1986 (6) TMI 83 - AT - Income Tax

Summary

Issues:
- Entitlement to exemption under section 80MM of the Income-tax Act, 1961 on gross receipts or after adjusting expenditure.
- Validity of reopening assessment under section 147(b) based on internal audit report.
- Admissibility of relief under section 80MM with reference to gross income.

Analysis:
1. The case involves an appeal by the assessee regarding the assessment for the year 1973-74. The primary issue was whether the assessee was entitled to exemption under section 80MM on gross receipts or after adjusting the expenditure incurred. Initially, the ITO granted relief with respect to net income, but the AAC held that relief under section 80MM should be allowed with reference to gross receipts.

2. Subsequently, the Revenue challenged this decision by the AAC in the Tribunal, which dismissed the appeal. However, the ITO reopened the assessment under section 147(b) based on an internal audit report to reverse the relief granted with reference to gross receipts. The Commissioner (Appeals) upheld the reopening of the assessment and the reduction of relief, stating that relief was admissible only with reference to net income.

3. The assessee argued that the internal audit report could not be a basis for reopening the assessment after the issue had been decided by the Appellate Authorities. The Departmental Representative failed to justify the reopening in light of the binding judgments. Reopening under section 147(b) requires information indicating escaped income, not mere disagreement with appellate decisions.

4. The Tribunal found the ITO's action in reopening the assessment post a binding decision as contemptuous and legally unjustified. The proper channel for the Revenue to challenge the decision was through a reference to the High Court under section 256. As the reassessment was deemed improper and untenable in law, the Tribunal allowed the appeal and annulled the reassessment made by the ITO.

5. In conclusion, the Tribunal held that the reassessment by the ITO, based on the internal audit report to reverse relief granted with reference to gross receipts, was unsustainable. The decision emphasized the importance of following legal procedures and respecting binding appellate judgments in tax assessments.