2016 (6) TMI 698 - HC - Income Tax

Reopening of assessment - non eligibility for the deduction under section 80IB - Held that - As gone through the assessment order where the Assessing Officer has recorded that since all the conditions laid down in the provisions of section 80IB(10) of the Income-tax Act have been fulfilled by the assessee, it is eligible for the deduction under section 80IB at 100% of profit shown during the year i.e. ₹ 59,26,427/-. For reopening of the assessment, notice should be issued within a period of four years from the end of the assessment. In the present case, we notice that the Assessing Officer has issued notice under section 148 of the I.T. Act on 10.8.2009 which is beyond the period of four years from the end of the assessment year. Even otherwise, no reasons are assigned by the respondent authority to claim that the earlier Assessing Officer has wrongly allowed the claim of the assessee. In that view of the matter, the petition deserves to be allowed and is allowed accordingly. Notice issued under section 148 of the Income-tax Act dated 10.8.2009 and the preliminary order dated 30.11.2010 for proceeding and completing the reassessment proceedings are hereby quashed and set aside - Decided in favour of assessee

Issues:
1. Validity of notice issued under section 148 for reopening assessment beyond the statutory period.
2. Claim of deduction under section 80IB and its impact on assessment.
3. Discrepancies in profit declaration compared to other builders.
4. Justification for reopening assessment based on abnormal profit rates.

Analysis:
1. The petitioner challenged a notice issued by the respondents seeking to reopen the assessment for the assessment year 2004-05. The notice was issued beyond the statutory period of four years from the end of the relevant assessment year, as per section 149(1) of the Income-tax Act. The petitioner contended that the reopening exercise was unlawful due to the expiration of the prescribed period. The court noted that the notice issued on 10.8.2009 was indeed beyond the four-year limit and found no justification provided by the authorities for the delay. Consequently, the court quashed the notice and the preliminary order for reassessment proceedings.

2. The petitioner had claimed a deduction under section 80IB of the Income-tax Act, which was allowed by the Assessing Officer during the initial assessment. The respondents sought to reopen the assessment, citing discrepancies in profit declaration compared to other builders and the possibility of income diversion. The court observed that the earlier Assessing Officer had correctly allowed the deduction under section 80IB, and no valid reasons were presented to challenge this decision. Therefore, the court found the notice for reopening the assessment to be unjustified.

3. The respondents contended that the abnormal profit rates declared by the petitioner, influenced by the deduction under section 80IB, warranted the reopening of the assessment. However, the court noted that no concrete evidence or reasoning was provided to support the claim that the profit rates were abnormal or influenced solely by the deduction. As a result, the court found the argument insufficient to validate the reopening of the assessment.

4. The court also considered the fact that for other assessment years where similar claims were made, no reopening was initiated by the respondents. This inconsistency raised doubts about the validity of the notice issued for the assessment year in question. The court emphasized the importance of providing consistent and justifiable reasons for reopening assessments to maintain the integrity of the process. Ultimately, the court ruled in favor of the petitioner, setting aside the notice and the order for reassessment proceedings, with no costs imposed.

← Previous Next →