2013 (3) TMI 563 - HC - Income Tax

Re opening of assessment - notice issued after the expiry of four years - reasons recorded for reopening that an Explanation has been introduced to Section 80-IA vide Finance (No.2) Act, 2009 with retrospective effect i.e. from April 01, 2000 - Held that - From the reasons recorded, it is apparent that deduction u/s 80-IA would not be admissible to an assessee due to retrospective amendment brought who carries on business which is in the nature of works contract and as such, the petitioner/assessee being engaged in the business of works contract is not eligible for deduction under section 80-IA but the same has been claimed by the assessee, hence, there was reason to believe that income chargeable to tax has escaped assessment for the assessment years under consideration. The record of the case does not in any manner indicate that proceedings under section 147 are sought to be reopened by reason of failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment for assessment years under consideration. As to whether or not there is any failure on the part of the assessee in disclosing fully and truly all material facts necessary for his assessment, is a matter of fact and there can be no deemed failure as is sought to be contended on behalf of the respondents - thus notice u/s 148 issued cannot be sustained - in favour of assessee.

Summary

Issues:
Challenging notice under Section 148 of the Income-tax Act, 1961 for Assessment Year 2006-2007 based on retrospective amendment to Section 80-IA.

Detailed Analysis:
The petitioner, engaged in renovation and modernization of transmission lines, challenged a notice dated 13.1.2012 issued by the Deputy Commissioner of Income Tax under Section 148 of the Income-tax Act, 1961. The notice alleged that certain income for Assessment Year 2006-2007 had escaped assessment due to a retrospective amendment to Section 80-IA introduced by the Finance Act, 2009. The petitioner contended that the notice was invalid as it was issued beyond the four-year limitation period from the end of the relevant assessment year.

The petitioner had filed the return of income for Assessment Year 2006-2007, and the assessment was concluded under Section 143(3) of the Act. Subsequently, the impugned notice was issued under Section 148, invoking the extended period of limitation under the First Proviso to Section 147 of the Act. The petitioner requested the copy of reasons recorded by the respondent, which indicated that the notice was based solely on the retrospective amendment to Section 80-IA.

The main contention of the petitioner was that the notice was invalid as there was no failure on their part to disclose all material facts necessary for assessment. The respondent argued that the amendment to Section 80-IA warranted the reopening of the assessment under Section 147, as it was deemed that the petitioner had not submitted true facts at the relevant time.

The Court noted that for Section 147 to be invoked after the four-year limitation period, income should have escaped assessment due to the assessee's failure to make a return or disclose material facts. In this case, the reasons recorded for reopening the assessment were silent on any failure by the petitioner to disclose all material facts. The Court found that the notice was solely based on the ineligibility of the petitioner for deduction under Section 80-IA due to the retrospective amendment, not on any failure to disclose necessary facts.

As there was no failure on the part of the petitioner to disclose material facts, the Court held that the initiation of proceedings under Section 147 was invalid. Consequently, the writ petition was allowed, and the impugned notice dated 13.1.2012 under Section 148 of the Income Tax Act, 1961, was quashed.