2007 (7) TMI 8 - HC - Income Tax

Assessing Officer u/s 143(3) and CIT (A) allowed deduction u/s 80HHD. An appeal filed by Revenue is pending before ITAT. Where the assessee has already complied with the requirements of Section 80HHD(4), the question of complying with the said provisions once again does not arise. Notice issued under section 148 quashed.

Summary

Issues:
Challenge to reopening of completed assessments for A.Y.2000-01 and A.Y.2001-02 under Section 148 of the Income Tax Act, 1961.

Analysis:
The High Court of Bombay heard two petitions challenging the reopening of assessments for A.Y.2000-01 and A.Y.2001-02 under Section 148 of the Income Tax Act, 1961. The Assessing Officer sought to reopen the assessments based on the grounds that the assessee had not utilized the amount credited to the '80HHD reserve account' for specific purposes as required by Section 80HHD(4) of the Act. The Assessing Officer contended that a certain amount had been transferred to the '80HHD utilised account' but not utilized for the purposes specified, leading to alleged income escaping assessment. The assessee objected to the reopening, arguing that the amount had been utilized as required by law. The court examined the provisions of Section 80HHD, which allow deductions for hotels, tour operators, and travel agents. It was noted that if the amount credited to the reserve account is not utilized for specified investments, it becomes chargeable to tax. The court analyzed the contentions of both parties, focusing on the utilization of funds and compliance with Section 80HHD requirements.

The court considered the arguments presented by both sides. The petitioner's counsel contended that the amount credited to the '80HHD reserve account' had been utilized for the specified purposes, and the transfer to the '80HHD utilised account' did not violate Section 80HHD. The revenue's counsel argued that the assessments were reopened based on audit objections and cited a relevant Supreme Court judgment. The revenue contended that the amount transferred to the '80HHD utilised account' had not been fully utilized for the specified purposes, justifying the reopening of assessments. The court emphasized the importance of genuine reasons for reopening assessments and examined the utilization of funds in detail.

After thorough analysis, the court found that the assessee had complied with the requirements of Section 80HHD(4) by utilizing the funds for specified purposes. The court noted that the transfer of funds to the '80HHD utilised account' did not constitute a violation of Section 80HHD. The court rejected the revenue's argument that income had escaped assessment due to alleged non-utilization of funds, stating that the facts did not support such a claim. Consequently, the court quashed and set aside the notices issued under Section 148 of the Act and the order rejecting the objections. The petition was allowed, with no costs imposed on either party.