2011 (11) TMI 365 - HC - Income Tax

RE-opening of Income escaping assessment after 4 years from relevant A/Y- Deduction under 80HHC were allowed without allowing deduction under 80IB - Held That - All material facts were available on record and no material facts had to be inferred or discovered by the assessing officer. failure to apply law or a section to admitted facts on record is not covered by Explanation (1). When assessee had disclosed all the relevant facts AO could not issue notice under 148 after 4 years.

Summary

Issues:
1. Reassessment order challenged under Section 260A of the Income Tax Act, 1961.
2. Jurisdictional pre-conditions for initiation of reassessment proceedings.
3. Failure to disclose material facts for assessment.
4. Interpretation and applicability of Section 80IA(9) to deductions under Section 80HHC.
5. Applicability of Explanation 1 and Explanation 2(c)(iv) to Section 147 of the Act.

Analysis:
1. The case involved a challenge to a reassessment order under Section 260A of the Income Tax Act, 1961, for the assessment year 2000-01. The tribunal had set aside the reassessment order due to jurisdictional pre-conditions not being satisfied, specifically regarding the deduction under Section 80HHC and Section 80IB.

2. The Assessing Officer initiated reassessment proceedings based on the deduction claimed under Section 80HHC without reducing the deduction claimed and allowed under Section 80IB, as required by Section 80IA(9). The tribunal found that the original return of income had been duly filed, and the Assessing Officer had already examined and restricted the deduction claimed under Section 80HHC during the original assessment proceedings.

3. The tribunal examined whether there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. It was noted that the reassessment was initiated after four years from the end of the financial year, making the proviso of Section 147 applicable. The tribunal concluded that there was no failure on the part of the assessee to disclose material facts, as the primary facts were available and considered during the original assessment.

4. The interpretation and applicability of Section 80IA(9) to deductions under Section 80HHC were subject to debate. The tribunal considered conflicting decisions on this matter but ultimately focused on whether the assessee had made full and true disclosure of material facts, which was found to be the case in this instance.

5. The tribunal also analyzed the applicability of Explanation 1 and Explanation 2(c)(iv) to Section 147 of the Act. It was concluded that these explanations did not assist the Revenue, as all material facts were available on record, and the assessing officer had failed to draw correct legal inferences during the original assessment, which was not the fault of the assessee. The tribunal's decision was upheld, dismissing the appeal on substantial questions of law.