2011 (9) TMI 260 - HC - Income Tax

High Court affirms reassessment under Income Tax Act, withdraws excess export profit deduction

The High Court upheld the re-assessment completed under Section 147 of the Income Tax Act, withdrawing excess deduction on export profit under Section ... Export profit under Section 80HHC of the Act - return filed by the assessee for the assessment year 2000-2001 was accepted However Assessing Officer later noticed that the exemption claimed on export profit is not in terms of Section 80HHC of the Act as amended by Finance Act No.2 of 2005 with retrospective effect from 01/04/1998 - Decided that do not find any substantial question of law arising on the validity of the reassessment completed under Section 147 - even though regular assessment was not completed under Section 143(3), the Assessing Officer is entitled to reopen and bring to tax escaped income, which includes excess relief granted in the original assessment - assessee's export turnover was above Rs. 10 crores and the amended provisions of Section 80HHC are applicable - amendment by retrospective effect cannot make an assessment order already passed based on existing law as one prejudicial to the interest of the Revenue - assessee has not satisfied the conditions stated therein, which entitles it to reckon DEPB benefit received for the purpose of deduction under Section 80HHC of the Act - there is no scope for interference with the order of the Tribunal upholding the validity of reassessment completed under Section 147 of the Act - Held against the assessee. Issues:Challenge to re-assessment under Section 147 for excess deduction on export profit under Section 80HHC of the Income Tax Act.Analysis:The High Court heard the appeal challenging the re-assessment completed under Section 147 of the Income Tax Act concerning the withdrawal of excess deduction granted on export profit under Section 80HHC. The Assessing Officer revised the assessment after noticing that the exemption claimed on export profit did not align with the amended provisions of Section 80HHC. The appellate authority and the Tribunal upheld the revised assessment. The High Court noted that the authorities followed the principles set by the Supreme Court in Asstt. CIT v. Rajesh Jhaveri Stock Brokers, where it was established that the Assessing Officer can reopen and tax escaped income, including excess relief granted in the original assessment. The High Court found that the reassessment was made in accordance with the amended provisions of the Act, specifically for cases where the export turnover exceeded Rs. 10 crores.The appellant's export turnover was above Rs. 10 crores, requiring satisfaction of conditions under Section 80HHC for deduction on export profits, including DEPB benefits. As the appellant did not meet these conditions, the Assessing Officer revised the assessment, withdrawing the relief granted on DEPB benefits under Section 80HHC. The High Court referenced the Supreme Court's explanation of the scope of Section 147, emphasizing that the Assessing Officer must have a reasonable belief that taxable income has escaped assessment. The High Court concluded that excess relief falls within the scope of Section 147, and the appellant failed to show that the reassessed deduction was not in line with the relevant provisions of Section 80HHC. Therefore, the High Court dismissed the appeal, finding no merit in challenging the reassessment's validity or the computation of export profit under Section 80HHC for the relevant assessment year.