2012 (4) TMI 597 - AT - Income Tax

Summary

Issues Involved:
1. Validity of reopening assessment u/s 148.
2. Disallowance u/s 35D.
3. Disallowance u/s 14A.

Summary:

Issue 1: Validity of Reopening Assessment u/s 148
- The Revenue filed an appeal against the order of the CIT (A) for the assessment year 2000-01, challenging the reopening of assessment finalized on 31.3.2003.
- The Assessing Officer issued a notice u/s 148 on 31.3.2005 for reasons including changes in accounting methods, deductions u/s 35D, calculation of deduction u/s 80HHF, and verification of dividend payment.
- The CIT (A) set aside the reassessment order, finding that no income had escaped assessment, the reopening was based on audit objections, proceedings u/s 263 had been dropped, and there was no reason to believe for reopening.
- The Tribunal upheld the CIT (A)'s order, stating that reopening based on audit objections is impermissible and constitutes a mere change of opinion without fresh material.

Issue 2: Disallowance u/s 35D
- For the assessment year 2002-03, the Assessing Officer disallowed expenses u/s 35D, citing that the expenditure was incurred after the commencement of business.
- The CIT (A) deleted the disallowance, stating that the claim pertained to earlier assessment years and not the year under consideration.
- The Tribunal agreed with the CIT (A), noting that once a claim is accepted u/s 35D, it cannot be withdrawn in later years, and the case law cited by the Revenue was not applicable.

Issue 3: Disallowance u/s 14A
- The Assessing Officer disallowed interest u/s 14A, attributing part of the borrowed funds to investment in shares.
- The CIT (A) deleted the disallowance, finding no expenditure relatable to exempt income for the year under consideration.
- The Tribunal upheld the CIT (A)'s decision, noting that investments were made before accepting deposits, and the Revenue failed to provide material to counter the CIT (A)'s findings.

Conclusion:
- The Tribunal dismissed the Revenue's appeals for the assessment years 2000-01, 2002-03, 2003-04, and 2004-05, upholding the CIT (A)'s orders on all issues.