2001 (8) TMI 48 - HC - Income Tax

Summary

Issues:
1. Validity of reopening assessment for withdrawing investment allowance under section 147 of the Income-tax Act, 1961.
2. Entitlement of the assessee to benefit of investment allowance on merits.

Analysis:

Issue 1: Validity of reopening assessment for withdrawing investment allowance under section 147 of the Income-tax Act, 1961:
The High Court considered the case of the assessee operating a cold storage plant for preserving frozen sea food. Referring to previous Supreme Court decisions, the court established that processing sea food in a cold storage plant does not amount to production or manufacture. The assessment granting investment allowance was reopened based on a decision of the Madhya Pradesh High Court, which held that investment allowance cannot be claimed for a cold storage plant due to lack of change in the stored articles. The Tribunal held that the reopening was not justified as it was a change of opinion and not based on new information. However, the High Court disagreed, stating that the reopening was justified as it was based on new information leading to the belief of income escapement. The court emphasized that the reopening was within the legal time limit and not a mere pretence, upholding the validity of the reassessment.

Issue 2: Entitlement of the assessee to benefit of investment allowance on merits:
The High Court analyzed the arguments presented by the assessee's counsel, who sought to distinguish the case from the decision of the Madhya Pradesh High Court. The court found the essential facts in both cases to be similar, and the law laid down in the previous case was relevant to the assessee's situation. The court concluded that the Income-tax Officer did not act in bad faith or pretend to base the reassessment solely on the previous judgment. Therefore, the Tribunal's decision that the reopening was not justified and that the assessee was entitled to investment allowance on merits was not sustained. Consequently, the High Court ruled in favor of the Revenue and against the assessee on both issues, denying the benefit of investment allowance to the assessee.

In summary, the High Court upheld the validity of reopening the assessment for withdrawing investment allowance and denied the assessee's entitlement to the benefit of investment allowance on merits, ruling in favor of the Revenue in this case.