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2022 (9) TMI 1254 - HC - Income TaxReopening of assessment u/s 147 - rectification proceedings and the various orders passed by Assessing Officer increasing or reducing the relief under Section 80HHC - HELD THAT - As surprised to find that Tribunal has held that the assessee suppressed the material facts which was never the allegation in the reasons recorded for reopening. It is not clear as to on what basis the learned Tribunal came to such a conclusion. Tribunal has accepted the legal position that the assessment cannot be done on a mere change of opinion. As sought to justify the reassessment order on the ground that the certificate furnished by the Chartered Accountant the figure of loss was not shown, though the figure of the sale proceeds of the trading goods and the direct and indirect costs were shown - we find that the finding of the learned Tribunal that the assessing officer had no occasion to or did not examine the claim for deduction under Section 80HHC is thoroughly flawed and equally is the finding of tribunal that there was suppression of facts made by the assessee. As pointed out that not only once but twice proceedings under Section 154 of the Act was initiated and both the proceedings were on the very same issue as regards the entitlement of the assessee to claim deduction under Section 80HHC of the Act. Therefore, such finding of the learned tribunal was absolutely perverse. Tribunal also had held that no conscious opinion was formed by the assessing at the original assessment stage while allowing deduction u/s 80HHC and there was no exemption or deliberation. This finding appears to be no supported by any justifiable reasons but on a perusal of the assessment order it is definitely clear that the case was discussed with the assessee and thereafter taking into consideration the Chartered Accountant s certificate the deduction as claimed was granted. In fact, there were two decisions of the learned Tribunal which were namely, International Research Park Laboratories Ltd. and A.M. Moosa which decisions would clearly support the stand and the conclusion arrived at the by the assessing officer while completing the scrutiny assessment under Section 143(3) of the Act vide order dated 3.3.1997. Thus, we find that Tribunal erroneously reversed the order passed by the CIT(A) who has considered the facts and circumstances and rightly applied the legal position. In the result, we find that the order of the learned Tribunal calls for interference. - Decided in favour of assessee.
Issues Involved:
1. Whether the findings of the Tribunal regarding the omission or failure of the appellant to disclose material facts and the justification for initiating reassessment proceedings are perverse and based on no material. 2. Whether the assessment proceedings initiated by the Tribunal for the assessment year 1994-95 are without jurisdiction and illegal since none of the conditions precedent for assumption of the jurisdiction existed or were satisfied. Detailed Analysis: Issue 1: Findings of the Tribunal on Omission or Failure to Disclose Material Facts - Background: The assessee exported jute goods and claimed a deduction under Section 80HHC of the Income Tax Act, 1961. The initial assessment allowed the deduction based on the Chartered Accountant's certificate. - Audit Objection: The Assessing Officer received an audit objection suggesting that the loss from the export of trading goods should be set off against the profit from the export of manufactured goods. - Reassessment Proceedings: Based on the audit objection, the Assessing Officer initiated reassessment proceedings, which were later challenged by the assessee. - Tribunal's Findings: The Tribunal justified the reassessment, alleging suppression of material facts by the assessee. - Court's Analysis: The Court found that the reopening of the assessment was based on an audit objection, which was an interpretation of the law and not new facts. The Court referred to the Supreme Court decision in Indian and Eastern Newspaper Society vs. Commissioner of Income Tax, which held that an audit party's interpretation of law cannot be the basis for reopening an assessment. - Conclusion: The Court concluded that the Tribunal's findings were perverse as they were based on an incorrect interpretation of the law by the audit party and not on any new material facts. Issue 2: Jurisdiction and Legality of the Assessment Proceedings - Original Assessment and Rectification: The original assessment allowed the deduction under Section 80HHC, and subsequent rectification proceedings also upheld this deduction. - Reassessment Notice: The reassessment notice was issued based on the audit objection, which the assessee challenged as a mere change of opinion. - CIT(A) Decision: The Commissioner of Income Tax (Appeals) [CIT(A)] held that the reassessment was a change of opinion and could not be based on an audit objection. This decision was reversed by the Tribunal. - Court's Analysis: The Court noted that the CIT(A) had rightly pointed out that no new material came to the knowledge of the Assessing Officer after the original assessment. The Court also referred to the Supreme Court decision in Commissioner of Income Tax vs. Kelvinator of India Ltd., which emphasized that a mere change of opinion cannot justify reopening an assessment. - Conclusion: The Court held that the reassessment proceedings were without jurisdiction and illegal, as they were based on the same set of facts and materials available during the original assessment. Final Judgment: The Court found that the Tribunal was not justified in reversing the order of the CIT(A). The reassessment proceedings were based on an audit objection, which is not a valid ground for reopening an assessment. The Court allowed the appeal filed by the assessee, answering the substantial questions of law in favor of the assessee. The Tribunal's order was set aside, and the original assessment allowing the deduction under Section 80HHC was upheld.
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