and 2002-03 under Section 147 by issuing a notice under Section 148. The reasons recorded for reopening were based on the belief that the income chargeable to tax had escaped assessment due to the assessee's failure to disclose fully and truly all material facts necessary for the assessment year 1999-2000. The assessee objected, stating that the time limit of four years from the end of the relevant assessment year for reopening the assessment had already lapsed, making the notice invalid. The Assessing Officer (AO) disposed of the objection, maintaining that the reopening was justified as the issue of allowability of deduction under Section 80HHC after reducing the profits allowed as deduction under Section 80-IA was not considered during the original assessment.The CIT(A) quashed the notice under Section 148 and the subsequent assessment order under Section 143(3) read with Section 147, stating that no new information had come into the possession of the AO to justify the belief that income had escaped assessment. The CIT(A) concluded that the reopening was based on a mere change of opinion, which is not permissible, especially since the notice was issued after four years from the end of the relevant assessment year. This decision was supported by the jurisdictional High Court's ruling in Godrej Agrovet Ltd. vs. Asstt. CIT and the Supreme Court's judgment in CIT vs. Kelvinator of India Ltd., which emphasized that a mere change of opinion cannot justify reopening an assessment.2. Allowability of Deduction under Section 80HHC after Reducing Profits Allowed as Deduction under Section 80-IA:The AO argued that for calculating the deduction under Section 80HHC, the profits of the business should be taken after deducting the amount allowed under Section 80-IA. As a result, the profits of the business would be negative, making the deduction under Section 80HHC not allowable. However, the CIT(A) and subsequently the Tribunal found that this issue was already considered during the original assessment and that the AO's reopening of the assessment on this ground constituted a change of opinion.The Tribunal upheld the CIT(A)'s decision, noting that the issue was covered in favor of the assessee by the jurisdictional High Court's decision in Associated Capsules (P) Ltd. vs. Dy. CIT, which held that Section 80-IA(9) does not mandate reducing the amount of profits allowed as deduction under Section 80-IA from the profits of the business while computing deduction under any other provisions under heading C in Chapter VI-A of the Act.3. Time-barred Nature of the Reassessment Proceedings:The reassessment proceedings for the assessment year 1999-2000 were initiated after four years from the end of the relevant assessment year. The CIT(A) and the Tribunal found that the reopening was time-barred as per the proviso to Section 147, which requires that no action shall be taken after the expiry of four years from the end of the relevant assessment year unless there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Since the assessee had disclosed all material facts in the original and revised returns, the reopening was deemed invalid.For the assessment year 2002-03, the reopening was within four years from the end of the relevant assessment year. However, the Tribunal upheld the CIT(A)'s decision to quash the reassessment order, applying the same reasoning as for the assessment year 1999-2000, and rejected the Revenue's grounds.Conclusion:The Tribunal dismissed the Revenue's appeals, upholding the CIT(A)'s decisions to quash the reassessment orders for both assessment years 1999-2000 and 2002-03. The Tribunal concluded that the reopening of the assessments was invalid due to being based on a mere change of opinion and being time-barred in the case of the assessment year 1999-2000. The decision was supported by relevant judicial precedents, including those from the jurisdictional High Court and the Supreme Court.