2010 (1) TMI 934 - AT - Income Tax

Deduction u/s 80HHC without reducing the deduction u/s 80IB - assessee had submitted all the details regarding its claim of deduction u/s 80HHC and 80IA - CIT(Appeals) directed the AO to compute deductions u/s 80HHC and 80IA separately on stand alone basis - Held that - CIT(A) erred in directing the AO to allow deduction u/s 80HHC without reducing the deduction u/s 80IB of the IT Act & directing the AO to compute deductions u/s 80HHC and 80IA separately on stand alone basis. Present appeal is squarely covered in favour of Revenue by the decision of ACIT vs. Hindustan Mint and Agro Products Pvt. Ltd. 2009 (6) TMI 124 - ITAT DELHI-C Validity of re-assessment proceedings u/s 147 - Held that - Once the AO passed the assessment order u/s 143(3) it is deemed that the AO has already applied his mind and after forming the opinion the claim of the assessee is allowed. It cannot be said that the AO has not applied his mind. Reopening of assessment u/s 147 merely because there is a change of opinion cannot be allowed revenue are dismissed.

Summary

Issues Involved:
1. Deduction under Section 80HHC without reducing the deduction under Section 80IB.
2. Disallowance of commission payment.
3. Validity of reassessment proceedings under Section 147.

Detailed Analysis:

1. Deduction under Section 80HHC without reducing the deduction under Section 80IB:
The revenue contended that the CIT(Appeals) erred in directing the AO to allow deduction under Section 80HHC without reducing the deduction under Section 80IB. The assessee, engaged in manufacturing bulk drugs and chemicals, claimed deductions under Sections 80IA and 80HHC based on a Disclaimer Certificate. The AO opined that deduction under Section 80IA should be given only after allowing deduction under Section 80HHC. The CIT(Appeals) directed the AO to compute deductions separately. The ITAT, referring to the Special Bench decision in ACIT vs. Hindustan Mint and Agro Products Pvt. Ltd., held that deductions under Chapter VI-A should be reduced by the amount allowed under Sections 80IB/80IA. Consequently, the ITAT set aside the CIT(Appeals) order and restored the matter to the AO for fresh adjudication, allowing the revenue's appeal.

2. Disallowance of commission payment:
The AO disallowed Rs.1 lakh out of Rs.23,09,263/- paid as commission to the sister concern, M/s. Aarti Drugs Ltd., under Section 40A(2) of the IT Act, deeming it excessive and unreasonable. The CIT(Appeals) confirmed this addition. The assessee argued that all details were provided, and the disallowance was made without proper consideration. The ITAT, in the interest of justice, remitted the matter back to the AO for fresh adjudication, directing the AO to consider all furnished materials and provide an adequate hearing opportunity to the assessee. Thus, the cross objections were allowed for statistical purposes.

3. Validity of reassessment proceedings under Section 147:
The assessee challenged the reassessment proceedings for assessment years 2000-01 and 2001-02, arguing that the AO's action amounted to a change of opinion, which is not permissible. The original assessments were completed under Section 143(3), and no new material or information justified the reopening. The CIT(Appeals) upheld the reassessment, but the ITAT found that no new facts emerged post the original assessments. Citing the jurisdictional High Court's ruling in Asian Paints Ltd. vs. DCIT, the ITAT held that the AO cannot reopen assessments merely due to a change of opinion. Consequently, the ITAT quashed the reassessment orders for both years and allowed the cross objections.

Related Appeals:
For assessment years 2000-01 and 2001-02, the revenue appealed the CIT(Appeals) direction to allow deduction under Section 80HHC without reducing the deduction under Section 80IB. Given the ITAT's decision to quash the reassessment orders, these appeals by the revenue were dismissed.

Conclusion:
The ITAT allowed the revenue's appeal regarding the deduction under Section 80HHC for assessment year 2003-04, remitted the commission disallowance issue back to the AO, and quashed the reassessment orders for assessment years 2000-01 and 2001-02, dismissing the related revenue appeals.