2009 (10) TMI 122 - HC - Income Tax

Court Upholds Reassessment & Deduction Restriction, Emphasizes Due Procedure

The court upheld the reassessment and restriction of deduction under section 80-IB, emphasizing the Assessing Officer's formation of requisite ... Whether, the action of the authorities below in reopening the assessment of the appellant and restricting the deduction under section 80-IB are legally sustainable in the eyes of law ? - The assessee made claim for deduction under section 80-IB of the Act in respect of income received by way of incentive for export. The claim was upheld by the Assessing Officer – in a subsequent assessment year the special deduction was restricted by reducing export incentives – thereupon reassessment proceeding were initiated – Facts coming to light in a subsequent assessment year could validly form the basis for initiating reassessment proceedings, in view of Explanation 2 to section 147 of the Act. – Held that assessment order of subsequent year could form basis for reassessment - action of the authorities below in reopening the assessment of the appellant and restricting the deduction under section 80-IB are legally sustainable Issues:1. Reopening of assessment and restricting deduction under section 80-IB.2. Justification of canceling the deletion of interest charged under section 234B.Issue 1: Reopening of assessment and restricting deduction under section 80-IB:The appellant challenged the reopening of assessment and the restriction of deduction under section 80-IB. The Assessing Officer initiated reassessment proceedings under section 147 of the Income-tax Act 1961 based on the claim for deduction under section 80-IB made by the assessee. The appellant's claim was negatived during reassessment. The Commissioner of Income-tax (Appeals) rejected the objection to the reopening of assessment, stating that no change of opinion was involved in initiating proceedings. The Tribunal affirmed the reassessment, holding that the issue was not a mere change of opinion but based on reasons leading to the formation of requisite satisfaction. The Tribunal also reversed the decision on the chargeability of tax under section 234B of the Act in favor of the Revenue. The court upheld the Tribunal's decision, citing settled law on the power of reassessment and the distinction between mere change of opinion and forming requisite satisfaction based on relevant material.Issue 2: Justification of canceling the deletion of interest charged under section 234B:The appellant contested the cancellation of the deletion of interest charged under section 234B. The Commissioner of Income-tax (Appeals) had set aside the charging of interest under section 234B, but the Tribunal reversed this decision in favor of the Revenue. The court upheld the Tribunal's decision, stating that if reassessment is upheld, the levy of interest cannot be objected to. The court found no substantial question of law arising from this issue as the Tribunal's judgment was consistent with settled law, including the Supreme Court's rulings on the exercise of power of reassessment.In conclusion, the court dismissed the appeal, affirming the Tribunal's decisions on both issues. The judgment emphasized the importance of following due procedure in reassessment cases and distinguishing between a mere change of opinion and forming requisite satisfaction based on relevant material. The court also highlighted the authority of settled law, including Supreme Court rulings, in guiding decisions on reassessment matters.