2015 (8) TMI 852 - HC - Income Tax

Reopening of assessment - Deduction under Section 80 HHC reduced - Held that - Escaped assessment can always form the basis for re-opening of assessment. Department, on the question of law, pure and simple, may be correct in his submissions that under clause (c)(iv) under Explanation II to Section 147, computation of any allowance in excess of the permissible limits, can be ordered as a case where income chargeable to tax had escaped assessment. But, can that form the basis for re-opening of assessment is a most fundamental question to be answered. It is well settled that merely because another Assessing Officer finds some thing wrong with the order of assessment passed by the previous one, assessment cannot be re-opened. The provisions of Section 147, which enables the Assessing Officer, who has reason to believe that income chargeable to tax has escaped assessment to reopen the assessment and recompute the assessment, cannot be exercised merely because one officer finds fault with the previous one. Hence, we do not find any justification to entertain the appeal. Therefore, it is dismissed. - Decided in favour of assessee.

Summary

Issues:
- Appeal under Section 260(A) of the Income Tax Act, 1961 regarding deduction under Section 80 HHC for assessment year 2004-05.
- Re-opening of assessment order based on change of opinion.
- Interpretation of Section 147 for re-opening assessment due to excess deduction.

Analysis:
1. The Commissioner of Income Tax filed an appeal under Section 260(A) of the Income Tax Act, 1961, regarding a deduction claimed under Section 80 HHC for the assessment year 2004-05. The respondent assessee initially filed a return of income with a gross total income of &8377; 2,47,37,757/- and claimed a deduction of &8377; 71,64,030/- under Section 80 HHC.

2. Subsequently, the assessment was re-opened by the Assessing Officer, leading to a revised assessment order reducing the deduction allowable under Section 80 HHC from &8377; 68,58,976/- to &8377; 60,10,271/-. The respondent appealed the decision, which was rejected by the Commissioner of Income Tax (Appeals)-VIII. The assessee then appealed to the Income Tax Appellate Tribunal, which allowed the appeal, prompting the department to file the current appeal.

3. The High Court analyzed the re-opening of the assessment order based on a change of opinion. The court highlighted that the mere fact that another Assessing Officer found faults with the previous assessment order does not justify re-opening the assessment. The court emphasized that the provisions of Section 147 allow the Assessing Officer to re-open an assessment only if there is a reason to believe that income chargeable to tax has escaped assessment, not merely because of a difference in opinion between officers.

4. The court delved into the interpretation of Section 147, specifically addressing the issue of excess deduction as a basis for re-opening an assessment. While acknowledging that excess allowance can be a ground for re-opening under Explanation II to Section 147, the court emphasized that this alone cannot be the sole basis for re-opening an assessment. The court concluded that the re-opening of assessment solely based on a difference in opinion between Assessing Officers is not justified under the law.

5. In the final judgment, the High Court dismissed the appeal, stating that there was no justification to entertain it. The court emphasized that re-opening an assessment should be based on valid reasons to believe that income has escaped assessment and not on mere differences in opinion between Assessing Officers. The appeal was dismissed with no costs awarded.