2012 (6) TMI 434 - HC - Income Tax

Reassessment - wrong deduction u/s 80IB - held that - The law regarding reopening of assessment is very strict. If an assessment could have been done but has not been done or erroneously done it cannot be done after expiry of the prescribed time limit. Exception can be made in very special circumstances. f the Assessing Officers had not questioned the entitlement of the assessee to deduction under section 80-IB in the assessment years in question it was their mistake. All information regarding the alleged manufacturing process of the assessee was before them. After the time limit for making assessment or reassessment has long expired the Revenue cannot turn round take recourse to an extraordinary provision which is section 147 and attempt to reopen concluded assessments. If such exercise is permitted that would be quite contrary to the intention of the Act. - Decided in favor of assessee.

Summary

Issues involved:
1. Challenge to notices under section 148 of the Income-tax Act, 1961 for assessment years 1998-99, 1999-2000, 2000-01, and 2001-02, along with an order negativing objections made by the assessee.
2. Interpretation of section 80-IB(5) of the Act regarding an industrial undertaking engaged in manufacture.
3. Dispute over whether the production of "cattle and poultry feed" qualifies as manufacturing for availing benefits under section 80-IB(5).
4. Validity of reopening assessment under section 147 based on the change of opinion by the Revenue regarding the manufacturing status of the assessee.
5. Justification of the impugned notice under section 148 and the proceeding under section 147 for the assessment years in question.

Analysis:
1. The judgment challenges notices under section 148 and an order negativing objections against reassessment proceedings initiated under section 147. The primary issue revolves around interpreting section 80-IB(5) of the Act concerning deductions for industrial undertakings in industrially backward districts engaged in manufacturing activities.
2. The dispute arises from the Revenue's contention that the production of "cattle and poultry feed" by the assessee does not qualify as manufacturing for claiming benefits under section 80-IB(5). The assessee argues that previous assessments treated them as manufacturers, and any change of opinion by the Revenue does not warrant reopening assessments.
3. The court emphasizes that reopening assessments based on a change of opinion is impermissible under the law. It cites precedents to establish that if all necessary information was before the Assessing Officer in earlier assessments, reopening under section 147 amounts to a change of opinion, violating the principle of finality in assessments.
4. The judgment highlights that the law on reopening assessments is stringent, and exceptional circumstances like escapement of income justify reassessment. It underscores that allowing reassessment after the prescribed time limit without valid reasons would undermine the statutory policy and erode the finality of assessments.
5. Ultimately, the court quashes the impugned notice and proceedings, emphasizing that the decision does not preclude future assessments on the issue of entitlement to claim deductions under section 80-IB. The judgment clarifies that the merits of the alleged entitlement were not decided, leaving room for future assessments in accordance with the law.