2016 (9) TMI 111 - HC - Income Tax

Reopening of assessment - beyond a period of 4 years - Entitlement to deduction under Section 80-IB(8A) - Held that - Assessing Officer in the order of assessment had disallowed the entire claim of deduction, he had, thereafter, not made any observations with respect to parts of such claim including with respect to the interest income. When the Tribunal was thus examining the entire claim of deduction, it was perhaps open for the Revenue to argue by way of alternative contention that even though the assessee may be entitled to deduction under Section 80-IB(8A) of the Act the same may not be true for the entire claim put-forth by the assessee. Even if while giving effect to the order of the Tribunal, the Assessing Officer had attempted to restrict the claim on any reasonable ground, the situation would have stood on a different ground. However, in the present petition we are examining the validity of notice for reopening of the entire assessment on this ground that too in a case, where the notice has been issued beyond a period of four years from the end of the relevant assessment year. Despite strenuous efforts on part of the counsel for the Revenue, we are unable to see where in a situation like one on hand the condition of failure of true and full disclosure can be done away with when the Assessing Officer has resorted to reopening of the assessment beyond a period of four years.

Summary

Issues:
Challenge to notice seeking to reopen assessment for assessment year 2008-09 under Section 80-IB(8A) of the Income Tax Act, 1961.

Analysis:
1. The petitioner contested a notice dated 26.03.2015 reopening the assessment for the assessment year 2008-09, challenging the Assessing Officer's decision.
2. The petitioner had initially claimed a deduction of ?31.32 crores under Section 80-IB(8A) of the Act for the assessment year 2008-09. The Assessing Officer raised queries regarding the nature of certain incomes, including interest income, which the petitioner justified as being derived from business activities.
3. Despite the petitioner's explanations, the Assessing Officer rejected the entire claim under Section 80-IB(8A) during the original assessment.
4. The petitioner appealed to the Tribunal, which allowed the deduction of ?31.32 crores, emphasizing that the income was derived from contract research falling within the ambit of Section 80-IB(8A) of the Act.
5. Subsequently, the Assessing Officer issued a notice to reopen the assessment, claiming that certain disallowances should have been made, particularly regarding interest income from fixed deposits not directly related to the business.
6. The Assessing Officer's reasons for reopening the assessment were deemed invalid by the High Court. The court noted that the notice was issued beyond the four-year limit and that there was no failure on the petitioner's part to disclose material facts.
7. The court emphasized that the petitioner had fully disclosed all relevant information during the original assessment, including justifications for interest income. The failure to restrict the claim during the original assessment did not justify reopening the assessment beyond the prescribed time limit.
8. Consequently, the High Court allowed the petition, setting aside the notice issued by the Assessing Officer and suggesting that the Revenue explore alternative legal remedies if necessary.