2013 (8) TMI 365 - AT - Income Tax

Notice u/s 148 - Deduction allowed u/s 80IA and 80HHC - CIT quashed notice holding that no new material found - Held that - All details were available before the Assessing Officer at the time of original assessment proceedings and assessee has filed these details along with return of income and AO has allowed the claim of the assessee after examining all these documents and passed a speaking order - AO has not pointed out any specific defect or omission on the part of the assessee - AO in original assessment allowed the claim of the assessee for deduction u/s.80HHD and 80-IA of the Act after examining the relevant details and even the computation made by AO in respect of the claim of these deductions are as per the provisions of Chapter-VI referred to now by the AO were very much available at the time of original assessment also - AO could not bring any new material which was not disclosed earlier nor there was an error in the computation of income filed along with the return of income - Following decision of CIT Vs. Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT OF INDIA - Decided against Revenue.

Summary

Issues Involved:
1. Validity of re-assessment proceedings initiated by the Assessing Officer (AO) under Section 147 read with Section 148 of the Income-tax Act, 1961.
2. Whether the AO was justified in re-computing deductions under Sections 80HHD and 80IA of the Income-tax Act.
3. Whether the assessee failed to disclose fully and truly all material facts necessary for the assessment.

Detailed Analysis:

1. Validity of Re-assessment Proceedings:
The core issue in the appeal was the validity of the re-assessment proceedings initiated by the AO under Section 147 read with Section 148 of the Income-tax Act. The AO issued a notice for re-opening the assessment on the grounds that there was an under-assessment of income due to the non-inclusion of Rs. 37,00,00,000/- transferred to the Profit and Loss account from reserves, and an omission in allowing deductions under Section 80IA and 80HHD.

The CIT(A) quashed the re-opening of the assessment, stating that:
- The claims for deductions under Sections 80HHD and 80IA were made in the original return and supported by relevant documents.
- The claims were examined and allowed by the AO in the original assessment order under Section 143(3).
- The notice for re-opening was issued after four years from the end of the relevant assessment year.
- The recorded reasons did not specify any material facts that the assessee failed to disclose, leading to the escapement of income.
- There was no new information or change in the legal position to justify the re-opening.

The Tribunal upheld the CIT(A)'s decision, noting that the AO's attempt to re-open the assessment was based on a mere change of opinion, which is not a valid ground for re-assessment as per the Supreme Court's ruling in CIT Vs. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC). The Tribunal emphasized that the AO must have "tangible material" to justify the re-opening of the assessment.

2. Re-computation of Deductions under Sections 80HHD and 80IA:
The AO re-computed the deductions under Sections 80HHD and 80IA, stating that the assessee had not excluded the income from the Bangalore unit, on which deduction under Section 80IA was claimed, while claiming deduction under Section 80HHD. The AO reduced the deduction under Section 80HHD from Rs. 48,98,74,299/- to Rs. 33,05,30,050/-.

The CIT(A) found that:
- The deductions were allowed in the original assessment after examining the relevant documents.
- The re-computation was based on the same set of facts already available during the original assessment.
- The AO's action was a mere change of opinion, which does not justify re-assessment.

The Tribunal agreed with the CIT(A), stating that the AO could not bring any new material that was not disclosed earlier. The details of the deductions were available in the original assessment, and the AO's re-computation was not based on any new information.

3. Full and True Disclosure of Material Facts:
The AO alleged that the under-assessment was due to the failure of the assessee to disclose fully and truly all material facts necessary for the assessment. However, the CIT(A) and the Tribunal found that:
- The assessee had disclosed all primary facts necessary for the assessment in the original return.
- The AO had examined these facts during the original assessment and allowed the deductions.
- The re-opening of the assessment was not justified as there was no failure on the part of the assessee to disclose material facts.

The Tribunal concluded that the re-assessment proceedings were invalid as they were based on a mere change of opinion without any new material or information. The Tribunal upheld the CIT(A)'s order quashing the re-assessment proceedings and dismissed the Revenue's appeals and the assessee's cross objections as infructuous.