2012 (1) TMI 215 - AT - Income Tax

Summary

Issues involved: Validity of reopening of assessment u/s 147 based on change of opinion and excess deduction under section 80HHC.

Validity of Reopening of Assessment u/s 147:
The appeal was filed against the order of the ld. CIT(A) confirming the reopening of the assessment u/s 147 and making additions. The assessee contended that the reopening was beyond the four-year limit from the end of the assessment year and was based on a change of opinion. The Assessing Officer had recorded reasons for reopening, citing a calculation mistake in the original assessment order leading to excess deduction under section 80HHC. However, the reasons were found to be vague and lacking clarity on the calculation error and the basis for allowing the excess deduction. The Tribunal referred to legal precedents emphasizing that reasons for reopening must be clear and objective. As the reasons provided were deemed insufficient, the Tribunal canceled the assessment and allowed the appeal of the assessee.

Excess Deduction under Section 80HHC:
The original assessment under section 143(3) allowed a deduction of &8377; 71,64,030 under section 80HHC based on export sales. However, the Assessing Officer treated quota sales as local sales, reducing the deduction to &8377; 68,58,976. The ld. CIT(A) directed to allow the full deduction of &8377; 71,64,030 without addressing the issue of quota sales. The Tribunal noted that the ld. CIT(A) did not discuss the issue raised by the AO regarding quota sales in the assessment order. The Tribunal highlighted that the Department's acceptance or appeal against the CIT(A)'s order was not clear. Citing legal precedents, the Tribunal emphasized the need for clear and unambiguous reasons for any adjustments in deductions. As the reasons for reducing the deduction were not adequately supported, the Tribunal found in favor of the assessee, rendering the other grounds of appeal academic and allowing the appeal.

Conclusion:
The Tribunal ruled in favor of the assessee, canceling the impugned assessment due to insufficient and vague reasons for reopening under section 147 and lack of clarity in reducing the deduction under section 80HHC. The appeal was allowed, and the assessment was deemed infructuous.