2015 (12) TMI 570 - HC - Income Tax

Reopening of assessment - Entitlement to the deduction u/s 80P(e) denied - Held that - The jurisdictional condition under Section 147 of the said Act is the formation of belief by the Assessment Officer that income chargeable to tax has escaped assessment. In the present matter, the Assessment Officer expressly did not accept the audit objection and later on acted under the dictate of superior authorities. In IL & FS Investment Managers Ltd vs Income Tax Officers and Ors (2006 (11) TMI 181 - BOMBAY High Court), the Division Bench of this Court has in paragraph no.8 held such initiation of reassessment on the directions of superiors is bad in law. There also the Assessment Officer had opposed the reopening. - Decided in favour of assessee.

Summary

Issues:
1. Entitlement to deduction under Section 80P(e) of the Income Tax Act, 1961 for alleged rental income.
2. Alleged perversity in appreciating facts and law by the Tribunal.
3. Justification of reopening proceedings based on change of opinion.
4. Reliance on unrelated judgments to reopen proceedings.

Analysis:

1. The case involves the assessment year 2003-2004, where the respondent Cooperative Society claimed a deduction under Section 80P(2)(e) of the Income Tax Act, 1961 for 50% of ginning and pressing charges. The dispute arose when the Income Tax Officer disallowed this deduction, leading to an appeal process. The CIT (A) and the ITAT both ruled in favor of the assessee, allowing the deduction based on a previous order and established practice.

2. The appellant argued that as the assessee did not receive any separate commission income, the deduction on ginning and pressing charges was impermissible. However, the respondent contended that the deduction was lawful as it followed settled law and practice. The Division Bench referred to past judgments to support the allowance of deductions in similar cases.

3. The issue of reopening proceedings was raised, questioning the justification for doing so based on a change of opinion. The appellate authority found the reopening not permissible as it was solely based on an audit objection without tangible material to support it. The court emphasized that disturbing a well-settled practice without proper grounds is unwarranted.

4. The reliance on unrelated judgments to reopen proceedings was also contested. The court highlighted that such actions, especially when based on audit objections and directives from superiors, are not legally sound. Citing previous cases, the court emphasized the importance of the Assessment Officer forming a genuine belief of income escaping assessment before initiating reassessment proceedings.

In conclusion, the court dismissed the appeal, emphasizing that the substantial questions of law raised did not hold merit in the present case. The judgment reaffirmed the importance of adherence to established practices, genuine belief in income escapement, and tangible material supporting reassessment decisions.