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Issues Involved
1. Validity of proceedings under Section 147 read with Section 148. 2. Legality of deductions allowed under Sections 80HH and 80-I. Detailed Analysis Issue 1: Validity of Proceedings under Section 147 read with Section 148 Assessment Years 1992-93, 1993-94, and 1994-95: The Assessing Officer (AO) issued notices under Section 148 on the grounds that excess deductions under Sections 80HH/80-I were allowed, which was not permissible by law. For the assessment year 1995-96, the notice was issued due to the redetermination of losses in earlier years to be set off against profits. The CIT(A) canceled the reassessments under Section 147 on two grounds: 1. The reopening was bad in law. 2. The deductions were rightly allowed without setting off the loss from Unit No. 2 against Unit No. 1. The Revenue argued that the reassessments were justified, citing Supreme Court judgments that deductions under Chapter VI-A should be allowed only after computing the gross total income. The CIT(A)'s reliance on the Andhra Pradesh High Court's decision in CIT vs. Visakha Industries Ltd. was contested, as it was allegedly overturned by the Supreme Court in other cases. The Tribunal found that the reasons for reopening were provided to the assessee, and the reopening was justified based on the material on record. However, for the assessment year 1992-93, the notice under Section 148 was issued after four years, and the Tribunal held that the reopening was not valid as the assessee had disclosed all material facts necessary for assessment. Assessment Year 1993-94: The return was processed under Section 143(1), and no assessment was made under Section 143(3). The reopening was within four years, and the Tribunal held that there was no change of opinion as no assessment was made under Section 143(3). Assessment Year 1994-95: The assessment was made under Section 143(3), but the AO had not expressed any opinion on the provisions of Sections 80A and 80AB. The Tribunal held that the reopening was valid as the AO had committed an error of law by ignoring these provisions. Assessment Year 1995-96: The notice under Section 148 was issued to adjust the carried forward loss from earlier years, which was justified under Section 155(4). Issue 2: Legality of Deductions under Sections 80HH and 80-I The Tribunal held that the deductions under Sections 80HH and 80-I should be computed with reference to the profits of the eligible unit alone, without setting off the loss from another unit. This view was supported by the Supreme Court's decision in CIT vs. Canara Workshops (P) Ltd. However, the Tribunal emphasized that the aggregate amount of deductions under Chapter VI-A cannot exceed the gross total income, as per Section 80A(2). This principle was affirmed by the Supreme Court in various cases, including IPCA Laboratory Ltd. vs. Dy. CIT. The Tribunal concluded that the AO was justified in restricting the deductions to the gross total income, and the excess deductions allowed earlier were erroneous. Conclusion - The appeal for the assessment year 1992-93 was dismissed as the reopening was not valid. - The appeals for the assessment years 1993-94, 1994-95, and 1995-96 were allowed, upholding the validity of the reassessments and restricting the deductions to the gross total income.
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