Court upholds CIT(A)'s decision cancelling income assessment for AY 1995-96, rejecting AO's opinion change. Assessee justified in Section 80HHC deduction claim. Revenue appeal dismissed.

The court upheld the CIT(A)'s decision to cancel the income escaping assessment for the Assessment Year 1995-96, finding that the AO's reopening was based on a change of opinion influenced by a superior officer's directive. The court determined that the Assessee's claim for deduction under Section 80HHC was justified, as the AO had thoroughly scrutinized the claim initially. The court ruled against the Revenue, dismissing the appeal and stating there was no valid reason for reopening the assessment.

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Issues Involved:

1. Justification of ITAT in upholding the order of CIT(A) in canceling the income escaping assessment.
2. Whether reopening the assessment was based on a change of opinion.
3. Justification of the assessee's claim for deduction under Section 80HHC.

Detailed Analysis:

1. Justification of ITAT in upholding the order of CIT(A) in canceling the income escaping assessment:

The appeal challenges the ITAT's judgment confirming the CIT(A)'s order, which quashed the reopening of the assessment by the Assessing Officer (AO) for the Assessment Year 1995-96. The Respondent-Assessee filed its return on 29/3/1996, and the assessment was completed on 2nd June 1997 under Section 143(3) of the Income Tax Act, 1961. However, on 17/2/2000, the AO issued a notice under Section 148 seeking to reopen the assessment. The CIT(A) quashed this reopening on 5th August 2002, and the ITAT upheld this decision on 3rd August 2007.

2. Whether reopening the assessment was based on a change of opinion:

The AO initially accepted the Assessee's claim for deduction under Section 80HHC after detailed scrutiny and consideration of the Assessee's responses and documents. Despite this, a notice for reassessment was issued on 17th February 2000, following an audit objection and a directive from the Commissioner of Income Tax. The ITAT and CIT(A) found that the AO's action amounted to a change of opinion and was influenced by the superior officer's directive, lacking independent application of mind. The court noted that the AO had already addressed the issue of whether the sale of shares constituted an export and allowed the deduction after thorough scrutiny.

3. Justification of the assessee's claim for deduction under Section 80HHC:

The Assessee, an investment company, claimed a deduction under Section 80HHC for the sale proceeds received in convertible foreign exchange from selling shares to a foreign company. The AO initially accepted this claim after detailed scrutiny, including verifying RBI approvals and other relevant documents. The court found that the AO had duly considered whether the transaction amounted to an export and allowed the deduction based on the materials on record. The court concluded that reopening the assessment based on the same set of facts amounted to a mere change of opinion, which is not permissible.

Conclusion:

The court answered the substantial questions of law (A) and (B) against the Revenue, stating that there was no case for reopening the assessment. Consequently, there was no need to remit the matter to the ITAT for deciding the issue raised in question (C). The appeal was dismissed with no order as to costs.

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