2021 (6) TMI 964 - AT - Income Tax

Tribunal upholds CIT(A)'s decisions on reassessment validity & deduction eligibility under Income Tax Act

The Tribunal dismissed the revenue's appeals for Assessment Years 2010-11 and 2011-12, upholding the CIT(A)'s decisions on the validity of reopening ... Reopening of assessment u/s 147 - Bogus purchases - notice issued on the basis of information received by the Ld. AO about a purchase from M/s. Motion Traders Pvt. Ltd. and as per the Value Added Tax (VAT) Department, Mumbai, this party issued bogus bills - HELD THAT:- As records shows that after receiving the information Ld. iAO has not made an independent application of mind on the information. Before initiating the reassessment proceedings in motion he was bound to examine the facts related to the purchase from M/s. Motion Traders Pvt. Ltd. which is available on record. The purchase was made from a Pvt. Limited company assessed to tax. Material was received by the AKOLA unit of the assessee and on 18.12.2009 payments made through account payee cheque. Copy of bank account in support already stood filed during the assessment proceedings. All the documentary evidences shows no iota of evidence that there was any intention of the assessee to evade tax by over stating the purchase. The above stated facts were required to be examined by the Ld. AO to form an opinion before issuing notice u/s 148 - In the instant case, no such efforts were made and just based on the information received from VAT Department notice was issued -mere change of opinion cannot be a basis to issue a notice u/s 148 of the Act. We find support from in the judgment of Hon'ble Apex Court in the case of CIT vs. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT] We find no reason to interfere in the finding of Ld. CIT(A) quashing reassessment proceedings. Ground No.1 raised by the Revenue is dismissed. Claim of deduction u/s 80IB - proof of commencing the commercial production - date from which appellant company was ready for manufacturing - HELD THAT:- From perusal of the above finding as well as the documentary evidences placed before us in the paper book including water connection, electricity connection, Maharashtra Pollution Control Board Registration, Sales Tax registration, professional Tax registration and the date of installation of machinery and found that all these events occurred before 31.03.2002 which was the deadline for commencing the commercial production. Ld. DR failed to rebut this fact by placing any contrary material. Assessee is eligible for deduction u/s 80IB and thus, find no reason to interfere in the finding of Ld. CIT(A) allowing the assessee’s claim of deduction u/s 80IB. - Decided in favour of assessee. Issues Involved:1. Validity of reopening the assessment under Section 148 of the Income Tax Act.2. Eligibility for deduction under Section 80IB of the Income Tax Act.Detailed Analysis:Issue 1: Validity of Reopening the AssessmentAssessment Year 2010-11:The revenue challenged the finding of the CIT(A) that the reopening of the assessee's case was not valid. The notice under Section 148 was issued based on information from the VAT Department, Mumbai, indicating bogus purchases from Motion Traders Pvt. Ltd. However, the Tribunal observed that the Assessing Officer (AO) did not independently verify the information before initiating reassessment proceedings. The AO was required to examine the facts related to the purchase, which were already on record, such as the purchase being made from a tax-assessed company, payment through account payee cheque, and the absence of any intention to evade tax. The Tribunal cited the Supreme Court's judgment in CIT vs. Kelvinator of India Ltd. 320 ITR 561 (SC) to support that mere change of opinion cannot justify reopening. Consequently, the Tribunal upheld the CIT(A)'s decision to quash the reassessment proceedings.Assessment Year 2011-12:The reopening was based on an audit objection regarding the wrong claim of deduction under Section 80IB. The Tribunal noted that the claim had already been examined during the original assessment proceedings, and no new material was presented to justify the reopening. The Tribunal reiterated that reopening based on a change of opinion is not permissible, referencing the Supreme Court's ruling in CIT vs. Kelvinator of India Ltd. The Tribunal upheld the CIT(A)'s decision that the reopening was invalid.Issue 2: Eligibility for Deduction under Section 80IBAssessment Year 2010-11:The revenue contested the CIT(A)'s decision to allow the deduction under Section 80IB. The CIT(A) had examined various documents, such as water and electricity connections, pollution control registration, sales tax registration, and professional tax registration, all obtained before 31.03.2002, indicating that the plant was ready for production within the statutory time limit. The Tribunal found no reason to interfere with the CIT(A)'s finding that the assessee was eligible for the deduction, as the plant was ready to put to use before the deadline, despite the actual production starting on 11.03.2003 due to delayed orders from the Electricity Board.Assessment Year 2011-12:The revenue's grounds for challenging the deduction were similar to those for the previous year. The CIT(A) had allowed the deduction based on the same set of facts and documents as the previous year. The Tribunal, having already examined the issue for the preceding year, confirmed the CIT(A)'s finding that the assessee was eligible for the deduction under Section 80IB, as the plant was ready for manufacturing before 31.03.2002.Conclusion:The Tribunal dismissed both the revenue's appeals for Assessment Years 2010-11 and 2011-12, upholding the CIT(A)'s decisions on both the validity of reopening the assessments and the eligibility for deduction under Section 80IB. The cross objections filed by the assessee were also dismissed due to being time-barred. The order was pronounced on 25.05.2021.