2022 (2) TMI 1401 - AT - Income Tax

Reopening of assessment u/s 147 - deduction u/s 80IA disallowed - notice after four years from the end of relevant assessment year - as per AO deduction could not be allowed on old existing infrastructure facility, as such, the assessee does not fulfil the requisite condition for claiming deduction u/s 80IA - HELD THAT - As there was no failure on the part of the assessee in disclosing fully and truly all necessary for assessment as the assessing officer fully and extensively examined the whole of the claims while finalising the assessment. The AO solely relied on the material information available on record. As assessment order passed by AO was the subject-matter of appeal before CIT(A) and principle of merger would apply. Moreover, there is no tangible material before the AO to reopen the assessment. Thus, we hold that the action of AO for re-opening is not valid as the original scrutiny assessment was the subject-matter of appeal before Ld. CIT(A) and again appeal before Tribunal, moreover, the action of Assessing Officer is based on change of opinion on similar set of fact. Moreover, it was overreaching to the decisions of the superior authorities on the similar set of fact on similar issues. Therefore, the re-opening is held as invalid and subsequent action initiated thereof are void ab initio. Disallowance of 10% ad hoc expenses for earning income from other source (interest income) - There is no dispute on the fact that the AO disallowed ad hoc expense @ 10% by taking view that no nexus was proved in the setting aside proceedings and that the assessee again failed to prove the nexus with the expense qua the interest income earned. Before us the assessee could not substantiate the cross- examination made the submission that same expense is certainly incurred. In the absence of any nexus, we are unable to concur with the submission of Ld. Sr. counsel for the assessee. Therefore, we affirm the order of Ld. CIT(A). In the result of assessee s appeal is dismissed. Penalty levied u/s 271(1)(c) - HELD THAT - As in quantum appeal we have set aside the assessment order by holding as invalid and based on change of opinion thereby accepted the appeal of assessee, therefore, the addition of disallowance under section 80IA does not survive, therefore penalty levied u/s 271(1)(c) has no leg to stand.

Summary

Issues Involved:
1. Validity of reopening the assessment under section 148 of the Income-tax Act, 1961.
2. Eligibility for deduction under section 80IA of the Income-tax Act.
3. Levying of interest under sections 234B and 234D of the Income-tax Act.
4. Disallowance of various expenses and incomes in the assessment.
5. Computation of book profits under section 115JB of the Income-tax Act.
6. Penalty under section 271(1)(c) of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Validity of Reopening the Assessment under Section 148:
The assessee challenged the reopening of the assessment under section 148, arguing it was based on a mere change of opinion. The original assessment was completed under section 143(3), and the deduction under section 80IA was partly disallowed and subsequently upheld by the CIT(A) and Tribunal. The Tribunal noted that the reopening was beyond four years from the end of the assessment year, and there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The Tribunal held that the reopening was invalid as it was based on a change of opinion and overreaching the decisions of superior authorities on similar facts.

2. Eligibility for Deduction under Section 80IA:
The assessee claimed deduction under section 80IA for profits derived from a landfill project. The AO disallowed the deduction, arguing that the assessee did not enter into an agreement with the government authority before the commencement of the project. The CIT(A) upheld this view. However, the Tribunal found that the assessee had entered into an agreement with GIDC on 15.05.2002, and the deduction was claimed from A.Y. 2002-03. The Tribunal held that the deduction should be allowed as the conditions for claiming the deduction were fulfilled, and the reopening was invalid.

3. Levying of Interest under Sections 234B and 234D:
The CIT(A) upheld the AO's action in levying interest under sections 234B and 234D. The Tribunal did not specifically address these issues in detail, as the primary issue of reopening was decided in favor of the assessee, rendering other grounds academic.

4. Disallowance of Various Expenses and Incomes:
The AO disallowed certain expenses and incomes, including the write-back of pit covering expenses, interest income earned on fixed deposits, and provisions for post-closure care and pit covering expenses. The CIT(A) upheld these disallowances. The Tribunal found that these issues were covered in favor of the assessee by the decision of the Tribunal in the assessee's own case for A.Y. 2008-09 and allowed the appeal on these grounds.

5. Computation of Book Profits under Section 115JB:
The AO added back provisions for post-closure expenditure and pit covering expenses while computing book profits under section 115JB. The CIT(A) upheld this action. The Tribunal did not specifically address this issue in detail, as the primary issue of reopening was decided in favor of the assessee.

6. Penalty under Section 271(1)(c):
The AO levied a penalty under section 271(1)(c) for furnishing inaccurate particulars of income regarding the claim for deduction under section 80IA. The CIT(A) upheld the penalty. The Tribunal, considering that the reopening was held invalid and the addition under section 80IA did not survive, directed the AO to delete the penalty.

Conclusion:
The Tribunal allowed the appeals of the assessee for A.Y. 2006-07 and 2007-08 on the primary ground that the reopening of the assessment was invalid. Consequently, the other grounds of appeal became academic. The Tribunal dismissed the appeal regarding the disallowance of expenses for earning interest income for A.Y. 2007-08 and allowed the appeal against the penalty under section 271(1)(c).