2012 (12) TMI 80 - HC - Income Tax

Excess claim of Deduction u/s 80HHC - Reopening of Assessment - held that - if the Assessing Officer has reason to believe that income has escaped assessment it confers jurisdiction on the Assessing Officer to reopen the assessment. Thus, the case herein is covered by the main provision and not the proviso. - So long as the ingredients of Sec 147 are fulfilled, the Assessing Officer is free to initiate proceeding u/s 147 and failure to take steps under Section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation u/s 143(1) had been issued - it is seen that prima facie adjustments were made under Section 143(1-A) of the Act on a debatable issue, which was subsequently set aside by the Commissioner and thereafter there being no regular assessment rightly, the Officer assumed jurisdiction under Section 147 of the Act as a case of an escaped assessment for making the original assessment under Section 147 of the Act - Decided in favor of revenue. Decision in Assistant Commissioner of Income-Tax Versus Rajesh Jhaveri Stock Brokers P. Limited 2007 (5) TMI 197 - SUPREME COURT followed.

Summary

Issues:
- Whether excess claim of deduction under Section 143(1)(a) proceedings empowers Assessing Officer to reopen assessment under Section 147?

Analysis:
1. The case involves an appeal by the Revenue against the Tribunal's order regarding the assessment year 1997-98. The substantial question of law raised was whether excess claim of deduction, disallowed under Section 143(1)(a) proceedings, could empower the Assessing Officer to reopen the assessment under Section 147.

2. The assessment order initially disallowed the claim of deduction under Section 80HHC. The assessee appealed before the Commissioner of Income Tax (Appeals) who set aside the intimation under Section 143(1)(a). Subsequently, the assessment was reopened under Section 147 based on the claim disallowed earlier. The Commissioner of Income Tax (Appeals) and the Tribunal both ruled in favor of the assessee, stating there was no new information to justify reopening the assessment.

3. The Revenue relied on the decision in ASST. CIT v. RAJESH JHAVERI STOCK BROKERS P. LTD, arguing that the intimation under Section 143(1)(a) does not constitute an assessment order, giving the Revenue jurisdiction to assess under Section 147 for escaped assessment.

4. Section 147 of the Income Tax Act allows for reassessment or escaped assessment in cases where the assessee fails to disclose all material facts necessary for assessment. The Apex Court clarified that Section 143(1)(a) is not an assessment order and that the Assessing Officer can proceed under Section 147 for escaped assessments.

5. The Court, following the law declared by the Apex Court, held that the adjustments made under Section 143(1-A) were on a debatable issue and were subsequently set aside. As there was no regular assessment, the Officer rightly assumed jurisdiction under Section 147 for making the original assessment.

6. Ultimately, the Court accepted the Revenue's case, setting aside the Tribunal's order and allowing the Tax Case (Appeal) in favor of the Revenue. No costs were awarded in the judgment.