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2012 (9) TMI 286 - AT - Income TaxSecond reopening attempted u/s 148 - exclusion of Duty Drawback and DEPB Licence values while computing deduction under Section 80-IB - First Reopening of assessment on deduction u/s 80HHC was given without invoking Section 80-IB(13) was pending - Held that - Re-assessment was not initiated u/s 147(b) for a reason that the said section stood substituted by Direct Tax Laws (Amendment) Act, 1987 with effect from 1.4.89 giving wide power to the AO even to cover cases where the assessee had fully disclosed the material facts. No doubt, an exposition of law would declare the law as it stood all the time and could be a basis for rectification proceedings under Section 154 but, in our opinion, it cannot be a basis for resorting to a reopening where such reopening is done after the expiry of four years from the end of relevant previous year unless and until there is any failure on the part of the assessee in production of books of accounts or other evidence from which material evidence could with due diligence be gathered - the assessee has to succeed in this appeal.
Issues Involved:
1. Legitimacy of reopening the assessment under Section 148 of the Income-tax Act, 1961, after four years from the end of the relevant assessment year. 2. Validity of disallowing the deduction under Section 80-IB for Duty Drawback and DEPB Licence sale. Detailed Analysis: 1. Legitimacy of Reopening the Assessment under Section 148: The primary issue is whether the reopening of the assessment under Section 148, after four years from the end of the assessment year, was justified. The assessee argued that the reopening was not valid as there was no failure on its part to disclose fully and truly all material facts necessary for the assessment. The original return was filed under Section 139, and the assessment was completed under Section 143(3). The reopening was based on the Supreme Court's decision in Liberty India v. CIT, which clarified that Duty Drawback and DEPB Licence sales are not eligible for deduction under Section 80-IB. The Tribunal noted that the first proviso to Section 147 restricts reopening after four years unless there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The Tribunal found no such failure on the part of the assessee. The assessee had filed the return and responded to all notices issued under Sections 142(1) and 148. The Tribunal emphasized that the decision of the Supreme Court could not be a basis for reopening unless there was a failure by the assessee as specified in the proviso to Section 147. 2. Validity of Disallowing Deduction under Section 80-IB for Duty Drawback and DEPB Licence Sale: The second issue was whether the deduction under Section 80-IB could be disallowed for Duty Drawback and DEPB Licence sales. The reopening was attempted based on the Supreme Court's decision in Liberty India, which held that such incomes are not derived from the eligible business and hence not eligible for deduction under Section 80-IB. However, since the Tribunal allowed the appeal on the jurisdictional ground, it did not delve into the merits of excluding Duty Drawback and DEPB Licence sales for computing the deduction under Section 80-IB. The Tribunal concluded that the reopening was not justified due to the absence of any failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Conclusion: The Tribunal ruled in favor of the assessee, holding that the reopening of the assessment after four years was not justified as there was no failure by the assessee to disclose fully and truly all material facts necessary for the assessment. Consequently, the Tribunal did not address the issue of excluding Duty Drawback and DEPB Licence sales for the purpose of computing the deduction under Section 80-IB. The appeal filed by the assessee was partly allowed.
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