2016 (11) TMI 726 - HC - Income Tax

Reopening of assessment - whether the assessing authority was entitled to invoke Section 147 of the Act as regards the deductions granted by the assessing authority at the first instance through the assessment order allowing deductions under Sections 80HH and 80I during the regular assessment proceedings against the assessee? - Held that - The assessee had responded to the queries raised by the assessing officer in the original assessment proceedings and during the course of such proceedings had produced all material facts as were called for and were relevant and necessary for completing the assessment for the year. Under such circumstances, we are of the view that the Tribunal was abundantly justified in the facts and in the circumstances of the case in hand to have concluded that this is a case where proceedings were impermissible in view of the embargo under the first proviso to Section 147 of the Act. Having held so, we cannot but to affirm the decision of the Tribunal and thereby answer the questions raised by the Revenue against it.- Decided in favour of assessee.

Summary

Issues:
1. Validity of reassessment proceedings due to lack of full and true disclosure of material necessary for assessment during original assessment.
2. Verification of deduction claim under Sections 143(1)(a) and 154.
3. Perversity of Tribunal's finding based on wrong appreciation of facts.

Issue 1:
The Department appealed the Tribunal's decision on the validity of reassessment proceedings, arguing that the assessing authority had insufficient materials to proceed under Section 147 of the Income Tax Act. The Department cited a relevant case to support their position. The dispute centered around whether the assessing authority could invoke Section 147 regarding deductions granted during the initial assessment. The Tribunal noted that the reassessment was attempted after the four-year period, referencing Section 147(3) and its provisos. The Appellate Tribunal, as the final authority on facts, found that the assessing officer had considered all necessary materials during the original assessment, making the reassessment impermissible under the first proviso to Section 147.

Issue 2:
The second issue involved the verification of the deduction claim under Sections 143(1)(a) and 154. The Department argued that the assessing authority had only considered the allowability of deductions, not the eligibility, due to constraints under Section 143(1)(a). However, the Tribunal found that the assessing officer had indeed considered the materials and the claims were debatable. The Tribunal concluded that the proceedings were impermissible under the first proviso to Section 147 due to the assessee's full and true disclosure of material facts during the original assessment.

Issue 3:
Regarding the alleged perversity of the Tribunal's finding, the Court upheld the Tribunal's decision, emphasizing the assessee's compliance with disclosing all necessary material facts during the original assessment. The Court affirmed the Tribunal's conclusion that the reassessment was impermissible under the first proviso to Section 147, dismissing the income tax appeal by the Department.

In conclusion, the Court rejected the Department's appeal, affirming the Tribunal's decision that the reassessment proceedings were invalid due to the assessee's full and true disclosure of material facts during the original assessment, as required by the first proviso to Section 147 of the Income Tax Act.