2011 (5) TMI 608 - HC - Income Tax

Reopening of assessment - Deduction u/s 80(IB) - Book profit u/s 115JB - Held that - It is clear from all the doubt that the petitioner assessee had made full and true disclosure of all material facts necessary for the assessment and there was no concealment. The fact that the petitioner had not submitted a separate profit & loss account or furnished/maintained separate accounts was known as without knowing these facts, the computation or quantification under section 80-IB was not possible. Inspite of knowing the full and true material facts, the Assessing Officer computed the said deduction in the original assessment proceedings. Thus, it cannot be said that the assessee had not disclosed fully and truly all the material facts necessary for the assessment. This is a case where the material facts were truly and fully disclosed by the assessee but as per the case of the Revenue, the Assessing Officer had made the assessment without considering the requirements of sub-section (13) to section 80-IB - thus reassessment proceedings are set aside - Decided in favour of the assessee

Issues Involved:
1. Change of opinion.
2. Full and true disclosure of material facts.
3. Jurisdiction of reassessment proceedings under section 147/148 of the Income-tax Act, 1961.
4. Compliance with section 80-IB(13) and Rule 18BBB.
5. Applicability of the first proviso to section 147.
6. Explanation 1 to the proviso to section 147.
7. Legal precedents and their applicability.

Detailed Analysis:

1. Change of Opinion:
The petitioner argued that the reassessment proceedings were based on a change of opinion, which is not permissible. The court reiterated that an Assessing Officer cannot reopen or re-examine aspects and questions that had been considered in the original assessment proceedings. The power to reopen cannot be exercised on the basis of a change of opinion, as established in CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561/187 Taxman 312 (SC).

2. Full and True Disclosure of Material Facts:
The petitioner contended that they had made full and true disclosure of all material facts necessary for the assessment. The court found that the original assessment order dated 20-3-2006 had specifically examined the deduction claimed under section 80-IB, including the quantum and computation. It was noted that the petitioner had submitted all relevant documents and accounts during the original assessment proceedings. The court held that there was no failure on the part of the petitioner to disclose fully and truly all material facts.

3. Jurisdiction of Reassessment Proceedings Under Section 147/148:
The court examined whether the reassessment proceedings initiated after four years were valid. The first proviso to section 147 applies when reassessment proceedings are initiated after four years from the end of the relevant assessment year. The court found that there was no allegation or statement in the reasons recorded that the petitioner had failed to disclose fully and truly all material facts necessary for the assessment. Therefore, the reassessment proceedings lacked jurisdiction.

4. Compliance with Section 80-IB(13) and Rule 18BBB:
The Revenue contended that the petitioner had not complied with section 80-IB(13) and Rule 18BBB, which require separate profit and loss accounts and balance sheets for each unit eligible for deduction. The court found that the original assessment order had already considered the computation of business income for the two units separately. The court held that the material facts were fully disclosed, and the alleged failure was in applying the law to the known facts, not in the disclosure of facts.

5. Applicability of the First Proviso to Section 147:
The court emphasized that the first proviso to section 147 bars reassessment proceedings after four years unless there is a failure to disclose fully and truly all material facts. The court found that the petitioner had disclosed all material facts, and the reassessment proceedings were based on a change of opinion or an error in applying the law, which does not justify reassessment after four years.

6. Explanation 1 to the Proviso to Section 147:
The Revenue relied on Explanation 1 to argue that mere production of account books does not amount to disclosure. The court clarified that Explanation 1 does not help the Revenue in this case, as the material facts were fully disclosed, and the issue was the application of the law to these facts. The court held that the failure alleged by the Revenue was an error in applying the law, not a failure in disclosure.

7. Legal Precedents and Their Applicability:
The court referred to several legal precedents, including Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 and ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC), to emphasize that the duty of the assessee is to make a true and full disclosure of primary facts. The court also referred to IPCA Laboratories Ltd. v. Gajanand Meena, Dy. CIT (No. 2) [2001] 251 ITR 416/[2002] 124 Taxman 556 and Haryana Acrylic Mfg. Co. v. CIT [2009] 308 ITR 38/[2008] 175 Taxman 262 to support its decision that the reassessment proceedings were not justified.

Conclusion:
The court allowed the writ petition, quashing the impugned order dated 1-11-2010 and the notice dated 31-3-2010. The reassessment proceedings were set aside, and there was no order as to costs.

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