2004 (6) TMI 28 - HC - Income Tax

Reopening of assessment - Deduction of investment allowance - It wasurged that the petitioner was merely processing pre-composed printing material and in return the petitioner received labour charges only which did not entitle the petitioner to claim investment allowance u/s 32A - Reassessment limitation - there is no failure or omission on the part of the petitioner either to make a return as required or any failure or omission in relation to any material fact necessary for the purposes of assessment as required under the proviso to section 147 - there is no material with the Assessing Officer to come to the conclusion that any income has escaped assessment Reassessment is bad in law petition is allowed notices are quashed

Summary

Issues:
Reopening of assessment for assessment years 1982-83 to 1986-87 beyond the limitation period under section 148 of the Income-tax Act, 1961. Claim of investment allowance under section 32A of the Act for printing machinery. Justification for reopening assessment for the assessment year 1986-87.

Analysis:
The petitioner challenged the notices issued under section 148 of the Income-tax Act, 1961 for the assessment years 1982-83 to 1986-87, claiming they were beyond the limitation period of four years. The petitioner had claimed investment allowance under section 32A for various printing machinery purchases. The respondent argued that the petitioner, engaged in job work, did not meet the manufacturing requirement under section 32A. The court noted that all conditions under section 32A were fulfilled by the petitioner, but did not delve into the manufacturing aspect. The court found that for the years 1982-83 to 1985-86, the notices were issued beyond the four-year limit without any failure or omission by the petitioner, leading to the quashing of reassessment proceedings for those years.

For the assessment year 1986-87, the court observed that there was no failure or omission on the petitioner's part, and no evidence of income escapement. Reopening assessments based on a change of opinion was deemed impermissible. Notably, for the subsequent assessment year 1987-88, the petitioner was granted the investment allowance. Consequently, the court held that the reopening for the assessment year 1986-87 was unjustified, leading to the quashing of the notice under section 148 and declaring the proposed reassessment as unlawful.

In conclusion, the court allowed the petition, quashed all notices under section 148 for the assessment years 1982-83 to 1986-87, and restrained the respondents from further action based on those notices. The ruling was made absolute with no order as to costs.