2012 (7) TMI 796 - HC - Income Tax

Reassessment proceedings - disallowance of the deduction u/s 80IA(4) - Held that - CIT(A) expressly stating that the action of the AO of not allowing the deduction for the A.Y. 2008-2009 was erroneous inter-alia in view of the judgment in Commissioner of Income Tax v. Paul Brothers 1992 (10) TMI 5 - BOMBAY HIGH COURT that a deduction could not have been denied in subsequent years without first withdrawing it in the initial year - in favour of assessee.

Summary

Issues:
Challenge to notice under section 148 of the Income Tax Act and order disposing of objections to reassessment proceedings regarding deduction under section 80IA(4) for a container freight station (CFS) undertaking.

Analysis:
The petitioners challenged a notice under section 148 of the Income Tax Act and an order regarding reassessment proceedings for claiming a deduction under section 80IA(4) for their CFS undertaking. They had been availing the deduction from A.Y. 2002-2003 to A.Y. 2007-2008 but were denied it for A.Y. 2008-2009, leading to the reopening of assessments for 2004-2005 to 2007-2008. The petitioners argued that unless deductions allowed in previous years were withdrawn, they could not be denied benefits in subsequent years. They cited judgments emphasizing that relief granted in the initial year must be disturbed or changed on valid grounds before being withheld in subsequent years.

The reassessment proceedings primarily focused on the disallowance of the deduction for A.Y. 2008-2009. The petitioners highlighted an order by the CIT (A) overturning the AO's decision, citing the judgment in Commissioner of Income Tax v. Paul Brothers. The department had not challenged this order, strengthening the petitioners' case for interim reliefs. The court acknowledged the strong prima facie case made by the petitioners and granted interim reliefs as requested, with an expedited hearing and liberty to apply for a fixed date if the department filed an appeal before the Income Tax Appellate Tribunal.

This judgment underscores the importance of valid grounds for denying deductions in subsequent years following relief granted in the initial assessment year. It also highlights the significance of judicial precedents in interpreting tax laws and ensuring fair treatment for taxpayers in reassessment proceedings.