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2005 (10) TMI 218 - AT - Income TaxIncome Escaping Assessment - Reopening beyond a period of four years - deduction u/s 80HHB - interest amount of arbitration award received - HELD THAT - It is apparent that the Assessing Officer is well empowered to re-open the case within four years even the assessment has been framed under sub-section (3) of section 143(3) and since initiation of re-assessment proceedings were initiated well within time to re-compute the allowance wrongly allowed, the action of Assessing Officer in re-opening the case was justified and same cannot be held to be a change of opinion, which was basically invoked for rectifying the glaring mistake committed by Assessing Officer at the lime of original assessment proceedings. The intention of Legislature in amending the provision u/s 147 with effect from 1-4-1989 was also meant for enabling the Assessing Officer to recompute the excess deduction/disallowance wrongly allowed to the assessee which comes to his notice subsequently. Since in the present case, the Assessing Officer has not taken a permissible view or possible view as the deduction u/s 80HHB was not allowable to the assessee keeping in view the fact that the overseas project was completed by the assessee in 1982 itself, whereas the deduction u/s 80HHB came with effect from 1-4-1983 and, therefore, the view taken by the assessee while granting deduction u/s 80HHB cannot be permissible and, therefore, was rightly withdrawn after invoking section 148 proceeding and, therefore, the objection raised by the assessee that the above action of Assessing Officer is a very change of opinion does not hold good and accordingly do not find favour from us. We, therefore, find that the action of Assessing Officer in re-opening the case was not a change of opinion as the same was initiated with a view to re-compute the allowance/deduction wrongly allowed by him at the lime of original assessment proceedings. Deduction u/s 80HHB - We do not see any merit in the objection raised by the ld. counsel while relying on the case laws as in the present case before us, the income has not been disputed by the Assessing Officer and the only dispute is with regard to the treatment of income arose to the assessee during the previous year on account of such contract receipt. Since such receipt of the contract attained finality in the previous year itself and the same has also been offered by the assessee for taxation while crediting the same in P L A/c. The only dispute is regarding the claim of the assessee on account of deduction u/s 80HHB which was not permissible keeping in view of the fact that only those income from the project executed abroad is entitled for deduction under section 80HHB which have been executed on or after 1-4-1982 and not for the project executed before 1-4-1982 and since in the present case this is not a contract receipt for which the assessee has executed a foreign project on or after 1-4-1983 which entitle the assessee to claim deduction u/s 80HHB and, therefore, in our considered opinion, the ld. CIT(A) was justified in rejecting the claim of the assessee u/s 80HHB. Since we have already held while adjudicating the above legal issue above that the assessee was not entitled for any claim u/s 80HHB as it executed the foreign project in March, 1982, whereas the deduction u/s 80HHB came into existence w.e.f. 1-4-1983, the assessee was not entitled for any deduction u/s 80HHB for the project completed in March, 1982, even otherwise the payment against such contract attained finality in the previous year i.e. financial year 1997-98 only. We, therefore, are of the opinion that the ld. CIT(A) was justified in upholding the action of Assessing Officer in withdrawing the deduction u/s 80HHB since the assessee was not eligible for the same, we therefore, do not see any reason to interfere with the order of ld. CIT(A) and, accordingly, uphold the same and reject the ground Nos. 1 to 5 taken by the assessee in this regard. In the result, the appeal filed by the assessee is dismissed.
Issues Involved:
1. Re-opening of the case under section 147. 2. Denial of deduction under section 80HHB on interest amount. 3. Maintenance of separate accounts for foreign projects. 4. Permission from RBI for extension of time for receipt of payment. 5. Attribution of income to an earlier assessment year. 6. Addition of interest accrued on Inter Corporate Deposit. Detailed Analysis: 1. Re-opening of the Case under Section 147: The assessee challenged the re-opening of the case, arguing it was based on a change of opinion and objections from the revenue audit, which is not permissible under law. The Tribunal found that the re-opening was justified under section 147, as the audit party pointed out a factual error overlooked by the Assessing Officer. The Tribunal cited the Supreme Court judgment in CIT v. P.V.S. Beedies P. Ltd., which allows re-opening based on factual errors identified by the audit party. Therefore, the Tribunal upheld the re-opening of the case within the permissible four-year period. 2. Denial of Deduction under Section 80HHB on Interest Amount: The assessee claimed a deduction under section 80HHB for an arbitration award received in 1998 for a project completed in March 1982. The Tribunal noted that section 80HHB, which provides deductions for profits from foreign projects, was introduced only from 1-4-1983. Consequently, the deduction was not applicable to projects completed before this date. The Tribunal upheld the Assessing Officer's decision to disallow the deduction on the interest amount, as the project was completed before the enactment of section 80HHB. 3. Maintenance of Separate Accounts for Foreign Projects: The assessee did not maintain separate accounts for profits derived from foreign projects as required under section 80HHB(3)(i). The Tribunal found this non-compliance significant and upheld the disallowance of the deduction under section 80HHB, as the statutory requirement was not met. 4. Permission from RBI for Extension of Time for Receipt of Payment: The Tribunal noted that the assessee did not seek permission from the Reserve Bank of India (RBI) or any competent authority for an extension of time beyond six months for the receipt of payment. This failure to comply with the procedural requirement further justified the disallowance of the deduction under section 80HHB. 5. Attribution of Income to an Earlier Assessment Year: The assessee argued that the income from the arbitration award should be attributed to the assessment year 1998-99 when it was received. The Tribunal rejected this argument, stating that the income related to a project completed in 1982 and should be attributed to that earlier period. The Tribunal upheld the Assessing Officer's decision to attribute the income to the earlier assessment year. 6. Addition of Interest Accrued on Inter Corporate Deposit: The assessee did not press this ground, and therefore, the Tribunal dismissed it without further consideration. Conclusion: The Tribunal upheld the re-opening of the case under section 147 and the disallowance of the deduction under section 80HHB on multiple grounds, including the timing of the project completion, failure to maintain separate accounts, and lack of necessary permissions. The appeal filed by the assessee was dismissed in its entirety.
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