2011 (6) TMI 883 - AT - Income Tax

Summary

Issues Involved:
1. Validity of reassessment proceedings initiated u/s 147.
2. Quantum of addition made during reassessment proceedings.

Summary:

Validity of Reassessment Proceedings:
The cross objection by the assessee challenges the validity of reassessment proceedings initiated u/s 147. The assessee argued that the notice u/s 148 dated 28.3.2008 for reopening the completed assessment u/s 143(3) dated 19.12.2003 was invalid as the assessee had declared full and true particulars of its income. The reassessment was based on a retrospective amendment to section 80 HHC, which was not applicable at the time of the original assessment. The Tribunal upheld the assessee's grievance, noting that reassessment proceedings initiated after four years from the end of the relevant assessment year are invalid unless it is established that the assessee failed to disclose all material facts necessary for the assessment. The Tribunal cited the decision in Dharmik Exim Pvt Ltd v ACIT, which held that reopening based on retrospective amendment is invalid if the assessee had fully disclosed all material facts at the time of the original assessment. Consequently, the reassessment proceedings were quashed.

Quantum of Addition:
The departmental appeal challenged the CIT(A)'s order on the quantum of addition made during the reassessment proceedings, specifically regarding the deduction u/s 80 HHC on DEPB licenses. However, since the reassessment proceedings were quashed, the issue of the quantum of addition became academic and infructuous. The Tribunal noted that the correctness of the additions made during the reassessment proceedings was covered against the assessee by the Jurisdictional High Court's judgment in Kalpataru Colours and Chemicals. However, since the reassessment proceedings themselves were invalid, this aspect ceased to have any practical implication.

Conclusion:
The cross objections filed by the assessee were allowed, and the appeals filed by the revenue were dismissed as infructuous. The Tribunal emphasized that reassessment proceedings initiated after four years based on retrospective amendments are invalid if the assessee had fully disclosed all material facts at the time of the original assessment.