2018 (12) TMI 1692 - AT - Income Tax

Reopening of assessment u/s 147 - denial of deductions claimed u/s 80IA and 80IB - HELD THAT - Notice u/s 148 was issued without recording any reasons for reopening the assessment. This is contradictory to the provisions of section 148 (2) which makes it mandatory for the AO to record reasons before serving a notice u/s 148 and if this mandatory requirement of law is not fulfilled entire proceedings become without jurisdiction which deserve to be struck down. For this proposition we draw support from the judgment of the Hon ble High court of Delhi in the case of Prabhat Aggarwal Vs. DCIT 2018 (8) TMI 1066 - DELHI HIGH COURT There is no failure on the part of the assessee to disclose the facts truly and correctly. This is clear from the reasons recorded for reopening the assessment which is based on the documents already on record / file. Moreover in the reasons recorded nowhere AO has pointed out which fact was not fully and truly disclosed by the assessee. Deduction claimed u/s 80 IA / 80 IB of the Act was very much on the face of computation of income the deduction was properly disclosed in the tax audit report the deduction was supported by the audit report in Form 10 CCB moreover the detailed submissions on eligibility / merits and quantum of the claims were made before the Assessing Officer during the course of original assessment proceedings. Claim of deduction are allowed to the assessee since A. Y. 2000-01 in the assessment framed u/s 143 (3) of the Act. Without disturbing the initial assessment years of the claim of deduction denying the claim in the middle by reopening the assessment is nothing but change of opinion. No new tangible material has came into existence which is accepted by the Assessing Officer himself who in the reasons recorded has accepted this as he states that a perusal of the assessment records reveals . This issue is well settled in favour of the assessee and against the revenue by the decision of the Hon ble Supreme Court in the case of Kelvinator of India Limited 2002 (4) TMI 37 - DELHI HIGH COURT Disallowance were made including the issue of 80 IA and 80IB deduction. This assessment order was challenged before the CIT (A) who vide order dated 01.07.2011 partly allowed appeal. This means that the original assessment order was merged with the order of the CIT(A). Though the present proceedings are in respect of the assessment order framed pursuant to the order u/s 263 of the Act but the same is nothing but change of opinion. The Hon ble High Court of Bombay in the case of Prima Paper and Engineering industry 2015 (2) TMI 803 - BOMBAY HIGH COURT has held that after the issue of deduction u/s 80 IA of the Act was raised by the Assessing Officer during original proceedings and the same was also duly represented by assessee then reassessment proceedings cannot be initiated on this issue. The Hon ble High Court held that since the Assessing Officer had applied his mind to the issue of deduction claimed u/s. 80IA the reassessment proceedings cannot be initiated in respect thereof - notice issued u/s 148 of the Act is bad in law - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the reassessment under Section 143(3) read with Section 147 of the Income Tax Act.
2. Legality of the notice issued under Section 148 of the Income Tax Act.
3. Denial of deductions claimed under Sections 80IA and 80IB of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of the reassessment under Section 143(3) read with Section 147 of the Income Tax Act:
The assessee challenged the validity of the reassessment dated 31.03.2016, arguing that the notice issued under Section 148 and the subsequent assessment were bad in law. The reassessment was initiated despite repeated examinations and verifications of the return of income and books of accounts. The reasons for reopening the assessment were based on findings from assessments for AY 2005-06 and 2011-12. However, the Tribunal noted that the reasons for reopening were undated, implying they were recorded either on or before 24.03.2015. This led to the conclusion that the notice under Section 148 was issued without proper recording of reasons, violating Section 148(2) of the Act, rendering the reassessment proceedings without jurisdiction.

2. Legality of the notice issued under Section 148 of the Income Tax Act:
The Tribunal observed that the notice under Section 148 was issued after four years from the end of the relevant assessment year, invoking the first proviso to Section 147. This proviso necessitates a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The Tribunal found no such failure by the assessee, as the facts were already on record, and the deduction claims were properly disclosed and supported by audit reports. The Tribunal referenced several judgments, including those from the Delhi High Court and the Punjab & Haryana High Court, which held that the absence of a finding of failure to disclose material facts makes the action under Section 147 without jurisdiction. Additionally, the Tribunal noted that no new tangible material came to the Assessing Officer’s notice to justify reopening, and the reopening was based on a mere change of opinion, which is not permissible.

3. Denial of deductions claimed under Sections 80IA and 80IB of the Income Tax Act:
The Tribunal found that the reasons for denying the deductions under Sections 80IA and 80IB were influenced by findings from assessments for AY 2005-06 and 2011-12. However, the Tribunal highlighted that the deductions had been allowed to the assessee since AY 2000-01 in assessments framed under Section 143(3). The Tribunal emphasized that without disturbing the initial assessment years of the claim, denying the claim in subsequent years based on reopening was a change of opinion. The Tribunal referred to the Supreme Court’s decision in Kelvinator of India Limited, which held that a change of opinion does not justify reopening. Furthermore, the Tribunal noted that the original assessment order had merged with the CIT(A)’s order, and reassessment on the same issue amounted to a change of opinion.

Conclusion:
The Tribunal concluded that the notice issued under Section 148 was bad in law, as it was issued without recording reasons and beyond the permissible time limit without fulfilling the necessary conditions. Consequently, the reassessment framed pursuant to the said notice was quashed, and the appeal of the assessee was allowed. The reassessment was held to be bad in law, and the Tribunal pronounced the order in the open court on 10.12.2018.