2002 (5) TMI 853 - AT - Income Tax

Summary

Issues Involved:
1. Validity of notice under section 148 due to a technical defect.
2. Legitimacy of reassessment under section 147 based on change of opinion.
3. Inclusion of interest income for deduction under section 80HHC.

Detailed Analysis:

1. Validity of Notice under Section 148:
The Revenue contended that the notice under section 148 was defective because the time allowed for filing the return fell short by one day, although the appellant was asked to file the return within 30 days of service of the notice. The CIT(A) held that the notice was defective, making the reassessment illegal and void. However, the Tribunal noted that the Finance Act, 1996, amended section 148, effective from 1-4-1989, removing the requirement of a minimum 30-day period for filing returns. Therefore, the Tribunal concluded that the notice issued after 1-4-1989 allowing the assessee 30 days to file the return was valid and could not be deemed illegal.

2. Legitimacy of Reassessment under Section 147 Based on Change of Opinion:
The assessee argued that the reassessment under section 147 was invalid as it was based on a mere change of opinion by the Assessing Officer (AO) on the same set of facts. The original assessment had considered the interest income from bank deposits as business income, and the deduction under section 80HHC was computed accordingly. The AO later issued a notice under section 148, seeking to exclude the interest income from the computation of the deduction under section 80HHC, which the assessee claimed was a change of opinion. The Tribunal agreed with the assessee, stating that section 147 does not empower the AO to review an assessment order on the same set of facts merely by a fresh application of mind. The Tribunal emphasized that the AO did not bring any fresh or new material on record, nor was there any fresh information received. Thus, the reassessment was deemed invalid and illegal as it was based on a change of opinion.

3. Inclusion of Interest Income for Deduction under Section 80HHC:
The CIT(A) had directed the AO to include the interest income of Rs. 119.16 lakhs from short-term deposits as business income for the purpose of allowing deduction under section 80HHC. The Revenue's contention was that this interest income should not be included for the deduction under section 80HHC. However, since the Tribunal held that the reassessment itself was invalid and illegal, the issue of inclusion of interest income for deduction under section 80HHC became infructuous and was not addressed on merits.

Conclusion:
The Tribunal dismissed the appeal, confirming the order of the CIT(A) that the reassessment made was illegal and void. The reassessment was invalidated primarily due to the AO's change of opinion on the same set of facts without any fresh material or information, and not because of the technical defect in the notice under section 148. Consequently, the Tribunal did not delve into the merits of including the interest income for deduction under section 80HHC.