2006 (7) TMI 353 - AT - Income Tax

Summary

Issues:
1. Validity of reopening assessment under section 148 of the Income-tax Act.
2. Treatment of share of loss from a partnership firm while computing book profit under section 115JA of the Income-tax Act.

Issue 1: Validity of reopening assessment under section 148:

The appeal by the Revenue challenged the CIT(A)'s order regarding the reopening of assessment for the year 1997-98 under section 148 of the Income-tax Act. The Revenue contended that the income chargeable to tax was under-assessed due to the omission to increase the book profit by the share of loss from a partnership firm. The Departmental Representative argued that the reopening was based on new information within four years of the original assessment. The assessee claimed it was a case of a mere change of opinion by the Assessing Officer, citing relevant case laws. The Tribunal held that the share of loss was known to the Assessing Officer during the original assessment and, therefore, reopening the assessment was a change of opinion, not a valid reason. The Tribunal dismissed the appeal, stating that no mistake was found in the CIT(A)'s decision.

Issue 2: Treatment of share of loss from a partnership firm in computing book profit under section 115JA:

The second ground of appeal by the Revenue concerned the addition of the share of loss from a partnership firm while computing book profit under section 115JA of the Income-tax Act. The Departmental Representative argued that the provisions of the Act required the inclusion of loss in the computation of income. The assessee contended that the special provisions of Chapter XII-B should be strictly construed and that the word "income" should not include "loss" in this context. The Tribunal observed that the provisions of Chapter XII-B were specific to certain companies and required strict application. It held that the share of loss from the partnership firm should not be added to the book profit as it was not credited to the profit and loss account. The Tribunal upheld the CIT(A)'s decision that the addition made by the Assessing Officer was not in accordance with the law. Therefore, the appeal on this issue was also dismissed.

In conclusion, the Tribunal dismissed the Revenue's appeal, ruling against the validity of reopening the assessment under section 148 and the treatment of share of loss from a partnership firm while computing book profit under section 115JA of the Income-tax Act.