2012 (6) TMI 107 - HC - Income Tax

Re-opening of the concluded assessment - whether the petitioner company is entitled to claim deduction under Section 80IB(10) - writ petition to issue a Writ of Certiorari assessee contested that the re-opening of the assessment is a case of change of opinion on a concluded scrutiny assessment - petitioner is a domestic private limited company, engaged in the business of construction of residential/commercial complexes - Held that - Notice for the re-opening of the assessment has not stated that the petitioner had failed to fully and truly disclose the material facts relevant for the passing of the original assessment order - the petitioner had placed all the relevant records including the construction agreement that he was operating only as a contractor and not as a builder in the light of the explanation to Section 80IB(10) introduced by the Finance Act, 2009 with retrospective effect, from 1.4.2001, it would not be open to the respondent to re-open the assessment before the passing of the original assessment order - thus it is not the case of the respondent that the petitioner had suppressed certain material facts due to which the original assessment order passed by the respondent is liable to be reassessed in favour of assessee.

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Jurisdiction of the respondent to re-open the concluded assessment under Section 147 of the Act.
3. Alleged failure of the petitioner to disclose material facts fully and truly.
4. Applicability of the explanation to Section 80IB(10) introduced by the Finance Act, 2009, with retrospective effect from 1.4.2001.
5. Whether the re-opening of the assessment is based on a mere change of opinion.

Detailed Analysis:

1. Validity of the Notice Issued Under Section 148 of the Income Tax Act, 1961
The petitioner challenged the notice dated 16.3.2011, issued under Section 148 of the Income Tax Act, 1961, arguing it was arbitrary, illegal, and void. The petitioner contended that the re-opening of the assessment was a case of "change of opinion" on a concluded scrutiny assessment, contrary to the Supreme Court's decision in Commissioner of Income Tax, Delhi Vs. Kelvinator of India Ltd. [2010] 320 ITR 561 (SC). The court found that the notice did not state that the petitioner had failed to fully and truly disclose the material facts relevant for the original assessment order, making the re-opening of the assessment invalid.

2. Jurisdiction of the Respondent to Re-open the Concluded Assessment Under Section 147 of the Act
The petitioner argued that the respondent lacked jurisdiction to re-open the concluded assessment without fresh tangible material. The court agreed, noting that the original assessment had been completed after considering all relevant issues and that no new facts had come to light that would warrant re-opening the assessment. The court held that the respondent's action was not justified under Section 147 of the Act.

3. Alleged Failure of the Petitioner to Disclose Material Facts Fully and Truly
The petitioner contended that there was no failure on their part to disclose fully and truly all material facts necessary for the assessment. The court noted that the petitioner had provided all relevant records, including the construction agreement, at the time of the original assessment. The court found no evidence of suppression of material facts by the petitioner, making the assumption of jurisdiction by the respondent under Section 147 of the Act, after the expiry of four years from the end of the relevant assessment year, illegal and invalid.

4. Applicability of the Explanation to Section 80IB(10) Introduced by the Finance Act, 2009, with Retrospective Effect from 1.4.2001
The respondent argued that the re-opening of the assessment was based on the explanation to Section 80IB(10) introduced by the Finance Act, 2009, which stated that deduction under Section 80IB(10) would not be available to any undertaking executing the housing project as a works contract. The court found that this explanation was not a valid ground for re-opening the assessment, as the original assessment had already considered all relevant issues, and the petitioner had not failed to disclose any material facts.

5. Whether the Re-opening of the Assessment is Based on a Mere Change of Opinion
The petitioner argued that the re-opening of the assessment was based on a mere change of opinion by the assessing authority. The court agreed, noting that the original assessment had been completed after considering all relevant issues and that the re-opening was not based on any new facts or tangible material. The court held that a mere change of opinion could not justify the re-opening of a concluded assessment.

Conclusion:
The court concluded that the re-opening of the assessment under Section 147 of the Income Tax Act, 1961, was invalid and illegal. The notice issued under Section 148 of the Act and the consequential proceedings were quashed. The writ petition was allowed, and the connected miscellaneous petition was closed.

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