2020 (2) TMI 1399 - HC - Income Tax

Reopening of assessment u/s 147 - inadequate disclosure for the deduction claimed u/s 80IB(10) - HELD THAT - As evident from a reading of the language of the 1st proviso to Section 147 as per which no action shall be taken after the expiry of 4 years from the end of the relevant assessment year, unless income chargeable to tax has escaped assessment for such assessment year by reason of failure on the part of the assessee to make a return u/s 139 or in response to a notice issued under subsection (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for those assessment, for that assessment year. It is incumbent on the respondent to pass appropriate order terms of the 1st proviso to Section 147. Mere retrospective amendment to Section 80 IB of the Income Tax Act, 1961 is of relevance. Since the dispute pertains to the assessment year 2004-05, the respondent is requested to pass appropriate orders within a period of three months from date of receipt of a copy of this order. While passing such order, liberty is also given to the respondent to proceed on any other grounds, other than the ground on which the subject notice under Section 148 of the Income Tax Act, 1961 was issued in terms of Explanation 3 to Section 147 of the Income Tax Act, 1961.

Summary

Issues:
Challenge to communication/order invoking Section 148 of the Income Tax Act, 1961 for deduction claimed under Section 80IB(10).

Analysis:
The petitioner contested the communication/order dated 08.12.2011 which overruled their objection against invoking Section 148 of the Income Tax Act, 1961 for the deduction claimed under Section 80IB(10). The petitioner argued that although the scrutiny assessment order of 30.5.2006 under Section 143(3) did not specifically discuss the deduction, there were adequate disclosures made through letters from their Chartered Accountant. The Commissioner of Income Tax revised the assessment order on 24.3.2009 disallowing the deduction, which was further upheld by the assessing officer on 30.9.2009 after hearings. The petitioner appealed these decisions before the Income Tax Appellate Tribunal and the Commissioner of Income Tax (Appeals), leading to the orders being set aside on 15.12.2010.

The petitioner emphasized that there was no failure to disclose all necessary material for assessment, thus questioning the validity of invoking Section 148. They argued that the retrospective effect of the Explanation to Section 80IB(10) from 1.4.2001 did not automatically allow for the reopening of completed assessments. Citing a Gujarat High Court decision, they contended that retrospective amendments did not grant the authority to reopen assessments under Section 148.

On the respondent's side, it was argued that the assessment could be reopened due to the retrospective amendment to Section 80IB in 2009, affecting assessments from 2001. The respondent claimed that the Tribunal had not considered the eligibility of the deduction under Section 80IB in light of the retrospective amendment, justifying the reopening of the assessment.

The court analyzed the situation and highlighted that the assessing officer's power to reopen assessments under Section 148 is limited by the proviso to Section 147, which requires the absence of full and true disclosure of material facts for assessment. The court emphasized that mere retrospective amendments did not justify reopening assessments if there was no failure on the part of the assessee to disclose necessary information. Consequently, the respondent was directed to pass appropriate orders within three months, with liberty given to proceed on other grounds apart from those initially cited in the notice under Section 148. The petitioner was granted thirty days to file objections, and the writ petition was disposed of accordingly.