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2012 (10) TMI 528 - AT - Income TaxReassessment - After completion of assessment u/s 143(3), a notice us/ 148 was issued reopening the assessment u/s 147 - claim u/s 80HHC - held that - Re-opening has been made on the self same materials which are already available on record at the time of assessment u/s 143(3). Therefore, reopening of assessment made on the basis of very same material amounts to change of opinion. Further, the assessee has disclosed all material facts fully and truly, therefore reopening of assessment could not have been made beyond four years from the end of the assessment year in dispute i.e., 2004-05. - Decided in favor of assessee.
Issues Involved:
1. Validity of reassessment proceedings under Section 147 of the Income-tax Act, 1961. 2. Restriction of deduction claim under Section 80HHC. 3. Disallowance of interest under Section 14A. 4. Disallowance of car depreciation under Section 14A. Issue-wise Detailed Analysis: 1. Validity of Reassessment Proceedings under Section 147: The assessee challenged the initiation of proceedings under Section 147 beyond the period of four years, arguing that they had furnished full and complete particulars. The facts reveal that the assessee filed its return on 1-11-2004, which was initially processed under Section 143(1) but later scrutinized under Section 143(2). The AO issued a notice under Section 148 after the initial assessment, claiming that the assessee should have claimed deduction under Section 80HHC(3)(a) instead of Section 80HHC(3)(b), and also raised issues regarding interest on loans and car depreciation. The CIT (A) upheld the reassessment, stating that mere production of account books does not equate to full disclosure. However, the Tribunal found that the assessee had disclosed all material facts fully and truly, and the reopening was based on the same materials already available during the initial assessment. Citing precedents, the Tribunal held that reopening based on a change of opinion is not justified, especially beyond four years. Consequently, the reassessment proceedings were deemed invalid. 2. Restriction of Deduction Claim under Section 80HHC: The AO restricted the assessee's claim for deduction under Section 80HHC at Rs. 4,77,099 instead of Rs. 18,27,687, arguing that the assessee, being a manufacturer, should have claimed deduction under Section 80HHC(3)(a). The Tribunal found that the assessee had disclosed all relevant facts and materials supporting its claim under Section 80HHC(3)(b) as a trader of gold ornaments. The audit report and other documents confirmed the trading activity. The Tribunal noted that the AO had accepted similar claims in earlier years, and there was no new material to justify a different view. Thus, the Tribunal sided with the assessee, finding no failure in disclosure. 3. Disallowance of Interest under Section 14A: The AO disallowed Rs. 22,10,408 towards interest on loans, claiming it was not allowable under Section 14A as the assessee had earned exempted income from investments in mutual funds. The Tribunal observed that the assessee had disclosed all material facts regarding the interest payment and investments. The AO had examined these facts during the initial assessment. Therefore, the Tribunal found no basis for disallowance under Section 14A, as the reassessment was based on the same disclosed facts. 4. Disallowance of Car Depreciation under Section 14A: The AO disallowed 1/4th of the car depreciation for personal use, which the assessee had not disallowed while claiming depreciation. The Tribunal noted that the assessee had fully disclosed the motor car expenses and depreciation details. The AO had considered these during the initial assessment. The Tribunal found no new material justifying the disallowance, reinforcing that the reassessment was a mere change of opinion. Conclusion: The Tribunal concluded that the reassessment proceedings initiated beyond four years based on the same facts already disclosed by the assessee were invalid. The appeal filed by the assessee was allowed, and the reassessment order was quashed. Consequently, the other grounds on merits of the addition became academic and were not adjudicated.
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