9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (7) TMI 514 - HC - Income TaxReopening of assessment - reasons to believe - change of opinion - deductions under section 80IA wrongly claimed - Held that - It does not appear to be the case of the then Assessing Officer at the time of framing the original assessment that the details were confusing, inasmuch as, the Assessing Officer at the relevant time, could have very well called upon the assessee to explain the details which were confusing. Thus, once the Assessing Officer, at the relevant time while framing the assessment under section 143 of the Act, has been satisfied with the details provided by the assessee and did not find the same to be confusing, the successor Assessing Officer cannot be permitted to contend that such details were very confusing and complicated the matter. Whether the assessee had deliberately presented the facts in such a manner so that it is not understood by the Tax Authority easily? - Held that - Here, the Assessing Officer who framed the original assessment under section 143(3) of the Act, has not found the facts to have been presented in such a manner that the same cannot be understood easily, inasmuch as, he has, after hearing the assessee, framed the assessment. Besides, if any facts are put in a manner which the Assessing Officer cannot understand, it is always permissible for the concerned Assessing Officer to call upon the assessee to explain the same. Thus, when the Assessing Officer who passed the original assessment order did not find the facts to be difficult to understand, it is not permissible for the successor Assessing Officer to seek to reopen the assessment on the ground that the facts were presented in a manner which could not be easily understood. Insofar as the claim of deductions under section 80IA of the Act, which according to AO have wrongly been claimed by the assessee are concerned, it is an admitted position that at the time of framing the original assessment, deductions under section 80IA of the Act had been computed by the Assessing Officer and the claims of the assessee had been partly allowed, against which, the assessee had approached the Commissioner (Appeals), who had partly granted the reliefs. Under the circumstances, as rightly submitted by the learned counsel for the respondent assessee, the order passed by the Assessing Officer stood merged with the order passed by the Commissioner (Appeals) insofar as the claim of deduction under section 80IA of the Act is concerned and hence, it did not have any independent existence in the eyes of law. It was, therefore, not permissible for the Assessing Officer to reopen the assessment in respect of those items which had already been examined by the Assessing Officer while framing the assessment under section 143(3) of the Act. In Cliantha Research Ltd. v. Deputy Commissioner of Income Tax, (2013 (7) TMI 452 - GUJARAT HIGH COURT ), has held that when a claim was processed at length and after calling for detailed explanation from the assessee, the same was accepted, merely because a certain element or angle was not in the mind of the Assessing Officer while accepting such a claim, cannot be a ground for issuing notice for reassessment. In the present case, the claim of deduction under section 80HHC and 80IA of the Act had been processed at length by the Assessing Officer. The mere fact that such claim was not examined from a particular angle, therefore, cannot be a ground for reopening the assessment. Allocation of expenditure - according to the Assessing Officer, there is intermixing of R&D expenses of all the products, therefore, the best way to allocate the expense under these circumstances should be on the basis of profitability ratio of various units - Held that - In the opinion of this court, once the Assessing Officer while framing the assessment under section 143(3) of the Act has accepted the R & D expenses of all products, the successor Assessing Officer cannot claim to be wiser and seek to reopen the assessment merely because according to him there is a better way of allocation of expenses. Grant of deduction under section 80HHC and 80IA which is not correct - Held that - As in effect and substance, the Assessing Officer wants to sit in appeal over the order passed by the predecessor Assessing Officer and seeks to disallow the deductions which have already been granted by him. Assessee has inflated its profit and at the same time shown reduced profit because the same is exempt under section 80IA, by giving more interest on overdue bills by Aditya Medisales Ltd - Held that - In the opinion of this court, one fails to understand as to how it can be stated that the income chargeable to tax has escaped assessment if the assessee had shown inflated profits. Thus on overall perusal of the reasons recorded for reopening the assessment, it is evident that the Assessing Officer seeks to correct the mistakes which according to him had been made by the earlier Assessing Officer while framing the original assessment, which is nothing but a mere change of opinion. As decided in the case of Commissioner of Income Tax v. (1) Kelvinator of India Ltd., (2010 (1) TMI 11 - SUPREME COURT OF INDIA ) an assessment cannot be reopened on a mere change of opinion. - Decided in favour of assessee
Issues Involved:
1. Validity of reassessment proceedings under section 147 of the Income Tax Act, 1961. 2. Whether reassessment constitutes a change of opinion. 3. Merger of the Assessing Officer's order with the Commissioner of Income-tax (Appeals) order. 4. Allocation and treatment of deductions under sections 80IA and 80HHC of the Act. 5. Alleged inflation of profits and improper allocation of Research & Development (R&D) expenses. 6. Netting off interest payments against gross interest receipts. Detailed Analysis: 1. Validity of Reassessment Proceedings under Section 147 of the Income Tax Act, 1961: The appellant-revenue challenged the common order of the Tribunal, which quashed the reassessment orders for the assessment years 2000-01 and 2001-02. The Tribunal held the reassessment proceedings as vitiated in law. The revenue argued that the Tribunal erred in treating the reassessment as invalid despite the Assessing Officer (A.O.) having reasons to believe that income chargeable to tax had escaped assessment. 2. Whether Reassessment Constitutes a Change of Opinion: The Tribunal accepted the assessee's contention that the reassessment was based on a mere change of opinion. The original assessment under section 143(3) of the Act had already considered the deductions under sections 80IA and 80HHC. The Tribunal found that the reasons for reopening were essentially a re-evaluation of the same facts, which is not permissible under the law as it constitutes a change of opinion. 3. Merger of the Assessing Officer's Order with the Commissioner of Income-tax (Appeals) Order: The Tribunal noted that the original assessment order had merged with the order of the Commissioner (Appeals) concerning the deductions under sections 80IA and 80HHC. Therefore, the A.O. could not reopen the assessment on grounds already addressed and decided by the Commissioner (Appeals). This principle follows the judgment in the case of United Phosphorus Ltd. v. ACIT. 4. Allocation and Treatment of Deductions under Sections 80IA and 80HHC of the Act: The reassessment was partly based on the A.O.'s view that the assessee had improperly claimed deductions under sections 80IA and 80HHC. However, the Tribunal found that these deductions were already scrutinized during the original assessment. The court observed that once a claim is processed and accepted after detailed examination, it cannot be reopened merely because a different angle was not considered initially. 5. Alleged Inflation of Profits and Improper Allocation of Research & Development (R&D) Expenses: The A.O. alleged that the assessee inflated profits by allocating more interest on overdue bills and improperly allocated R&D expenses. The Tribunal found that these matters were already considered in the original assessment. The court held that the successor A.O. could not reopen the assessment merely because he believed there was a better way to allocate expenses or because he disagreed with the previous A.O.'s conclusions. 6. Netting Off Interest Payments Against Gross Interest Receipts: The A.O. argued that the assessee improperly set off interest payments against gross interest receipts. The Tribunal held that this issue was also considered during the original assessment. The court reiterated that reassessment cannot be used to correct perceived mistakes of the earlier A.O. as it amounts to a change of opinion. Conclusion: The court dismissed the appeals, upholding the Tribunal's decision that the reassessment proceedings were invalid as they were based on a mere change of opinion. The court emphasized that an assessment cannot be reopened on such grounds, as established by the Supreme Court in Commissioner of Income Tax v. Kelvinator of India Ltd. The appeals were found to be devoid of merit and were accordingly dismissed.
|
