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2012 (11) TMI 310 - AT - Income TaxRe-opening of Assessment - Held that - Reopening is merely change of opinion of the Assessing Officer and he should have tangible material for forming an opinion that there has been an escapement of income. Reason to believe will not include mere change of opinion. Respectfully following the ratio laid down by the Hon ble Delhi High Court in the case of CIT vs Kelvinator India Ltd. 2002 (4) TMI 37 - DELHI HIGH COURT , order of the CIT(A) is upheld in treating the reassessment made by the AO u/s 148 is null and void. Further,an audit opinion in regard to the application or interpretation of law cannot be treated as information for reopening the assessment u/s 147(b) of the Act, as held by the Hon ble Supreme Court in the case of CIT Vs. Lucas TVS Ltd., 2000(12) TMI 102 - SUPREME COURT held that information with the meaning of section 147(b) includes information as to true and correct state of law as well which should come from a competent legislature or judicial order or judicial authority - grounds raised by the revenue in this regard are dismissed - In the result, appeal of the revenue is dismissed. Deduction u/s 80HHC Assessee had adopted incorrect adjusted export turnover and adjusted total turnover and also the eligible profits for working out deduction u/s 80HHC. The assessee adopted eligible profits without reducing 90% of other income admitted as conversion charges and technical consultancy charges amounting to Rs. 21,87,459/- as required under Explanation (baa) to section 80HHC. Thus resulted in excess claim of deduction u/s 80HHC Held that - There is no escapement of Income - Reopening is merely change of opinion of the Ao - decided in favour of assessee.
Issues Involved:
1. Validity of reopening the assessment under Section 147 of the Income Tax Act. 2. Excess claim of deduction under Section 80HHC due to incorrect computation of eligible profits. Detailed Analysis: 1. Validity of Reopening the Assessment Under Section 147: The primary issue in this case revolves around whether the reopening of the assessment by the Assessing Officer (AO) under Section 147 of the Income Tax Act was valid. The assessee contended that the reassessment was based on a mere change of opinion prompted by an audit objection, which is not permissible under the law. The CIT(A) relied on the decision of the Delhi High Court in the case of CIT v. Kelvinator of India (256 ITR 1), which was affirmed by the Supreme Court, to conclude that a mere change of opinion cannot form the basis for reopening a completed assessment. The CIT(A) observed that all relevant details regarding the deduction under Section 80HHC were examined during the original assessment proceedings, and the reassessment was initiated without any new information. The Tribunal upheld the CIT(A)'s decision, highlighting that the AO's action was merely a change of opinion and not based on any tangible material indicating escapement of income. The Tribunal emphasized that an audit opinion on the application or interpretation of law cannot be treated as information for reopening the assessment under Section 147(b). 2. Excess Claim of Deduction Under Section 80HHC: The AO had originally allowed the deduction under Section 80HHC at Rs. 18,40,275/-. However, upon reassessment, the AO noted that the assessee had adopted incorrect adjusted export turnover and adjusted total turnover. Specifically, the assessee did not reduce 90% of other income, such as 'conversion charges' and 'technical consultancy charges', amounting to Rs. 21,87,459/-, as required under Explanation (baa) to Section 80HHC. Additionally, the AO observed that the assessee had not reduced 90% of the 'commission' on exports received, amounting to Rs. 67,98,563/-, from the profits of the business while working out the deduction. This resulted in an excess claim of deduction under Section 80HHC. The AO recomputed the deduction at Rs. 3,44,690/-. The CIT(A) found that the original assessment had thoroughly examined these details and allowed the deduction after due consideration. The reassessment was based on the same facts and information, which indicated a change of opinion rather than new information. The Tribunal agreed with the CIT(A)'s findings and upheld the decision to treat the reassessment as null and void. Conclusion: The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s order that the reassessment under Section 147 was invalid due to being based on a mere change of opinion. The Tribunal emphasized that the AO must have tangible material for forming an opinion of escapement of income, and a mere change of opinion does not suffice. The audit opinion on the application or interpretation of law was not considered valid information for reopening the assessment. Thus, the reassessment was treated as null and void, and the original deduction under Section 80HHC was upheld. Pronounced in the open court on 8th June, 2012.
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