Income Tax Act | Reassessment U/S 147 Valid If Original Order Did Not Consider S. 80HHC Claim Earlier: Madras High Court

Section 147 of the Income Tax Act, 1961, empowers the Assessing Officer (AO) to assess or reassess income that has escaped assessment.

Justices Anita Sumanth and Mummineni Sudheer Kumar stated that the original order of assessment is wholly silent in regard to the claim under Section 80HHC. Normally, when an order of assessment is passed under Section 143(3) of the Act, there is a presumption that the issues raised for consideration in the return of income have been duly taken note of by the Assessing Officer.

In the case at hand, the assessee filed a return of income claiming relief under Section 80 HHC of the Income Tax Act. The return was taken up for scrutiny, and an assessment was completed under Section 143(3) of the Income Tax Act.

A notice under Section 148 was issued proposing to re-assess the income for AY 2004-05. A letter was filed before the Assessing Officer, where the assessee states that the return of income originally filed may be taken as a response to the notice under Section 148 and seeks a copy of the reasons for reassessment.

Despite the same, the assessment came to be completed wherein the Assessing Officer states that there was no response to the Section 148 notice.

However, in the order of reassessment, the Assessing Authority refers to the discussion had with the Chartered Accountant of the assessee, including on the question of excess claim under Section 80HHC, which is the basis on which reassessment had been initiated.

The counsel for the assessee argued that the impugned re-assessment proceedings are based wholly on a change of opinion and are hence bad in law.

It was submitted that the return of income filed contains the computation of deduction under Section 80 HHC, and it was only upon consideration of the same that the Assessing Authority had accepted the relief claimed. Hence, there was no new or tangible material brought on record in the re-assessment proceedings, vitiating the assumption of jurisdiction under Section 147 of the Act.

The department pointed out that there has been absolutely no consideration of the claim under Section 80HHC by the Assessing Officer at the original instance.

The bench stated that the assessment order is singularly silent with regard to any such correspondence with the assessee, and is wholly non-speaking with regard to the claim under Section 80HHC. Had the Assessing Officer mentioned the claim under Section 80HHC in either the body of assessment or in the computation, there would have been something to base the presumption that the claim has not been wholly lost sight of by the Assessing Authority. However, the order of assessment passed in the present case does not indicate any such application of mind.

The bench noted that the assessment order is wholly silent as to the deduction under Section 80HHC, and nowhere does the Assessing Authority refer to the computation of 80 HHC. Neither does he mention anywhere that he had discussed with the assessee the details necessary and relevant to the computation of deduction under Section 80 HHC.

Normally, when an order of assessment is passed under Section 143(3) of the Act, there is a presumption that the issues raised for consideration in the return of income have been duly taken note of by the Assessing Officer, added the bench.

Hence, the original orders of assessment in those cases had been preceded by a detailed discussion which indicated application of mind and formation of opinion by those Assessing Officers, which is absent in the present case, stated the bench.

In view of the above, the bench dismissed the appeal.

Case Title: Jasmine Towels (P) Ltd. v. Asst. Commissioner Of Income Tax

Case Number: TCA No. 394 of 2012

Counsel for Appellant/Assessee: Athiban Vijay A.K.

Counsel for Respondent/Department: V. Mahalingam

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