2012 (2) TMI 302 - AT - Income Tax

Validity of Re-assessment under 147 - Held That - The amount of deduction claimed u/s 80IB amounting toRs.78,82,237/- was required to be deducted from profits and gains of business while calculating deduction u/s 80HHC. This has resulted in excess allowance of deduction u/s 80HHC to the extent of Rs.38,59,364 therefore issue of show cause under 148 is valid. Deduction under 80HHC and 80IA - Held That - In view of CIT V Sharon Vencers (P) Ltd.(Madras High Court), CIT vs Great Easter Exports (2010 - TMI - 202426 - DELHI HIGH COURT) and Olam Exports India Ltd. V CIT (2009 - TMI - 204204 - KERALA HIGH COURT), held that deduction u/s 80HHC has to be calculated after deduction of the relief claimed u/s 80IA. Appeal of assessee rejected.

Summary

Issues:
1. Validity of re-opening the case u/s 148 of the IT Act, 1961.
2. Calculation of deduction u/s 80HHC after reducing the deduction allowed u/s 80IB.

Issue 1: Validity of re-opening the case u/s 148 of the IT Act, 1961:
The appeal challenged the re-opening of the case under Section 147 read with Section 148 of the Act. The AO re-opened the case due to the assessee's incorrect claim of deduction u/s 80IB, resulting in excess allowance of deduction u/s 80HHC. The AO issued a notice under Section 148 based on the belief that income had escaped assessment. The CIT(A) upheld the notice issuance, citing the violation of Section 80IA(9)/80IB(13) of the Act by the assessee. The Tribunal found a live nexus between the reasons recorded and income escapement, dismissing the appeal against the notice's validity.

Issue 2: Calculation of deduction u/s 80HHC after reducing the deduction allowed u/s 80IB:
The assessee contended that the deduction u/s 80HHC was wrongly computed by reducing the deduction allowed u/s 80IB. The CIT(A) upheld the AO's decision, stating that the assessee did not comply with Section 80IA(9) in its entirety. The Tribunal referred to relevant case laws and the decision of the Hon'ble Punjab & Haryana High Court in Friends Castings (P) Ltd. v. CIT, supporting the reduction of deduction under Section 80IB from business profits to compute deduction under Section 80HHC. The Tribunal dismissed the appeal, aligning with the legal interpretations and decisions provided by higher courts.

In conclusion, the Tribunal upheld the validity of re-opening the case under Section 148 and the correct computation of deduction u/s 80HHC after reducing the deduction allowed u/s 80IB, based on statutory provisions and legal precedents. The appeal of the assessee was dismissed, affirming the decisions of the lower authorities.