2024 (3) TMI 108 - HC - Income Tax

Reopening of assessment u/s 147 - reasons to believe - issues subject matter of discussion during the assessment proceedings or not? - petitioner submitted that four items, i.e., claim of provision against unascertained liabilities, claim of excessive deduction u/s 35(2AB), deduction claimed on account CSR expenses and donations and excess allowance of deduction u/s 80IC were all subject matter of discussion during the assessment proceedings HELD THAT - All the four items, as submitted by assessee which form the basis for reason to believe escapement of income have been considered during the assessment proceedings. In the first notice Assessee received u/s 142(1 Petitioner was called upon to furnish deduction claimed under Chapter VIA with documentary evidences and also details of deductions claimed u/s 35 of the Act with supporting documents. Another communication was received by Petitioner u/s 142(1) calling upon Petitioner to provide data in the format prescribed for deduction claimed u/s 80IC details of products manufactured at 80IC Units and details of products sold from these Units, item-wise details of direct expenses which has been considered for allocation to 80IC Units, details of claim u/s 35 along with DSIR certificate of expense in Form 3CL and any other certificate obtained or required to be obtained in this regard, details of R D activity being carried on in respect of which deduction has been claimed and details of expenditure in CSR for which deduction u/s 80G has been claimed. Petitioner through its Chartered Account s letter gave data in connection with deductions claimed. In the assessment order it is accepted that questionnaire along with two notices u/s 142(1) were issued and the further details were called for from time to time during the course of assessment proceedings and Petitioner from time to time furnished the details called for. In the assessment order, the AO has also dealt with Petitioner s claim for deduction under Section 80IC and disallowed certain deductions. Likewise, the AO also disallowed certain provision for expenses u/s 37 of the Act. Therefore, the fact that the four issues raised in reason to believe for escapement of income have been subject matter of consideration during the assessment proceedings cannot be disputed. Revenue's submissions that all the four items do not find the mention in the assessment proceedings and, therefore, it cannot be stated that the AO had formed an opinion while writing the assessment order also cannot be accepted. As held by this Court in Aroni Commercials Limited 2014 (8) TMI 390 - BOMBAY HIGH COURT once a query is raised during the assessment proceedings and Assessee has replied to it, it follows that the query raised was a subject of consideration of the AO while completing the assessment. It is also not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. Therefore, the reopening of the assessment, in our view, is merely on the basis of change of opinion of the AO - Decided in favour of assessee.

Summary

Issues Involved:

1. Claim of provisions against unascertained liabilities.
2. Claim of excessive deduction under Section 35(2AB) of the Act.
3. Deduction claimed on account of CSR expenses and donations.
4. Excess allowance of deduction under Section 80IC of the Act.

Summary:

1. Claim of Provisions Against Unascertained Liabilities:
The Petitioner claimed year-end provisions for advertising and publicity expenses amounting to Rs. 89,17,26,682/-. The Revenue contended that these were against unascertained liabilities and hence not allowable. The court noted that this issue was discussed during the original assessment proceedings and, therefore, reopening on this ground was not justified as it would amount to a change of opinion.

2. Claim of Excessive Deduction Under Section 35(2AB) of the Act:
The Petitioner claimed a deduction of Rs. 6,38,97,55,364/- under Section 35(2AB) for scientific research, whereas the allowable amount was Rs. 5,45,47,95,980/-, resulting in an excess claim of Rs. 93,49,59,384/-. The court found that this issue was also raised and responded to during the original assessment proceedings. The reopening of assessment on this ground was deemed a change of opinion, which is not permissible.

3. Deduction Claimed on Account of CSR Expenses and Donations:
The Petitioner added back Rs. 86,72,16,104/- for CSR expenses in the P&L account but claimed Rs. 48,56,48,000/- under Section 80G, resulting in a double deduction. The court observed that this matter was part of the original assessment discussions and reopening on this basis was not justified.

4. Excess Allowance of Deduction Under Section 80IC of the Act:
The Revenue argued that there was a short apportionment of expenses leading to an excess deduction of Rs. 5,15,01,705/- under Section 80IC. The court noted that this issue was considered during the original assessment proceedings. Therefore, reopening on this ground was also seen as a change of opinion.

Conclusion:
The court held that all four issues raised for reopening the assessment were already considered during the original assessment proceedings. The reopening of assessment based on these issues was deemed a change of opinion, which is not permissible. The petition was allowed, and the notice for reopening the assessment was quashed. The court emphasized that an AO cannot remedy errors resulting from their own oversight through reassessment.