2018 (2) TMI 1635 - AT - Income Tax

Validity of reopening of assessment - assessee eligibility deduction u/s 80IA - proceedings u/s 154 were pending on the same issue - Held that - All relevant materials and facts necessary for assessments were available with the AO at the time of original assessee passed u/s 143(3) and further the claim of deduction allowed while passing the order u/s 143(3) would not be excessive even if proposed adjustment of loss of previous year is made against the profit of the current year. The assessee reminded the AO in its reply to the notice u/s 154 that even after the adjustment of loss of ₹ 1.36 Crores allowable deduction would be more than ₹ 95.11 Crores allowed in the original assessment. AO without bringing the proceedings u/s 154 to a logical conclusion had initiated the proceedings u/s 147 on the basis of the same fact and material available on the assessment record. Thus, reopening on the basis of the material available on assessment record is nothing but based on change of opinion. The reopening is not sustainable when the proceedings u/s 154 were pending on the same issue. Accordingly, we set aside the initiation of proceeding u/s 147/148 and consequential reassessment order. As we have set aside the initiation of proceeding u/s 147/148 and consequential reassessment order, therefore, the other grounds raised on the merits becomes infructuous. Decided in favour of assessee

Issues Involved:
1. Validity of the order passed under Section 147.
2. Disallowance of claim of deduction under Section 80IA.
3. Disallowance under Section 14A by application of Rule 8D(2)(iii).
4. Set-off of losses of earlier years from gross deduction under Section 80A(4).
5. Allowance of deduction under Section 80IA on interest income including penal interest income and other income.
6. Relief to the assessee out of addition under Section 14A.

Detailed Analysis:

1. Validity of the Order Passed Under Section 147:
The assessee challenged the validity of reopening the assessment under Section 147, arguing that the proceedings under Section 154 were still pending. The original assessment was completed under Section 143(3) on 22.12.2010, allowing a deduction under Section 80IA. The AO issued a notice under Section 154 on 08.06.2012 to rectify the order by adjusting the previous year's loss of ?1,36,34,565/-. The assessee responded on 15.06.2012, explaining that even after adjusting the loss, the eligible deduction under Section 80IA would be more than the claimed amount. Subsequently, the AO issued a notice under Section 148 on 21.11.2012, citing the same reason for reopening the assessment.

The Tribunal held that the initiation of proceedings under Section 147 while proceedings under Section 154 were pending is not permissible. It was observed that the AO did not conclude the proceedings under Section 154 before initiating the proceedings under Section 147, leading to parallel proceedings on the same issue. The Tribunal referred to several judicial precedents, including the decisions of the Hon’ble Madras High Court in Sterilite Industries India Ltd. vs. ACIT and the Mumbai Bench of the Tribunal in Mahinder Freight Carrier vs. DCIT, which held that parallel proceedings on the same issue are not permissible. Consequently, the Tribunal set aside the initiation of proceedings under Section 147 and the consequential reassessment order.

2. Disallowance of Claim of Deduction Under Section 80IA:
The assessee claimed a deduction under Section 80IA, which was initially allowed in the original assessment. However, the AO, during the reassessment, proposed to disallow the deduction by adjusting the losses of previous years. The Tribunal noted that the assessee had already provided complete details of the deduction claim along with the audit certificate during the original assessment. The Tribunal found that the AO's action to reopen the assessment on the same grounds was based on a change of opinion, which is not permissible. Therefore, the Tribunal upheld the assessee's claim for deduction under Section 80IA.

3. Disallowance Under Section 14A by Application of Rule 8D(2)(iii):
The assessee challenged the disallowance of ?17,56,304 under Section 14A by the application of Rule 8D(2)(iii). The Tribunal did not delve into the merits of this issue as it had already set aside the initiation of proceedings under Section 147, rendering this ground infructuous.

4. Set-off of Losses of Earlier Years from Gross Deduction Under Section 80A(4):
The Revenue contended that the CIT(A) was not justified in allowing the set-off of losses of earlier years from the gross deduction under Section 80A(4). The Tribunal did not address this issue separately, as it had already set aside the reassessment proceedings, making this ground irrelevant.

5. Allowance of Deduction Under Section 80IA on Interest Income Including Penal Interest Income and Other Income:
The Revenue argued against the allowance of deduction under Section 80IA on interest income, including penal interest income and other income. The Tribunal did not provide a separate analysis on this issue, as the reassessment proceedings were already set aside.

6. Relief to the Assessee Out of Addition Under Section 14A:
The Revenue also contested the relief granted to the assessee out of the addition under Section 14A. Similar to other grounds, the Tribunal did not address this issue separately due to the setting aside of the reassessment proceedings.

Conclusion:
The Tribunal allowed the assessee's appeal, setting aside the initiation of proceedings under Section 147 and the consequential reassessment order. Consequently, the grounds raised by the Revenue were dismissed as infructuous. The Tribunal's decision was pronounced in the open court on 20/02/2018.

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