2017 (12) TMI 68 - HC - Income Tax

Reopening of assessment - additions made holding that the amounts brought to tax could not have been legitimately claimed as deduction under Section 80HHb - ITAT allowed the assessee s contentions - Held that - This Court is of the opinion that the conclusion recorded by the ITAT does not call any interference. The regular assessment was completed, in this case, on 31.03.2003. The regular assessment for AY 1998-99 was completed on 27.03.2001. In these circumstances, the assessee could not be faulted for having accepted the additions made for the previous assessment year (AY 1998-99); though later, given that the returns were filed on 29.11.2000 for the assessment year (AY 2000-01) in the present case. - Decided against revenue

Issues:
1. Validity of re-assessment for Assessment Year (AY) 2000-01.
2. Justification of additions made by the Assessing Officer.
3. Legitimacy of deductions claimed under Section 80HHb.
4. Adequacy of disclosure of material facts by the assessee.
5. Consideration of previous assessment year's additions.
6. Legal grounds for setting aside the assessment order.

Issue 1: Validity of re-assessment for AY 2000-01:
The Revenue challenged the order of the Income Tax Tribunal (ITAT) setting aside the assessment for AY 2000-01, arguing that the re-assessment was justified beyond four years due to the failure of the assessee to disclose all material facts necessary for assessment. The ITAT concluded that the re-assessment was a mere change of opinion without fresh material, rendering it unsustainable in law. The ITAT quashed the notice under Section 148 and the assessment order for AY 2000-01, allowing the assessee's appeal.

Issue 2: Justification of additions made by the Assessing Officer:
The Assessing Officer made additions to the income of the assessee, contending that certain amounts claimed as deductions under Section 80HHb were not legitimately eligible for such deductions. The CIT(A) upheld the additions, but the ITAT ruled in favor of the assessee, stating that the AO's opinion regarding the failure to disclose material facts amounted to a change of opinion without fresh material, making the re-assessment invalid.

Issue 3: Legitimacy of deductions claimed under Section 80HHb:
The dispute revolved around the legitimacy of deductions claimed under Section 80HHb by the assessee. The ITAT found that the AO's assertion of the ineligibility of the claimed deductions was based on a lack of fresh material and amounted to a mere change of opinion, leading to the allowance of the assessee's contentions and the quashing of the assessment order for AY 2000-01.

Issue 4: Adequacy of disclosure of material facts by the assessee:
The ITAT emphasized that the Assessing Officer had all necessary material facts before him during the original assessment, and the assertion of the assessee's failure to disclose all material facts was deemed unsustainable without specific details of undisclosed material. The ITAT concluded that the re-assessment lacked fresh material and was solely based on a change of opinion, leading to its invalidation.

Issue 5: Consideration of previous assessment year's additions:
The Court noted that the assessee had accepted additions made for the previous assessment year (AY 1998-99) and that the returns for AY 2000-01 were filed before the completion of the regular assessment for that year. This timeline was considered in evaluating the validity of the re-assessment for AY 2000-01.

Issue 6: Legal grounds for setting aside the assessment order:
The Court concurred with the ITAT's decision to set aside the assessment order for AY 2000-01, noting that the regular assessment was completed before the re-assessment and that the re-assessment lacked fresh material, making it a mere change of opinion without legal basis. No substantial question of law was found, leading to the dismissal of the appeal.

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