2012 (6) TMI 108 - HC - Income Tax

Re-opening of the concluded assessment - claim of deduction under Section 80IB(10)questioned - 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 - the petitioner is a domestic private limited company, engaged in the business of engineering works, building and developing of residential properties - 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.

Summary

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Jurisdiction to re-open the assessment under Section 147 of the Act.
3. Alleged failure 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. Allegation of reassessment based on a 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 25.3.2011, issued under Section 148, and the consequential proceedings dated 28.9.2011, rejecting the objections against the re-opening of the assessment for the year 2004-2005. The petitioner argued that the assessment was completed under Section 143(3) on 27.3.2006, and re-opening it under Section 147 is a change of opinion, which is contrary to the Supreme Court decision in Commissioner of Income Tax, Delhi Vs. Kelvinator of India Ltd. [2010] 320 ITR 561 (SC).

2. Jurisdiction to Re-open the Assessment Under Section 147 of the Act:
The petitioner contended that the respondent lacked jurisdiction to re-open the assessment without fresh tangible material. The respondent issued the notice under Section 148 based on the explanation to Section 80IB(10) introduced by the Finance Act, 2009, with retrospective effect from 1.4.2001. The petitioner argued that there was no failure on their part to disclose material facts necessary for the assessment.

3. Alleged Failure to Disclose Material Facts Fully and Truly:
The petitioner argued that they had disclosed all relevant materials during the original assessment. The respondent, however, claimed that the petitioner did not fully and truly disclose the facts, which necessitated the reassessment proceedings. The court found that the notice did not state any failure on the part 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:
The respondent argued that the petitioner operated as a contractor and not as a builder, making them ineligible for deduction under Section 80IB(10) due to the explanation introduced by the Finance Act, 2009. The petitioner contended that this explanation could not be a ground for re-opening the assessment, as all relevant facts were already disclosed during the original assessment.

5. Allegation of Reassessment Based on a Change of Opinion:
The petitioner claimed that the reassessment was based on a mere change of opinion, which is not permissible. The court noted that the original assessment order did not consider the issue of eligibility for deduction under Section 80IB(10) in light of the retrospective amendment. The court found that the re-opening of the assessment was not justified as there was no failure on the part of the petitioner to disclose material facts.

Conclusion:
The court concluded that the respondent's notice for re-opening the assessment was invalid and illegal as it was not based on any failure by the petitioner to disclose material facts fully and truly. The assumption of jurisdiction under Section 147 after the expiry of four years was deemed illegal and invalid. Consequently, the writ petition was allowed, and the impugned proceedings were quashed.