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2023 (1) TMI 608 - AT - Income TaxReopening of assessment u/s.147 - addition made on account of CENVAT credit and consequently reduction in claim of deduction u/s.80IA - whether reopening could be made to examine another facet of the same claim of deduction? - HELD THAT - There is absolutely no failure on the part of the assessee in making full and true disclosure of material facts in the original scrutiny assessment proceedings that are relevant for the purpose of framing the assessment. There is absolutely no basis for the ld. AO to come to the conclusion that income of the assessee had escaped assessment by way of excess claim of deduction u/s.80IA of the Act in the instant case. The ld. DR vehemently argued that the information sought for u/s. 133(6) of the Act constitute tangible material to the ld. AO which enabled him to form belief that income of the assessee had escaped assessment. As stated earlier the said information was no new information provided by the assessee to the ld. AO as the assessee had only re-furnished the very same information that is already available with the ld. AO in the assessment record. Hence it could be safely concluded that there is absolutely no tangible material available with the ld. AO having live link to form a belief that income of the assessee had escaped assessment. Hence reopening of the assessment fails on this count itself. Reopening could be made to examine another facet of the same claim of deduction - This was subject matter of adjudication by the Hon ble Gujarat High Court as rightly pointed by the ld. AR before us in the case of QX KPO Services (P.) Ltd. 2018 (3) TMI 1664 - GUJARAT HIGH COURT wherein as settled legal position that when a particular claim has been scrutinized by the Assessing Officer at the time of original assessment as such the Assessing Officer cannot reopen such assessed case in order to examine another facet of the same claim. The assumption of jurisdiction under Section 147 of the Act by the Assessing Officer of issuing notice under Section 148 of the Act is without the authority of law and cannot be sustained. Also confirmed by SC 2018 (11) TMI 1185 - SC ORDER As assessee had furnished all the relevant details in the return of income and also elaborated those details during the course of original scrutiny assessment proceedings itself. In fact the ld. AO in the assessment framed u/s.143(3) of the Act had even resorted to disturb the claim of deduction u/s.80IA of the Act by making additions thereon which got ultimately deleted by the ld. CIT(A) and by this Tribunal. Hence the entire gamut of the issue of claim of deduction u/s.80IA of the Act was already subject matter of examination in the original scrutiny assessment proceedings and an opinion has already been framed by the ld.AO. The Revenue seeking to reopen the assessment in this scenario only tantamount to change of opinion which is not permissible in law. Even on merits we find that the main grievance of the Revenue is that the assessee had not debited certain expenses in the eligible unit i.e. 80IA units and thereby had claimed excess deduction u/s.80IA of the Act in the return of income. We find that this aspect has been addressed elaborately by the ld.CIT(A) and the ld. CIT(A) had deleted the said disallowances by placing reliance on various decisions of Tribunals High Courts and Supreme Court and granted relief to the assessee - Decided in favour of assessee.
Issues Involved:
1. Validity of reopening the assessment under Section 147 of the Income Tax Act. 2. Justification for the addition made on account of CENVAT credit and its impact on the deduction claimed under Section 80IA of the Income Tax Act. Issue-Wise Detailed Analysis: 1. Validity of Reopening the Assessment Under Section 147: The first issue to be decided is whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in upholding the action of the Assessing Officer (AO) in reopening the assessment under Section 147 of the Income Tax Act. The interconnected issue on merits is whether the CIT(A) was justified in deleting the addition made on account of CENVAT credit and consequently reducing the claim of deduction under Section 80IA of the Act. The assessee filed its return of income for the Assessment Year (A.Y.) 2008-09 on 30/09/2008, declaring a total income of Rs.182,39,78,434/-. The assessment was completed under Section 143(3) on 22/03/2010, determining the total income at Rs.226,91,32,020/-. Additions included Rs.12,40,25,900/- on account of CENVAT credit and Rs.26,64,162/- for allocation of Head Office Expenses to the 80IA unit. The AO reopened the assessment by issuing a notice under Section 148 on 26/03/2015, citing reasons that the assessee had claimed excess deduction under Section 80IA by not including the CENVAT credit in the expenses. The Tribunal noted that the AO did not have any new tangible material to form a belief that income had escaped assessment. The AO had examined the same book entries and assessment records during the original assessment proceedings. Specific queries were raised during the original scrutiny assessment, and the assessee had provided detailed replies. Therefore, the Tribunal concluded that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment. The Tribunal relied on the decision of the Hon'ble Gujarat High Court in the case of QX KPO Services (P.) Ltd. vs DCIT, which held that reopening is not permissible to examine another facet of the same claim of deduction. The Tribunal also noted that the information obtained by the AO under Section 133(6) was merely a refurnishing of data already available in the tax audit report, and hence, did not constitute tangible material. Therefore, the Tribunal held that the reopening of the assessment under Section 147 was invalid and quashed the reopening for A.Y. 2008-09. This decision applied mutatis mutandis to A.Y. 2009-10 and 2010-11, with the proviso to Section 147 not applicable for A.Y. 2010-11 as the reopening was within four years from the end of the relevant assessment year. 2. Justification for Addition Made on Account of CENVAT Credit:On merits, the main grievance of the Revenue was that the assessee had not debited certain expenses in the eligible unit (80IA units), thereby claiming excess deduction under Section 80IA. The CIT(A) deleted the disallowances, relying on various judicial decisions, including the Hon'ble Supreme Court's decision in the case of CIT vs. Meghalaya Steels Ltd., which held that subsidies reimbursed for costs related to manufacturing or sale bear a direct nexus to the business profits and are eligible for deduction under Section 80IA. The Tribunal also referred to its decision in the case of Ambuja Cements Ltd vs. Addl. CIT, where it was held that the expenses debited net of CENVAT credit availed do not vitiate the profits of the eligible undertaking as long as the CENVAT credits are fully availed by other units. The Tribunal upheld the CIT(A)'s decision to delete the disallowance of deduction under Section 80IA on account of CENVAT credit. In conclusion, the Tribunal allowed the appeal of the assessee for A.Y. 2008-09 and dismissed the appeal of the Revenue. For A.Y. 2009-10 and 2010-11, the Tribunal's decision followed the same reasoning, allowing the assessee's appeals partly and dismissing the Revenue's appeals. Summary of Results:
Order pronounced on 10/01/2023 by way of proper mentioning in the notice board.
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