2014 (1) TMI 803 - HC - Income Tax

Whether the retrospective amendment of law and subsequent judgment of apex court be a basis for reopening for assessment u/s 147 - Held that - The assessee cannot be blamed for filing a return by contemplating a possible amendment to Section 80-HHC of the Act - One cannot state that there was an escaped assessment of tax which could be reopened within a period of four years from the end of the relevant assessment year - Subsequent amendments or subsequent interpretation of the statute is not a ground to reopen concluded transactions - Decided against Revenue.

Summary

Issues:
Challenge to order by Income Tax Appellate Tribunal regarding assessment year 2002-2003 based on Section 80 HHC of the Income Tax Act.

Analysis:
The Revenue challenged the order passed by the Income Tax Appellate Tribunal, Cochin Bench in I.T.A No. 152/2009, related to the assessment year 2002-2003. The Tribunal allowed the appeal filed by the assessee, stating that the Assessing Officer cannot take any action after the expiry of four years based on the amended provision to Section 80 HHC of the Income Tax Act. The Revenue sought to reopen the assessment completed under Section 143(3) of the I.T Act in 2004, through a notice issued under Section 148 in 2008, citing reasons like ineligibility for deduction under Section 80 HHC, setting off loss against profits, and deduction of margin on processing commission. The assessee contended that the assessment cannot be reopened after four years, as per the proviso to Section 147 of the I.T Act. The Tribunal found that the assessee had filed the return of income as per the law existing at the time, and it was not negligent in furnishing the required material. The Tribunal emphasized that subsequent amendments or interpretations of the law cannot be a basis for reopening completed assessments after the limitation period has expired.

The Revenue raised substantial questions of law regarding the retrospective amendment of the law and subsequent judgments affecting the reopening of assessments under Section 147 of the Income Tax Act. The High Court noted that the assessee could not have anticipated the amendment to Section 80 HHC at the time of filing the return, and therefore, there was no escaped assessment that could be reopened within four years from the end of the relevant assessment year. The Court highlighted that subsequent amendments or interpretations of the law cannot be used to reopen concluded transactions. The Court referred to the proviso to Section 147, which prohibits actions after the expiry of four years from the end of the relevant assessment year unless there is an escaped assessment due to the assessee's failure to disclose material facts. The Court found no evidence of such an eventuality in the case, leading to the dismissal of the appeal by the Revenue.

In conclusion, the High Court held that the assessing officer was not justified in reopening the assessment after the expiry of the limitation period, as there was no indication of any escaped assessment due to the assessee's fault. The Court emphasized that subsequent amendments or interpretations of the law cannot be used as grounds to reopen assessments completed under Section 143(3) beyond the four-year limit. Therefore, the questions of law raised by the Revenue were deemed irrelevant in this appeal, leading to the dismissal of the appeal.