2013 (7) TMI 854 - HC - Income Tax

High Court Upholds Revenue's Appeal on Validity of Assessment Reopening Under Section 147

The High Court allowed the Revenue's appeal, determining that the reopening of assessment under Section 147 was valid as the information provided through ... Validity of reassessment - Declaration filed under VDIS 1997 - CIT held that full disclosure not done therefore reassessment necessary - Tribunal held that A.O. not applied mind independently therefore, reassessment unnecessary - Held that:- It is no doubt true that under the circular issued by the Commissioner, the declaration made by the assessee was to be placed for the information of the Assessing Officer for the purpose initiation of proceedings under Section 147 of the Income Tax Act. But that, by itself, would not lead to an automatic mechanical exercise of jurisdiction under Section 147 of the Income Tax Act - when the Assessing Officer had had the necessary materials indicating the concealment of income or income which had escaped assessment irrespective of the source from which it had come, it being the information and the material indication of escapement of income from assessment for the Assessing Officer to reopen the assessment, rightly the Assessing Officer assumed jurisdiction under Section 147 of the Income Tax Act and no exception could be taken to this by the assessee, contending that the Assessing Officer had no jurisdiction under Section 147 of the Income Tax Act - Decided in favour of Revenue. Issues:1. Validity of reopening assessment under Section 147 of the Income Tax Act based on a declaration under the Voluntary Disclosure of Income Scheme, 1997.2. Jurisdiction of the Assessing Officer to reopen assessment without independent inquiry.3. Applicability of Section 80HHC for computation of deduction.Issue 1: Validity of reopening assessment under Section 147 of the Income Tax Act based on a declaration under the Voluntary Disclosure of Income Scheme, 1997:The case involved an appeal by the Revenue against the Income Tax Appellate Tribunal's order regarding the assessment year 1998-99. The Tribunal set aside the assessment, stating that the reopening was not valid as the Assessing Officer did not have independent reasons for believing that income had escaped assessment. However, the High Court disagreed, holding that the declaration made under the Voluntary Disclosure Scheme provided the necessary information for reopening the assessment under Section 147. The Court emphasized that the Assessing Officer had the materials indicating income concealment or escapement, justifying the reopening. The Court concluded that the Assessing Officer had jurisdiction under Section 147 based on the information provided through the VDIS Scheme.Issue 2: Jurisdiction of the Assessing Officer to reopen assessment without independent inquiry:The Commissioner of Income Tax (Appeals) had dismissed the assessee's appeal, stating that the declaration made under the VDIS Scheme was conclusive and could not be retracted unless proven incorrect. The Tribunal set aside the assessment, highlighting that the Assessing Officer did not independently apply his mind before reopening. The High Court, however, held that the information provided through the VDIS Scheme was sufficient for the Assessing Officer to assume jurisdiction under Section 147. The Court emphasized that the details given in the declaration could not be disregarded, even if the assessee later claimed it was incorrect. Therefore, the Court allowed the Revenue's appeal, setting aside the Tribunal's order and restoring the matter for reassessment on merits.Issue 3: Applicability of Section 80HHC for computation of deduction:The substantial question of law in this case was whether 90% of dyeing charges should be reduced from the 'profits of business' for the purpose of deduction under Section 80HHC. The Income Tax Appellate Tribunal had disregarded the plain wording of Explanation (baa) to Section 80HHC, leading to the Revenue's appeal. However, the High Court did not delve into this issue as the focus was primarily on the validity of reopening the assessment under Section 147. Consequently, the Court allowed the Revenue's appeal based on the jurisdiction of the Assessing Officer to reopen the assessment.In conclusion, the High Court allowed the Revenue's appeal, holding that the reopening of assessment under Section 147 was valid based on the information provided through the Voluntary Disclosure of Income Scheme. The Court emphasized that the Assessing Officer had jurisdiction to reopen the assessment, and the matter was restored for reassessment on merits.