2013 (1) TMI 287 - HC - Income Tax

Reopening of assessment - entire sale consideration on sale of DEPB scrip should be discarded for deduction u/s 80HH and not merely the profit margin thereof - Held that - There is not an iota of allegation that the assessee failing to disclose fully and truly any of material fact either in the reasons recorded or anywhere else. In fact, in the reasons recorded, the AO observes that, thus, a mistake has been committed by the AO, but a mistake on the part of the AO surely would not be a ground to reopen an assessment previously framed after scrutiny beyond a period of four years. Besides such observation which is damaging to the revenue also, there are other sufficient indications in the reasons recorded that in the original assessment the entire issue was examined threadbare by the AO. To the extent he was convinced that the claim was exaggerated, disallowances were made. Thus perusing minutely the portion of the reasons recorded it becomes clear that the AO in the original assessment had examined the claim of the assessee pertaining to deduction u/s 80HHC at considerable length. Various aspects were gone into and disallowances to the extent found required were made. Quite apart from there being nothing on the record to suggest that the AO formed a belief that the income chargeable to tax has escaped assessment due to the reason of the assessee failing to disclose truly and fully all material facts, the present case would be one of mere change of opinion. On all counts, therefore, the impugned notice must fail. Rule made absolute - decided in favour of assessee.

Summary

Issues:
Challenging a notice under section 147 of the Income Tax Act, 1961 for reopening the assessment beyond the prescribed period.

Detailed Analysis:
1. The petition challenges a notice issued under section 147 of the Income Tax Act, 1961, beyond the four-year period for the assessment year 2004-05. The Assessing Officer recorded reasons for reopening, supplied to the petitioner, who raised objections. The objections were rejected, leading to the petition challenging the notice for reopening.

2. The reasons recorded by the Assessing Officer for reopening the assessment focused on the deduction claimed under section 80HHC of the Act. The AO reduced various amounts, leading to a mistake in the calculation of eligible profits. The AO contended that the entire sale consideration on the sale of DEPB scrip should be discarded for deduction under section 80HHC, contrary to a Supreme Court decision in favor of the assessee.

3. The court found that the reasons recorded did not provide jurisdiction to the Assessing Officer to reopen the assessment. The AO's observation of a mistake committed by them was not a sufficient ground for reopening an assessment beyond four years. The court noted that the AO had thoroughly examined the claim in the original assessment, made necessary disallowances, and there was no evidence of the assessee failing to disclose material facts.

4. The court concluded that there was no allegation of the assessee failing to disclose material facts in the reasons recorded, and the case appeared to be a mere change of opinion. As such, the impugned notice was quashed, ruling in favor of the petitioner. The court held that the notice for reopening the assessment was not valid and should be set aside.