2012 (1) TMI 6 - HC - Income Tax

Validity of re-opening of assessment erroneous deduction u/s 80HHC & 80IA change in opinion Held that - The question of deductions u/s 80IA and 80HHC were specifically examined at the time of original assessment proceedings. Assessee had justified the claim and furnished documentary evidence or proof. The quantification of the claim was justified. This is a case of change of opinion. The opinion of the Assessing Officer may have been legally erroneous but this cannot be a ground for initiation of re-assessment proceedings. An erroneous decision which is prejudicial to the Revenue can be revised but the said option was not exercised. - Decided against the Revenue.

Summary

Issues involved:
1. Validity of reassessment proceedings under Section 147 of the Income Tax Act, 1961.
2. Examination of deductions under Section 80HHC and 80IA during original assessment proceedings.

Detailed Analysis:

Issue 1: Validity of reassessment proceedings under Section 147
The High Court was presented with the issue of the validity of reassessment proceedings under Section 147 of the Income Tax Act, 1961. The Assessing Officer had issued a notice under Section 148 for reopening the assessment for the assessment year 2001-02. The reasons for reopening included the claim of excessive deduction under Section 80HHC. The Tribunal struck down the reassessment proceedings, stating that the jurisdictional pre-conditions in Section 147 were not met, as it appeared to be a case of reopening based on a change of opinion. The Tribunal noted that the deductions under Section 80HHC and 80IA had been specifically examined during the original assessment proceedings. The High Court agreed with the Tribunal's decision, emphasizing that the Assessing Officer had already considered and accepted the deductions during the original assessment. The High Court held that a mere legal error by the Assessing Officer does not justify reopening the assessment under Section 147.

Issue 2: Examination of deductions under Section 80HHC and 80IA
During the original assessment proceedings for the assessment year 2001-02, the Assessing Officer had examined the deductions claimed under Section 80HHC and 80IA. The respondent-assessee had provided detailed responses and documentary evidence to support their claims for deductions. The assessment order dated 31st March, 2003, recorded that the chartered accountant/authorized representative had attended and filed necessary information. Subsequently, the Assessing Officer issued a notice for reassessment, claiming that the assessee had wrongly claimed excess deduction under Section 80HHC. However, the High Court noted that the deductions and their quantification had been thoroughly examined during the original assessment proceedings. The High Court held that the reassessment was not valid as it amounted to a change of opinion, which is impermissible under the law. The High Court dismissed the appeal, affirming that the original assessment had adequately considered and accepted the deductions under Section 80HHC and 80IA.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing that reassessment based on a mere change of opinion is not permissible under the law, especially when the deductions were already examined and accepted during the original assessment proceedings.