2015 (8) TMI 664 - HC - Income Tax

Reopening of assessment - change of opinion - Entitlement to benefit of Section 80IC denied - Held that - In cases where there is a prima facie satisfaction of jurisdiction to issue reopening notice, the Petitioner can agitate the issue before the authorities under the Act. In the present facts it was in December 2013 that on survey it was found that the activity of the Petitioner was held to be not manufacture under the Central Excise Tariff Act, 1985 as far back as 1993. The revenue had always proceeded on the basis that the making of the said product is manufacture as the order of the CEGAT was never brought to the notice of the Revenue. Therefore this issue was never adverted to, much less examined, during the regular assessment proceedings. Therefore there could be no question of any change of opinion. So far as the other objections are concerned viz. even if no manufacture yet it would be production of the said product would also require factual examination. However, at this stage one must also not lose sight of the fact that the charge under Section 3 of the Central Excise Act, 1944 is on goods produced or manufactured in India. So far as the issue of Schedule XIII to the Act is concerned, the issue whether it is to be read cumulatively or independently is at this stage best left to the authorities under the Act to interpret. Thus, we see no reason to admit this petition. - Decided against revenue.

Summary

Issues:
Challenge to notices under Section 148 of the Income Tax Act for reopening assessments for A.Y. 2009-2010 and 2010-2011.

Analysis:
The petitions challenged two notices issued under Section 148 of the Income Tax Act seeking to reopen assessments for A.Y. 2009-2010 and 2010-2011. The petitioner, engaged in manufacturing fabric whiteners, claimed benefits under Section 80IC of the Act for the said product, which were accepted in previous assessments. However, the impugned notices alleged non-compliance with Section 80IC conditions based on material obtained during survey proceedings and a past CEGAT order. The petitioner objected to the reopening, arguing it was a change of opinion and that the product's making constituted production. The Assessing officer rejected the objections, leading to the present challenge.

The main contention raised was that the reopening notice lacked jurisdiction due to being a mere change of opinion and that the product's making qualified as production, satisfying Section 80IC requirements. Additionally, it was argued that the product did not fall under the specified subclassification in Schedule XIII to the Act. The Assessing officer's order rejecting objections was challenged on the grounds that it did not address the production aspect of the product, rendering the reopening proceedings flawed and jurisdictionally unsound.

The Court analyzed the Assessing officer's reasonable belief for issuing the reopening notice, emphasizing that it need not establish income escape beyond doubt at that stage. The Court stated it would only intervene if the notice was ex facie without jurisdiction. It was noted that the issue of the product's manufacturing status was not previously examined during regular assessments, as the CEGAT order was not brought to the Revenue's attention. The Court opined that the question of whether the product fell under Schedule XIII should be interpreted by the authorities under the Act. Ultimately, the Court found no grounds to admit the petition, dismissing both petitions while leaving all contentions open for the reassessment proceedings.

In conclusion, the High Court dismissed the petitions challenging the reopening notices under Section 148 of the Income Tax Act for A.Y. 2009-2010 and 2010-2011. The Court held that the Assessing officer had a reasonable belief to issue the notices, and the objections raised by the petitioner did not warrant interference at that stage. The Court allowed all contentions to be raised during reassessment proceedings, emphasizing that the validity of the reopening notices would be considered along with other issues during the reassessment process.