2016 (4) TMI 357 - AT - Income Tax

Reopening of assessment - Disallowance u/s 28 and 80HHC - Held that - In the case in hand , the proceedings under section 147 of the Act were initiated by the Assessing Officer in view of the retrospective amendment to the provisions of sections 28 and 80HHC of the Act w.e.f. AY 98-99, by Taxation Laws Amendment Act, 2005, however, we find that the Jurisdictional High Court in the case of Pawan Kumar Jain Vs. Union of India, 2014 (8) TMI 32 - DELHI HIGH COURT following the judgment in the case of Avani Exports vs. CIT 2012 (7) TMI 190 - GUJARAT HIGH COURT has held the said amendment is prospective in nature and not retrospective. Thus there was no failure on the part of the assessee to disclose fully and truly all material facts in respect of the assessment and the case has been reopened beyond the period of 4 years from the end of the relevant assessment year, the proceedings of reopening under section 147 of the Act are without jurisdiction and not sustainable - Decided in favour of assessee

Summary

Issues Involved:
1. Legality of reopening assessments under sections 147/148 of the Income Tax Act.
2. Justification for reducing deductions under Section 80HHC and Section 80IA of the Income Tax Act.

Detailed Analysis:

1. Legality of Reopening Assessments under Sections 147/148 of the Income Tax Act:
- Grounds of Appeal: The assessee challenged the reopening of assessments under sections 147/148, arguing that the reopening was beyond the permissible time frame and lacked the necessary grounds.

- Facts and Procedural Background: The original assessments for AY 2001-02 and AY 2002-03 were completed under section 143(3) and section 143(1) respectively. The Assessing Officer (AO) later noticed that deductions under section 80HHC were incorrectly allowed and issued notices under section 148 to reopen the assessments.

- Arguments by Assessee:
- The reopening was beyond four years from the end of the relevant assessment year, which is not permissible unless there was a failure on the part of the assessee to disclose fully and truly all material facts.
- The reasons recorded for reopening did not specify any failure to disclose material facts.
- No new tangible material was available to justify the reopening, making it a case of mere change of opinion.
- Reopening based on retrospective amendments in law is not valid.

- Tribunal's Findings:
- Absence of Failure to Disclose: The AO failed to specify any material facts that were not disclosed by the assessee. The Tribunal cited the case of Global Signal Cables (India) Private Limited vs. DCIT, where the Hon’ble Delhi High Court held that reopening beyond four years is not valid without specifying undisclosed material facts.
- No New Tangible Material: The Tribunal referenced the case of CIT vs. Orient Craft Ltd., where it was held that reassessment without new tangible material amounts to a change of opinion, which is not permissible.
- Retrospective Amendment: The Tribunal noted that the reopening was based on retrospective amendments to sections 28 and 80HHC, which have been held to be prospective by higher courts, including the Hon’ble Supreme Court in CIT vs. Avani Exports.

- Conclusion: The Tribunal quashed the reopening proceedings under section 147 for both assessment years, declaring them without jurisdiction and not sustainable in law.

2. Justification for Reducing Deductions under Section 80HHC and Section 80IA of the Income Tax Act:
- Grounds of Appeal: The assessee contested the reduction of deductions under sections 80HHC and 80IA by the AO and upheld by the Commissioner of Income-tax (Appeals).

- Facts and Procedural Background: The AO recalculated the deductions under sections 80HHC and 80IA, reducing the amounts allowed. This recalculation was based on the amended provisions and the incorrect inclusion of certain incomes as export business income.

- Arguments by Assessee:
- The deductions were correctly claimed as per the original provisions of the law.
- The amendments cited by the AO were not applicable retrospectively.

- Tribunal's Findings:
- Reopening Quashed: Since the reopening itself was quashed, the recalculations and reductions made by the AO were rendered invalid.
- Prospective Amendments: The Tribunal reiterated that the amendments to sections 28 and 80HHC are prospective, as held in the cases of Pawan Kumar Jain vs. Union of India and Avani Exports vs. CIT.

- Conclusion: Given the quashing of the reopening proceedings, the Tribunal did not adjudicate on the specific reductions under sections 80HHC and 80IA, as the basis for such reductions no longer existed.

Final Decision:
- For AY 2001-02 (ITA No. 4314/Del/2010): The appeal of the assessee was allowed, and the reopening under section 147/148 was quashed.
- For AY 2002-03 (ITA No. 4315/Del/2010): The appeal of the assessee was allowed, and the reopening under section 147/148 was quashed.

The decision was pronounced in the open court on 8th April 2016.