2013 (7) TMI 544 - HC - Income Tax

Deduction u/s 80IA - Notice of re opening issued beyond four years - true and full disclosure of facts - Held that - Notice has been issued beyond the period of four years from the end of relevant assessment year - Merely because while framing assessment for the subsequent year 2007-08 the Assessing Officer noticed certain irregularity in the claim by itself would not be sufficient to satisfy the requirements of the proviso to Section 147 of the Act - there was no failure on the part of the assessee to disclose truly and fully all material facts - Decided in favour of assessee.

Issues Involved:
1. Validity of notice for reopening under Section 148 of the Income Tax Act, 1961.
2. Failure of the assessee to disclose all material facts necessary for assessment.
3. Claim of deduction under Section 80IA of the Act.
4. Jurisdiction of the Assessing Officer in issuing the notice for reopening.

Issue 1: Validity of notice for reopening under Section 148:
The Assessing Officer sought to reopen the assessment for the assessment year 2006-07 based on the irregular allowance of deduction under Section 80IA. The petitioner challenged the notice dated 15.03.2012, arguing that it was issued beyond the four-year period from the end of the relevant assessment year. The petitioner contended that there was no failure to disclose material facts necessary for assessment, as all details were furnished during the original assessment proceedings, and the Assessing Officer had examined the claim in detail. The Court noted that the reasons for reopening did not allege any failure to disclose material facts, and the observations were based on the assessment records of the year under consideration. The Court held that the notice for reopening issued beyond four years was not sustainable, and thus, quashed the impugned notice.

Issue 2: Failure of the assessee to disclose all material facts necessary for assessment:
The Assessing Officer alleged that the assessee had irregularly received a deduction under Section 80IA due to not setting off the depreciation claimed for windmills against the profit of the windmill only. However, the Court found that the petitioner had provided all necessary details, including statutory declarations and audited accounts, during the original assessment proceedings. The Court emphasized that the Assessing Officer had examined the claim in detail, and the irregularity in the claim noticed during the subsequent year did not indicate a failure to disclose material facts. Therefore, the Court concluded that there was no failure on the part of the assessee to disclose all material facts necessary for assessment.

Issue 3: Claim of deduction under Section 80IA of the Act:
The Assessing Officer contended that the assessee had claimed a deduction under Section 80IA irregularly, as the business eligible for the deduction had not been treated as the only source of income. The Court observed that the claim for deduction under Section 80IA was thoroughly examined during the original assessment proceedings, and detailed replies were provided by the petitioner. Despite certain irregularities noticed in the subsequent year, the Court held that the entire claim for deduction under Section 80IA was before the Assessing Officer and processed. Therefore, the Court found no merit in the Revenue's argument regarding the irregular allowance of the deduction.

Issue 4: Jurisdiction of the Assessing Officer in issuing the notice for reopening:
The Court analyzed whether the notice for reopening was validly issued, considering that it was beyond the four-year period from the end of the relevant assessment year. The Court emphasized the requirement that income must have escaped assessment due to the failure of the assessee to disclose material facts for the Assessing Officer to assume jurisdiction. The Court found that the reasons recorded did not support the allegation of failure to disclose material facts, and the Assessing Officer's observations were based on the assessment records of the year under consideration. As a result, the Court held that the notice for reopening issued beyond four years could not be sustained and quashed the impugned notice.

In conclusion, the High Court of Gujarat held that the notice for reopening the assessment for the assessment year 2006-07 was invalid as it was issued beyond the statutory period and there was no failure on the part of the assessee to disclose all material facts necessary for assessment. The Court emphasized that the Assessing Officer had thoroughly examined the claim for deduction under Section 80IA during the original assessment proceedings, and the irregularity noticed in the subsequent year did not warrant the reopening of the assessment. Therefore, the Court allowed the petition and quashed the impugned notice.

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