2012 (10) TMI 573 - HC - Income Tax

Reopening of assessment - deduction claimed u/s 80HH and 80I before first setting off the unabsorbed losses of the earlier years - Held that - There was no denial of the fact that the assessee had disclosed the details as regards the carry forward of the losses as well as the income computed and all these details were very much there before the Assessing Officer & that there is no denial of the fact that there was no failure on the part of the assessee in disclosing the facts necessary for assessment and that there is no such allegation that the escapement of income was on account of the failure of the assessee in not disclosing fully and truly all material facts. In the circumstances, applying the Supreme Court decision in CIT, Delhi Versus M/s. Kelvinator of India Limited 2010 (1) TMI 11 - SUPREME COURT OF INDIA AO has no power to review and has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of change of opinion is removed then in the garb of re-opening the assessment, review would take place - to reopen an assessment tangible material should be there & reasons must have a live link with the formation of the belief - no hesitation in accepting the plea of the assessee that the assumption of the jurisdiction beyond four years is hit by limitation as provided under Section 147 proviso - in favour of assessee.

Summary

Issues:
1. Validity of reopening assessment under Section 147 beyond 4 years.
2. Disclosure of material facts by the assessee during original assessment under Section 143(3).
3. Applicability of Explanation 1 to Section 147.
4. Allowance of deduction under Chapter VI-A on profits of eligible units.

Issue 1: Validity of reopening assessment under Section 147 beyond 4 years.
The Assessing Officer reopened the assessment under Section 147 after noticing that the assessee claimed deductions under Section 80HH and 80I on the total income before setting off unabsorbed losses of earlier years, which, according to the Assessing Officer, made the assessee ineligible for deduction under Chapter VIA. The assessee objected to the reopening, citing the lapse of four years from the original assessment under Section 143(3). The First Appellate Authority upheld the reopening, leading to an appeal before the Income Tax Appellate Tribunal. The Tribunal agreed with the Assessing Officer and the First Appellate Authority, justifying the reopening within the prescribed period under Section 147. However, the High Court found that the notice for reopening did not provide independent reasons, and as the assessee had disclosed all material facts during the original assessment, the reopening beyond four years was time-barred, thus setting aside the Tribunal's order.

Issue 2: Disclosure of material facts by the assessee during original assessment under Section 143(3).
The First Appellate Authority and the Tribunal held that the assessee did not fully disclose all material facts during the original assessment, justifying the reopening under Section 147. However, the High Court noted that the assessee had provided details of carry-forward losses and income computation to the Assessing Officer, and there was no failure to disclose necessary facts for assessment. Citing the Supreme Court's interpretation of Section 147, the High Court concluded that the assumption of jurisdiction beyond four years was barred by limitation, even though the merits of the assessment favored the Assessing Officer.

Issue 3: Applicability of Explanation 1 to Section 147.
The Appellate Tribunal considered whether Explanation 1 to Section 147 was attracted in the case. However, the High Court did not delve into this issue in its judgment.

Issue 4: Allowance of deduction under Chapter VI-A on profits of eligible units.
The Tribunal discussed whether deductions under Chapter VI-A should be allowed on profits of eligible units after deducting losses of other eligible units. The High Court did not provide detailed analysis on this issue in its judgment.

In conclusion, the High Court allowed the appeal in favor of the assessee, emphasizing the importance of the jurisdictional time limit under Section 147 and setting aside the Tribunal's order.