A completed assessment can not be reopened u/s 147 on the basis of opinion of audit party, where no new facts are there

Summary of Judgment

Carlton Overseas (P.) Ltd. vs. Income-tax Officer, August 18 2009 (HC Delhi)

FACTS

The petitioner is a Private Limited Company engaged in a business of manufacturing and export of footwear. For the assessment year 2002-03  the assessee-company filed the return of income on 30-1-2002 declaring an income of Rs. 3,02,91,449. In this return of income the petitioner had claimed deduction under sections 80G, 80HHC and 80-IB of the Act. The return of income was filed along with the following documents :

   “(i)   Audited Accounts.

   (ii)   Tax Audit Report.

  (iii)   Audit Report in Form No. 10-CCAC for claim of deduction under section 80HHC of the Act.

  (iv)   Detailed computation of income along with the detailed working of deduction claimed under sections 80HHC and 80-IB of the Act.

   (v)   Audit Report on Form 3-CEB relating to international transactions.”

 During the course of the assessment, the Assessing Officer vide questionnaire dated 28-2-2005 asked the following question with respect to the allowability of deduction under section 80HHC of the Act :

“Mr. S.C. Goyal, C.A. appeared. Ask to justify deduction under section 80HHC in view of the provisions of sub-section (9) of section 80-IA and why deduction allowed under section 80-IB should not be deducted while working out deduction under section 80HHC. Produce books of account. Produce details of interest income also. Case adjourned to 4-3-2005.”

The petitioner filed a detailed note on deduction under section 80HHC and section 80-IB which has been filed as Annexure ‘A’ to the writ petition. The said note justified the entitlement of the petitioner/assessee-company for claiming the reliefs under sections 80HHC and 80-IB. In the last para of the note, it was specifically stated that where there are two  reliefs, each relief under a different section, then, the relief should be calculated independently subject only to the condition that aggregate of both the reliefs should not exceed the income of the undertaking. Other portion in the note shows the claim of the assessee to get a double deduction under both the heads and that calculation of relief has to be done independently.

An assessment order was thereafter passed under section 143(3) of the Act on 29-3-2005. The assessee thereafter received the impugned notice dated 29-1-2007 under section 148 of the Act. On receipt of the  notice under section 148, the assessee-company applied for the reasons for re-opening the assessment which were furnished to the assessee as under :

“Reasons for reopening the assessment in the case of M/s Carlton Overseas Ltd. for the assessment year 2002-03.—Return of income for assessment year 2002-03 was filed on 31-10-2002 declaring the income of Rs. 23,70,590 and the case was assessed under section 143(3) at an income of Rs. 27,44,850. On perusal of the return, it was noticed that the assessee was allowed deduction of  Rs. 70.70 lakhs under section 80-IA and the same was not deducted from the profit  of the business for the purpose of calculating deduction under section  80HHC. As per the sub-section (9) of section 80-IA, the profits considered for the deduction under section 80-IA should be reduced for computing the deduction under any other section mentioned in the Chapter VIA. This has resulted in the incorrect allowance of deduction of Rs. 49.08 lakhs involving short, levy of tax of Rs. 24.57 lakhs including interest.

Therefore, I have reason to believe that taxable income of Rs. 24.57 lakhs chargeable to tax has escaped assessment and I am satisfied that it is a fit case for issue of notice under section 148 of the Income-tax Act.

Held

We find that the arguments on behalf of the petitioner are well founded and it must succeed. The Audit Report merely gives an opinion with regard to the non-availability of the deduction both under section 80-IA and under section 80HHC and that the deduction under section 80-IA was not deducted from the profits of the business while computing deduction under section 80HHC. Clearly, therefore, there was no new or fresh material before the Assessing Officer except the opinion of the revenue Audit Party.

Since it is settled law that mere change of opinion cannot form the basis for issuing of a notice under section 147/148 of the Act, therefore, we do not propose to burden our judgment with the said judgments. In fact, as stated above, the counsel for the revenue does not dispute this principle of law.

In view of the above, the present writ petition is allowed and the impugned notice dated 29-1-2007 issued by the respondent No. 2 is quashed. A writ in the nature of prohibition is issued commanding the respondents, more particularly the respondent No. 2, to forbear in giving any effect to or taking any steps whatsoever pursuant to and in furtherance of the notice under section 148 of the Act for the proceedings initiated with respect to the assessment year 2002-03.

Editor