2016 (9) TMI 763 - AT - Income Tax

Reopening of assessment - allowing rebate for Securities Transaction Tax (STT) under section 88E in a case where an assessee is also exigible to tax under section 115JB of the Act - Held that - The CIT(A) has clearly brought out the error on the part of the Assessing Officer while forming a belief about the escapement of income. Section 88E of the Act provides for a rebate in respect of STT paid. Ostensibly, such rebate is available against the income-tax payable by an assessee subject to other conditions specified in the section. If we read the relevant provisions, it is quite clear that Section 88E of the Act does not envisage any distinction between total income computable under the normal provisions of the Act and that computable under Section 115JB of the Act so far as it relates to the granting of rebate against the amount of income-tax payable. Therefore, in our view, it would not be wrong to conclude that the interpretation sought to be placed by the Assessing Officer even at the time of formation of belief for issuance of notice under section 147/148 of the Act was not borne out of the bare provisions of the Act. Of course, the stand of the Assessing Officer is also contrary to the judgment of the Hon ble Karnataka High Court in the case of M/s. Horizon Capital Ltd. (2011 (10) TMI 489 - KARNATAKA HIGH COURT ), but that decision is of a date later than the date on which the Assessing Officer initiated the proceedings under section 147/148 of the Act. Be that as it may, in our view, the CIT(A) has succinctly brought out that the interpretation made by the Assessing Officer to form the belief about escapement of income is not supported by the bare provisions of the Act also, which we hereby affirm. As a consequence, we affirm the action of CIT(A) in treating the initiation of proceedings under section 147/148 of the Act as invalid. Thus, on this aspect also Revenue fails. - Decided in favour of assessee

Summary

Issues Involved:
1. Validity of proceedings initiated under section 147/148 of the Income Tax Act.
2. Manner of allowing rebate for Securities Transaction Tax (STT) under section 88E in cases where tax is also exigible under section 115JB.

Detailed Analysis:

1. Validity of Proceedings Initiated under Section 147/148:
The Revenue challenged the CIT(A)'s decision to quash the reassessment proceedings initiated under section 147/148. The CIT(A) concluded that no new facts had come to the notice of the Assessing Officer (AO) and there was no escapement of income, thus invalidating the notice issued under section 148. The CIT(A) found that the AO's belief of income escapement was based on a misinterpretation of section 115JB of the Act. The Tribunal upheld the CIT(A)'s decision, noting that the AO's interpretation was not supported by the Act's provisions. The Tribunal emphasized that section 88E provides for a rebate in respect of STT paid, applicable against income-tax payable under both normal provisions and section 115JB. Therefore, the initiation of proceedings under section 147/148 was invalid, and the Revenue's appeal on this issue was dismissed.

2. Manner of Allowing Rebate for STT under Section 88E:
The core dispute was whether the rebate under section 88E should be allowed while computing tax liability under section 115JB. The CIT(A) allowed the rebate, stating that tax liability under normal provisions should be compared with section 115JB before allowing the rebate under section 88E. The Tribunal supported this view, referencing the Karnataka High Court's judgment in M/s. Horizon Capital Ltd., which held that rebate under section 88E is available against tax payable under section 115JB. The Tribunal noted that the comparison for determining the applicability of section 115JB should be made on a gross basis, before allowing the rebate under section 88E. Consequently, the Tribunal affirmed the CIT(A)'s decision, dismissing the Revenue's appeal on this ground as well.

Conclusion:
The Tribunal dismissed the Revenue's appeals, affirming the CIT(A)'s decisions on both the validity of the reassessment proceedings under section 147/148 and the manner of allowing the rebate for STT under section 88E. The Tribunal's judgment was consistent with the precedent set by the Karnataka High Court and other Tribunal decisions, ensuring that the rebate under section 88E is applicable against tax computed under section 115JB.