2015 (3) TMI 892 - HC - Income Tax

Reopening of assessment - AO deleted the deduction under Section 80IB - ITAT not upholding the issuance of notice under Section 148 valid - Held that - From the record, it appears and it is not disputed by Shri Bhatt, learned Counsel appearing on behalf of the revenue that as such alongwith the original return for the Assessment Year 2003-04 the assessee had produced the balance sheet in which the total value of the Plant and Machinery was ₹ 4,73,81,571/. Despite the above, the Assessing Officer allowed the deduction under Section 80IB of the Act and, therefore, as such, it cannot be said that there was any omission and / or suppression on the part of the assessee in not disclosing the true and correct facts. If that be so, it cannot be said that the learned tribunal has committed any error in holding the reassessment proceedings for the Assessment Year 2003-04 as bad in law. We confirm the finding recorded by the learned tribunal that initiation of the reassessment proceedings for the Assessment Year 2003-04 was not permissible and was not legal and as such was bad in law. Under the circumstances, the learned tribunal has rightly not considered the appeal preferred by the revenue which was on merits of deletion of disallowance under Section 80IB of the Act. Under the circumstances, there is no substance in the present Tax Appeals and the same deserves to be dismissed. No substantial question of law arise - Decided against revenue.

Summary

Issues involved:
1. Validity of initiation of reassessment proceedings beyond the period of four years under Section 147 of the Income Tax Act.
2. Eligibility of deduction under Section 80IB of the Income Tax Act based on investment in fixed assets.

Detailed Analysis:

Issue 1: Validity of initiation of reassessment proceedings beyond the period of four years under Section 147 of the Income Tax Act.
The case involved the initiation of reassessment proceedings by the Assessing Officer for the Assessment Year 2003-04 beyond the four-year period. The Assessing Officer contended that the assessee, who claimed deduction under Section 80IB of the Act, exceeded the investment limit in Plant & Machinery, making them ineligible for the deduction. The Assessing Officer passed a reassessment order disallowing the deduction under Section 80IB. The assessee challenged this reassessment, arguing that the initiation of proceedings beyond four years was illegal as there was no suppression or omission on their part. The CIT(A) upheld the initiation of proceedings but deleted the disallowance of deduction under Section 80IB. The tribunal allowed the Cross Objections by the assessee, holding the initiation of reassessment proceedings as bad in law. The High Court confirmed the tribunal's decision, stating that as the assessee had disclosed the value of Plant & Machinery in the original return, there was no omission or suppression, making the reassessment proceedings invalid.

Issue 2: Eligibility of deduction under Section 80IB of the Income Tax Act based on investment in fixed assets.
The dispute arose regarding the eligibility of the assessee for deduction under Section 80IB of the Act due to exceeding the investment limit in Plant & Machinery. The Assessing Officer disallowed the deduction, leading to appeals and cross-objections. The High Court's decision primarily focused on the validity of the reassessment proceedings. The court found that since the assessee had disclosed the total value of Plant & Machinery in the original return, there was no omission or suppression, rendering the initiation of reassessment proceedings beyond four years as illegal. Consequently, the court dismissed the Tax Appeals, upholding the tribunal's decision that the initiation of reassessment proceedings for the Assessment Year 2003-04 was not permissible and was bad in law. The court clarified that the order would apply only to the specific assessment year in question.

In conclusion, the High Court upheld the tribunal's decision, emphasizing that the initiation of reassessment proceedings beyond the four-year period without any omission or suppression on the part of the assessee was invalid. The court dismissed the Tax Appeals and clarified the applicability of the order to the specific Assessment Year 2003-04, where the reassessment proceedings were found to be legally flawed.