2018 (2) TMI 1756 - AT - Income Tax

Reopening of assessment - deduction u/s 80IB - Held that - As is evident from the letter dated 13.06.2008 the return was already processed u/s 143(1) of the Act on 30.03.2007. The reason for reopening the assessment were recorded only after the assessee vide letter dated 7.7.2008 has furnished the information called for by the AO. According to the learned DR the AO had called for information to satisfy herself about the reasons for reopening of the assessment. We find that there is no such provision in the Act to initiate re-assessment proceedings after requiring the assessee to furnish the information. However we also cannot consider the letter dated 13.06.2008 as a notice u/s 143(2) as 143(2) notice should have been issued before the expiry of 12 months from the end of the month in which the return is furnished and the AO could not have issued the notice u/s 142(1) once time period for issuance of notice u/s 143(2) has expired. Therefore the letter dated 13.06.2008 cannot be considered as a notice either u/s 143(2) or u/s 142(1) of the Act and assessee s contention that the reassessment proceedings have been initiated when the assessment proceedings are pending is not substantiated. Disallowance of the deduction u/s 80IB(5)(ii) though on a ground different from the reasons mentioned for reopening of the assessment - Held that - When an assessment is reopened on any one ground which is sustained in the reassessment proceedings the entire assessment is before the AO and he can consider any other issue which has come to his notice during the re-assessment proceedings as held by the full Bench in the case of CIT vs. Best Wood (2010 (12) TMI 748 - KERALA HIGH COURT). The assessment was reopened to consider the allowability of the deduction u/s 80IB of the Act and the disallowance of deduction u/s 80IB(5)(ii) has been made during the re-assessment proceedings and therefore we do not agree with the contention of the assessee that the re-assessment proceedings are invalid. Therefore ground of appeal No.3 is rejected. Deduction u/s 80IA - Held that - Initial A.Y referred to in section 80IA would only be the year of deduction u/s 80IA claimed for the first time out of the total period and not the year of commencement of eligible business and that the assessee had the option to choose the initial A.Y for claiming the deduction u/s 80IA. Therefore there is no infirmity in the assessee making the claim u/s 80IB during the A.Y before us. Computation of deduction u/s 80IB - Held that - In the case of the assessee though the assessee has got its books of account audited and Form 10CCB is signed by the C.A. of the assessee company the report is not signed by the CA but is signed by the authorized signatory. However as rightly pointed out by the learned Counsel for the assessee there is no variation in the claim of deduction u/s 80IB(5) in Form No.10CCB and P 65, 000 to institutions registered u/s 80G of the Act. In the absence of any material in support of assessee s claim the same cannot be entertained. Therefore Ground of appeal No.4 is rejected.

Summary

Issues Involved:
1. Validity of the reassessment proceedings under Section 148 of the Income Tax Act.
2. Disallowance of deduction under Section 80IB of the Income Tax Act.
3. Disallowance of deduction under Section 80G of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of the reassessment proceedings under Section 148 of the Income Tax Act:
The assessee contended that the reassessment was invalid as it was based on issues not mentioned in the original reasons for reopening. The Tribunal noted that the Assessing Officer (AO) had called for information before issuing the notice under Section 148. The AO's letter dated 13.06.2008 was not specified under any particular section, and the proceedings initiated with this letter were not concluded before issuing the notice under Section 148. The Tribunal held that the letter dated 13.06.2008 could not be considered a notice under Sections 143(2) or 142(1) as the time for issuing such notices had expired. The Tribunal also found that the reassessment was valid as the AO disallowed the deduction under Section 80IB(5)(ii) during the reassessment proceedings, which was one of the reasons for reopening the assessment. Therefore, the Tribunal rejected the assessee's contention that the reassessment proceedings were invalid.

2. Disallowance of deduction under Section 80IB of the Income Tax Act:
The assessee claimed a deduction under Section 80IB for its Midnapore Unit, which started production in the financial year relevant to the assessment year 2003-04 but claimed the deduction for the first time in the assessment year 2005-06. The Tribunal noted that the Supreme Court had held that the initial assessment year for claiming deduction under Section 80IA (and by extension, 80IB) could be chosen by the assessee and did not have to be the year of commencement of production. Therefore, the assessee's claim for the deduction in the assessment year 2005-06 was valid.

Regarding the computation of the deduction, the Tribunal referred to the Supreme Court's decision, which held that unabsorbed losses and depreciation from earlier years, already set off against other business income, could not be notionally brought forward and set off against the income of the eligible unit in the year the deduction was first claimed. Thus, the Tribunal held that the assessee was eligible to claim the deduction without setting off the unabsorbed losses and depreciation of earlier years.

The AO had also disallowed the deduction on the ground that the Profit & Loss Account (P&L A/c) and balance sheet of the Midnapore Unit were not certified by a Chartered Accountant (CA). The Tribunal found that while the P&L A/c and balance sheet were signed by the authorized signatory and not the CA, there was no variation in the claim of deduction in Form 10CCB and the P&L A/c and balance sheet filed during the reassessment proceedings. The Tribunal held that the AO's objection was technical and directed the AO to allow the deduction after verifying the claim.

3. Disallowance of deduction under Section 80G of the Income Tax Act:
The AO disallowed a sum of ?65,000 claimed as a deduction under Section 80G on the ground that the assessee could not furnish receipts for payments to various institutions. The Tribunal upheld the AO's disallowance as the assessee failed to provide evidence supporting the payment of ?65,000 to institutions registered under Section 80G.

Conclusion:
The Tribunal partly allowed the assessee's appeal. It upheld the validity of the reassessment proceedings and the disallowance under Section 80G but directed the AO to allow the deduction under Section 80IB after verifying the claim. The order was pronounced in the open court on 28th February 2018.