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2015 (9) TMI 67 - AT - Income TaxValidity of reopening of assessment - claim for deductions under section 80HHC and 80IA - Held that - In the course of the original assessment proceedings the claim for deductions under section 80HHC and 80IA of the Act were discussed in length and on those issue the matter was carried in appeal before the ld. CIT(A) who had partly allowed the appeal. On these facts, in the light of the law laid down by Hon ble jurisdictional High Court in the case of United Phosphorus Limited vs. ACIT 2011 (3) TMI 1555 - GUJARAT HIGH COURT , the order of the A.O. stood merged with the order of the CIT(A) and had no existence of it s own, and, as such, assessment could not be reopened in respect of the said item. For this short reason alone, the impugned reassessment proceedings must stand quashed. When it was put to the learned Departmental Representative, he did not have much to say except to place reliance on the stand of the authorities below and submit that a particular aspect of the deduction was not specifically considered by the A.O. and the ld. CIT(A). That aspect of the matter is, however, not really relevant because once we come to the conclusion that order of the A.O. stood merged in the order of the ld. CIT(A) on the issue of deduction under section 80IA and 80HHC of the Act, as we are obliged to hold in the light of law laid down by Hon ble jurisdictional High Court, these aspect of the matter are wholly academic. - Decided in favour of assessee.
Issues Involved:
1. Validity of reassessment proceedings under Section 147 of the Income Tax Act, 1961. 2. Merits of reassessment on various grounds including allocation of R&D expenses, higher interest receipts, and computation of deductions under Sections 80HHC and 80IA. Detailed Analysis: 1. Validity of Reassessment Proceedings: The primary issue raised by the assessee was the validity of the reassessment proceedings initiated under Section 147 of the Income Tax Act, 1961. The assessee contended that the reassessment was based on a mere change of opinion on issues already considered in the original assessment under Section 143(3). The reassessment was challenged on the grounds that it was initiated without any new material or evidence, and thus lacked jurisdiction. The tribunal observed that the original assessment proceedings had thoroughly discussed the claims for deductions under Sections 80HHC and 80IA. The matter was also carried in appeal before the CIT(A), who had partly allowed the appeal. The tribunal referred to the legal position laid down by the Hon'ble jurisdictional High Court in the case of United Phosphorus Limited vs. ACIT, which stated that the order of the Assessing Officer (A.O.) merges with the order of the CIT(A) and has no independent existence. Consequently, the assessment could not be reopened in respect of the said items. The tribunal concluded that the reassessment proceedings were vitiated in law and quashed the impugned reassessment order for the Assessment Year 2000-01. This decision rendered all other issues raised in the cross appeals infructuous and academic. 2. Merits of Reassessment: Despite the primary issue's resolution, the tribunal briefly addressed the merits of the reassessment grounds, which included: (a) Voluminous Details Submitted: The A.O. contended that the details submitted by the assessee were confusing and intended to frustrate quick understanding. However, the tribunal found this ground insufficient to justify reopening. (b) Higher Interest Receipts from Aditya Medisales Limited: The A.O. argued that the assessee received higher interest from Aditya Medisales Limited, inflating the profits eligible for deduction under Section 80IA. The tribunal noted that this aspect was part of the original assessment and thus could not be grounds for reopening. (c) Reduced Allocation of R&D Expenses: The A.O. claimed that the assessee had allocated R&D expenses arbitrarily, leading to higher profits for units eligible for Section 80IA deduction. The tribunal found that this issue was also considered in the original assessment. (d) Double Deduction on Exports: The A.O. alleged that the assessee claimed double deduction on exports under Sections 80HHC and 80IA. The tribunal held that this issue was part of the original assessment proceedings. (e) Netting of Interest Income and Expenditure: The A.O. contended that the netting of interest income and expenditure for computing profits under Section 80HHC was improper. The tribunal found this issue to be academic in light of its primary finding. Conclusion: The tribunal allowed the assessee's appeal for the Assessment Year 2000-01, quashing the reassessment proceedings and rendering the Revenue's appeal infructuous. The same decision was applied mutatis mutandis to the cross appeals for the Assessment Year 2001-02, resulting in the allowance of the assessee's appeal and dismissal of the Revenue's appeal as infructuous.
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