1992 (7) TMI 125 - AT - Income Tax

Summary

Issues Involved:
1. Reopening of assessments under Section 147(b) of the IT Act.
2. Withdrawal of investment allowance.
3. Reassessment and withdrawal of deductions under Section 80J.
4. Depreciation rates and allowances.
5. Capital subsidy and its impact on deductions.
6. Deduction under Sections 80HH and 80-I.
7. Treatment of sales commission as sales promotion expense.

Detailed Analysis:

1. Reopening of Assessments under Section 147(b) of the IT Act:
The original assessments for the assessment years 1981-82 and 1982-83 were reopened under Section 148 read with Section 147(b) of the IT Act. The reassessments were framed on 21st Feb. 1986, withdrawing the investment allowance allowed in the original assessments. The CIT(A) held that the reopening of the assessments under Section 147(b) for both years was bad in law. The CIT(A) observed that the Assessing Officer had already considered various High Court decisions and allowed the investment allowance in the original assessments. The Tribunal agreed with the CIT(A), stating that the Assessing Officer did not come into possession of any new 'information' but rather a difference of opinion, which cannot be treated as "information" for reopening assessments.

2. Withdrawal of Investment Allowance:
The investment allowance was initially allowed in the original assessments but was withdrawn in the reassessments. The CIT(A) found that the Assessing Officer had considered all necessary decisions and allowed the investment allowance in the original assessments. The Tribunal upheld the CIT(A)'s order, stating that the reassessment was based on a change of opinion and not on new information.

3. Reassessment and Withdrawal of Deductions under Section 80J:
For the assessment year 1982-83, the reassessment framed on 21st Feb. 1986 was set aside by the CIT(A), but it was reopened again under Section 148 read with Section 147(b). The reassessment framed on 18th Feb. 1988 withdrew the deduction of Rs. 1,14,294 allowed under Section 80J and Rs. 37,722 on account of initial depreciation. The CIT(A) held that the reopening was bad in law, and the Tribunal agreed, stating that the Assessing Officer did not disclose any new information for reopening the assessment.

4. Depreciation Rates and Allowances:
The reassessment for the assessment year 1983-84 was framed on 18th Feb. 1988. The CIT(A) found that the reopening was bad in law as the Assessing Officer did not disclose the information leading to the reopening. The Tribunal upheld the CIT(A)'s order, stating that the reassessment was based on a change of opinion regarding the depreciation rates and allowances, which cannot be allowed.

5. Capital Subsidy and Its Impact on Deductions:
The CIT considered the assessment orders for the years 1984-85 and 1985-86 as erroneous and prejudicial to the interests of the Revenue. The CIT(A) found that the objections raised by the CIT regarding the capital subsidy and its impact on deductions under Section 80J were without merit. The Tribunal agreed with the CIT(A), stating that the amount of capital subsidy should not be deducted from the written-down value of the assets.

6. Deduction under Sections 80HH and 80-I:
The CIT raised objections regarding the deductions under Sections 80HH and 80-I, stating that they should be allowed only out of the income of the unit for which the deductions are admissible. The CIT(A) found that the deductions are to be allowed from the entire gross profit, and the Tribunal upheld this finding.

7. Treatment of Sales Commission as Sales Promotion Expense:
The Department objected to the CIT(A)'s finding that the sales commission paid was not in the nature of sales promotion and did not fall within the purview of Section 37(3A) read with Section 37(3B). The Tribunal found that the commission was paid for actual procurement of orders and not for sales promotion, agreeing with the CIT(A).

Conclusion:
The Tribunal upheld the CIT(A)'s orders for the assessment years 1981-82, 1982-83, 1983-84, 1984-85, and 1985-86, finding that the reopening of assessments and the reassessments were based on changes of opinion rather than new information. The objections raised by the Department regarding deductions, depreciation, and capital subsidy were found to be without merit. The appeals of the Department and cross-objections were dismissed, while the appeals of the assessee were allowed.