2015 (1) TMI 819 - HC - Income Tax

Entitlement to deduction u/s.80IA - Reopening of assessment - Held that - It appears that the Assessing Officer had reopened the assessment on the ground that the activity of the assessee was not manufacturing activity and that the industrial undertaking was formed by splitting up the business which was already in existence. However, we find that there was nothing on record from which the Assessing Officer could have come to the conclusion that the assessee-firm was formed by splitting up of an industrial undertaking already in existence. There should have been something on record with the A.O for reopening the assessment alleging that the firm was formed by splitting up of an industrial undertaking already in existence. Thus the Assessing Officer could not be justified in stating that the assessee was formed by splitting up of an industrial undertaking. In any case, having not disallowed the claim of the assessee on this ground, the ground for reopening should also have failed. - Decided in favour of the assessee

Summary

Issues:
Challenge to the validity of reopening of assessment under Section 80IA of the Income Tax Act, 1961.

Analysis:
The appeal was filed against the judgment and order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench, where the Cross Objection filed by the assessee was allowed. The assessee, a partnership firm engaged in printing works, had claimed a deduction under Section 80IA of the Income Tax Act, 1961 for the A.Y. 2000-01. The Assessing Officer initially disallowed the deduction, leading to an appeal before the CIT(A) and subsequently before the Appellate Tribunal. The Tribunal dismissed the appeals but allowed the cross objection filed by the assessee, prompting the present appeals. The substantial question of law admitted for consideration was whether the reopening of the assessment was valid based on the outcome of the assessment.

Upon examination, it was found that the Assessing Officer had reopened the assessment on the premise that the assessee was not engaged in manufacturing activity and that the industrial undertaking was formed by splitting up an existing business. However, the Court noted that there was no evidence on record to support the conclusion that the firm was formed by splitting up an industrial undertaking already in existence. The Tribunal's observations highlighted that the reopening was unjustified as there was no fresh material available beyond what was considered in the original assessment. The Tribunal also emphasized that the Assessing Officer's satisfaction for reopening the assessment lacked a basis in the absence of any material on record supporting the claim of splitting up an industrial undertaking.

Consequently, the Court held that the reopening of the assessment was invalid based on the outcome of the assessment. The appeal was dismissed in favor of the assessee, affirming that the Assessing Officer's grounds for reopening the assessment were unfounded due to the lack of supporting material.