2011 (12) TMI 60 - HC - Income Tax

Re-opening of assessment on the basis of Audit objections - admissibility of deduction u/s 80IA - Held That - the assessee has not failed or omitted to disclose material facts either deliberately or intentionally. On the other hand, full and true information and details were furnished and given during the course of the original assessment proceedings. The relevant and germane facts were truly and fully disclosed. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the notice under Section 148 of the Income Tax Act, 1961.
2. Justification for re-opening the assessment under Section 147/148 of the Income Tax Act.
3. Compliance with the jurisdictional pre-conditions for re-assessment.
4. Alleged failure to disclose material facts by the assessee.

Issue-wise Detailed Analysis:

1. Validity of the notice under Section 148 of the Income Tax Act, 1961:
The petitioner, RRB Consultants and Engineers Pvt. Ltd., sought to quash the notice dated 26.3.2010 issued by the Deputy Commissioner of Income Tax under Section 148 of the Income Tax Act, 1961. The notice was intended to re-open the assessment for the assessment year 2003-04. The petitioner argued that the jurisdictional pre-conditions for issuing a re-assessment notice under Section 148, as prescribed under Section 147, were not satisfied.

2. Justification for re-opening the assessment under Section 147/148 of the Income Tax Act:
The Assessing Officer (AO) had originally allowed a deduction under Section 80IA to the extent of Rs.1,17,71,062/-. However, an audit note/objection led the AO to believe that the income had escaped assessment. The AO recorded reasons stating that the primary source of income for the assessee was earning commission by the sale of wind mills, and the power plant was set up as a demonstration unit, not for power generation. Therefore, the AO believed the deduction under Section 80IA was incorrectly allowed.

3. Compliance with the jurisdictional pre-conditions for re-assessment:
The court found merit in the petitioner's contention that the jurisdictional pre-conditions for re-opening the assessment were not satisfied. The original assessment records showed that the issue of deduction under Section 80IA was thoroughly examined during the original assessment. The petitioner had submitted detailed information and evidence regarding the power generation income, and the AO had specifically dealt with the claim under Section 80IA in the assessment order dated 30.1.2006.

4. Alleged failure to disclose material facts by the assessee:
The court noted that the petitioner had disclosed all material facts truly and fully during the original assessment proceedings. The AO had asked for and received detailed explanations and evidence regarding the power generation income and the claim under Section 80IA. The court emphasized that the assessee had not failed or omitted to disclose any material facts, either deliberately or intentionally. The Supreme Court's ruling in Commissioner of Income Tax v. Kelvinator of India Ltd. was cited, highlighting that the AO cannot re-open assessments on issues that were already examined and considered, as it would amount to a "mere change of opinion."

Conclusion:
The court concluded that the jurisdictional pre-conditions required for re-opening the assessment order were not satisfied. The writ petition was allowed, and the notice dated 26.3.2010 and the order dated 28.9.2010 were quashed. No order as to costs was made.