2015 (9) TMI 1625 - AT - Income Tax

Reopening of assessment - deduction under section 80-IC claimed - Held that - From the perusal of reasons recorded and material available on record we do not come across any tangible material coming in the notice of the Assessing Officer for formation of belief. The words used time and again in the reasons recorded are it is noticed that . No reference to any other material is given. Even at the time of hearing before us no such material could be brought to our notice. Therefore admittedly what triggered the AO to reopen the case after issuing intimation under section 143(1) of the Act is not coming out of records. In view of this we proceed to discuss whether the provisions of section 147 of the Act read with section 148 of the Act are still applicable to the present case or not. There can be no dispute that the main ingredients for initiating these provisions are presence of material and live link between the material and the belief formed by the Assessing Officer which makes the reasonable belief as propounded in the provisions itself. Coming to the reason to believe we may be guided by another judgment of the Hon ble Apex Court in the case of Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT OF INDIA . The case was rendered surely in the context of original assessment having been made under section 143(3) of the Act however the interpretation made was that of the phrase reason to believe which is applicable equally to the cases made under section 143(1)(a) as well as 143(3) of the Act - Decided in favour of assessee.

Summary

Issues Involved:
1. Eligibility for 100% deduction under section 80-IC of the Income Tax Act.
2. Validity of reopening the case under section 147 of the Income Tax Act.

Detailed Analysis:

1. Eligibility for 100% Deduction under Section 80-IC:
The assessee firm claimed a 100% deduction under section 80-IC for the assessment year 2011-12, arguing substantial expansion during the year. The Assessing Officer (AO) disagreed, allowing only a 25% deduction, as the assessee had already availed 100% deduction for the initial five years (2006-07 to 2010-11). The CIT (Appeals) upheld the AO's decision, interpreting the provisions of section 80-IC to limit the deduction to 25% after the initial five years, regardless of substantial expansion. The ITAT Chandigarh Bench, referencing the case of Hycron Electronics, supported this interpretation, ruling against the assessee's claim for a 100% deduction.

2. Validity of Reopening the Case under Section 147:
The assessee challenged the reopening of the case under section 147, arguing no new material justified the reassessment. The CIT (Appeals) dismissed this challenge, citing the Supreme Court's decision in Kalyanji Mavji & Co., which allows reopening based on information derived from existing records. However, the ITAT found no tangible material or new information triggering the AO's belief that income had escaped assessment. The reasons recorded by the AO repeatedly used the phrase "it is noticed that," without referencing any new material. The ITAT emphasized that the AO must have "reason to believe" based on tangible material, as established in the Supreme Court cases of Sheo Nath Singh and Kelvinator of India Ltd. The ITAT concluded that the reopening was not justified, as the AO lacked new material to form a belief of escaped income.

Conclusion:
The ITAT quashed the proceedings initiated under section 147, ruling that the AO did not have the necessary tangible material to justify reopening the case. Consequently, the appeal of the assessee was allowed, and there was no need to adjudicate other grounds raised by the assessee. The order was pronounced in the open court on 14.9.2015.