2015 (3) TMI 18 - HC - Income Tax

Reopening of assessment - assessee's claim of deduction u/s. 80IB is not in order and has resulted in income escaping assessment to the tune of ₹ 2,10,41,019/- - Held that - Notwithstanding the binding decision of this Court in Asian Paints Ltd. 2007 (1) TMI 159 - BOMBAY High Court wherein held that when an objection to reopening of an assessment is disposed of by an order, adverse to the petitioner, no further proceedings for reassessment would be initiated by the Assessing Officer for a period of four weeks from the date of disposal of the objections, the Assessing Officer did not wait for a period of four weeks from the order dated 23 November 2010 and passed the assessment order on 30 November 2010 under Section 143(3) r/w 147 of the Act. The petitioner has made a grievance of the order dated 30 November 2010 being dispatched in the evening of 13 December 2010 after being informed of the writ petition filed. Be that as it may, at this stage we enquired of Mr. Pinto, the learned Counsel for the Revenue as to how does he justify the order dated 30 November 2010 in the face of the decision of this Court in Asian Paints Ltd. (supra). Mr. Pinto very fairly states he is unable to justify the same. Therefore the assessment order dated 30 November 2010 cannot be sustained and the same is hereby quashed and set aside. The consequent demand notice dated 30 November 2010 issued under Section 156 of the Act and the show cause notice dated 30 November 2010 in respect of proposed penalty also cannot be sustained and are hereby quashed and set aside. - Decided in favour of assessee. Challenge to the impugned notice dated 26 March 2010 seeking to reopen the assessment for the Assessment Year 2005-06 - Held that - We do not disturb the impugned notice dated 26 March 2010 and the order dated 23 November 2010 disposing of the petitioner's objections as second ground in the reasons recorded indicates that the basis of the Assessing Officer for issuing the impugned notice was that the factory license to manufacture the goods inrespect of Unit No.II was issued to the petitioners only on 22 April 2004 i.e. after the end of the previous year relevant to the Assessing Year 2004-05 thus leading to a reasonable belief that the petitioners claim that they had commenced manufacturing in the Unit No.II on 22 March 2004 is not correct. This resulted in a prima facie view that in the absence of manufacture in Unit No.II, during the Assessment Year 2005-06 the benefit of Section 80IB of the Act is not available. However the petitioner's contention that the impugned notice is without jurisdiction is left open to be urged before the Assessing Officer during the reassessment proceedings. It is made clear that the petitioner's submissions in support of the above would be independently considered by the Assessing Officer without in any manner being influenced by any observation herein. - Decided against assessee.

Summary

Issues:
Challenge to notice seeking to reopen assessment for Assessment Year 2005-06 under Article 226 of the Constitution of India, rejection of objections to reopening by Assessing Officer, validity of assessment order dated 30 November 2010, demand notice under Section 156 of the Act, show cause notice for penalty under Section 271 of the Act.

Analysis:
1. The petition challenged a notice seeking to reopen assessment for Assessment Year 2005-06 under Article 226 of the Constitution of India. The notice was issued under Section 148 of the Income Tax Act, 1961, based on discrepancies in claiming deductions under Section 80IB(4) for two units. The reasons for reopening the assessment included issues with the audit certificate and the date of commencement of production for Unit-II. The petitioners objected to the grounds mentioned in the notice, arguing that the certificate requirement was for the auditing accountant of the undertaking, not the petitioner's accounts. They also provided evidence to support the commencement of manufacturing activity in Unit-II before the factory license was issued.

2. The Assessing Officer rejected the petitioners' objections, stating there was no change of opinion as no opinion was formed during the previous assessment. The petitioners then filed a petition challenging the notice, citing a previous court decision that no reassessment should be initiated for four weeks after disposing of objections. Despite this, the Assessing Officer proceeded with the assessment order on 30 November 2010, which was later quashed by the court due to non-compliance with the previous court decision.

3. The court examined the grounds for reopening the assessment, particularly regarding the commencement of manufacturing activity in Unit-II and the eligibility of the auditor's certificate. It was noted that the Assessing Officer must have a prima facie belief that income has escaped assessment to issue a notice under Section 147. The court found that the grounds in the notice indicated a prima facie view, warranting the initiation of proceedings, and did not interfere with the notice at that stage.

4. The court allowed the petition partly, quashing the assessment order, demand notice, and show cause notice for penalty. The court did not disturb the notice seeking to reopen the assessment, leaving the jurisdictional challenge open for the reassessment proceedings. The petitioners were granted the opportunity to present their case during reassessment, emphasizing that the reasons for the notice were subject to further inquiry during the reassessment proceedings.