2019 (8) TMI 309 - HC - Income Tax

Reopening of assessment u/s 147 - ITAT justification in quashing the reassessment order passed by AO u/s 147 admitting grounds of appeal of the Assessee under Rule 27 of the ITAT Rules - HELD THAT - The point stands answered against the Revenue by the decision of the Gujarat High Court in Principal Commissioner of Income Tax, Vadodara-2 v. Sun Pharmaceuticals Industries Ltd. 2017 (9) TMI 1416 - GUJARAT HIGH COURT holding that although an Assessee may not have appealed or filed a cross-objection, in a different proceedings before the Appellate Forum / Tribunal, he is free to defend such order on all grounds including on any of the grounds decided against him by the authority whose order is otherwise in his favour. Consequently, this Court is not persuaded to frame any question on this issue. Disallowance u/s 35(1)(ii) - HELD THAT - This issue is concerned are that according to the Revenue the actual research expenses have been incurred by the Mother Dairy Fruits and Vegetables Ltd. whose subsidiary is the present Assessee. The Assessee apparently reimbursed the expenses incurred on scientific research for Mother Dairy Fruits and Vegetables Ltd. The Assessee has been assessed in Gujarat prior to the AY in question and for an earlier AY 2002- 03 where again in reassessment proceedings such expenses were sought to be disallowed, the High Court of Gujarat decided the issue in favour of the Assessee by its order in Dhara Vegetable Oil and Foods Co. Ltd. v. The Deputy Commissioner of Income Tax 2012 (7) TMI 593 - GUJARAT HIGH COURT

Summary

Issues:
1. Justification of quashing reassessment order by ITAT under Rule 27 of ITAT Rules.
2. Justification of deleting addition made on account of disallowance under Section 35(1)(ii) of the Act.

Analysis:

Issue 1:
The first issue revolves around the ITAT's decision to quash the reassessment order passed by the Assessing Officer under Section 147 of the Act. The Court referred to a decision of the Gujarat High Court in a similar case, where it was held that even if the Assessee did not file an appeal or cross-objection, they are entitled to defend the order on all grounds. The Court, based on this precedent, declined to entertain any questions on this issue, thereby upholding the ITAT's decision.

Issue 2:
The second issue pertains to the deletion of an addition made on account of disallowance under Section 35(1)(ii) of the Act. The Revenue contended that the Assessee had reimbursed expenses incurred by another entity for research purposes. However, the High Court of Gujarat had previously ruled in favor of the Assessee in a similar case. Since the Revenue had accepted the earlier decision, the Court declined to entertain any questions on this issue as well. Consequently, the ITAT's decision to delete the addition was upheld, and the appeal was ultimately dismissed.