2016 (10) TMI 327 - HC - Income Tax

Reopening of assessment - Eligibility of deduction u/s 80IB(10) - Held that - The entire claim of deduction was minutely scrutinised by the Assessing Officer before acceptance. Any attempt on his part now to reopen the issue would be based on change of opinion. In any case, there is not even an allegation that the assessee had not disclosed truly and fully all material facts. Since the impugned notice has been issued beyond four years from the end of relevant assessment year, this aspect would assume significance. In order to suggest that the assessee was not a developer but had acted only as works contractor, the Assessing Officer in the reasons recorded did not bring in facts on record. He merely referred to the explanation added below section 80IB(10) by the Finance Act, 2009 but with effect from 1.4.2001. This explanation provides that for removal of doubts it is declared that nothing contained in the said subsection would apply to any undertaking which executes the housing project as a works contract awarded by any person including the Government. In the opinion of the Assessing Officer, this explanation changed the very legal matrix for granting deduction under section 80IB( 10) of the Act. - Decided in favour of assessee.

Issues Involved:
1. Legitimacy of reopening assessment beyond four years.
2. Assessing Officer's reliance on retrospective statutory amendment.
3. Change of opinion by the Assessing Officer.
4. Full and true disclosure of material facts by the assessee.

Detailed Analysis:

1. Legitimacy of Reopening Assessment Beyond Four Years:
The petitioner, a partnership firm engaged in developing and constructing housing projects, challenged a notice dated 16.3.2010 issued by the Assessing Officer for reopening the assessment for the year 2003-2004. The original assessment was completed on 11.11.2005, accepting the petitioner’s income declaration and deduction under section 80IB(10) of the Income Tax Act. The reopening notice was issued beyond the four-year period stipulated by law. The court noted that reopening beyond four years is impermissible unless there is a failure by the assessee to disclose all material facts fully and truly.

2. Assessing Officer's Reliance on Retrospective Statutory Amendment:
The Assessing Officer sought to reopen the assessment based on an explanation added to section 80IB(10) by the Finance Act, 2009, with retrospective effect from 1.4.2001. This explanation clarified that the deduction under section 80IB(10) is not available to entities executing housing projects as works contractors. The court found that relying on this retrospective amendment to justify reopening the assessment was not valid, as it would not apply to completed assessments unless there was a failure to disclose material facts.

3. Change of Opinion by the Assessing Officer:
The court observed that the original assessment involved a detailed scrutiny of the petitioner’s claim for deduction under section 80IB(10). The Assessing Officer had raised multiple queries and received comprehensive responses from the petitioner, including details of construction work, development agreements, project approvals, and financial transactions. The court concluded that reopening the assessment based on the same facts amounted to a change of opinion, which is not permissible under the law.

4. Full and True Disclosure of Material Facts by the Assessee:
The court emphasized that the petitioner had disclosed all necessary material facts during the original assessment. There was no allegation or evidence suggesting that the petitioner failed to disclose any material facts fully and truly. Given that the reopening notice was issued beyond the four-year period, the court held that the absence of any failure to disclose material facts by the petitioner rendered the reopening notice invalid.

Conclusion:
The court quashed the impugned notice dated 16.3.2010, ruling that the reopening of the assessment was not justified. The court emphasized that the entire claim for deduction under section 80IB(10) was thoroughly examined during the original assessment, and any attempt to revisit the issue based on the same facts constituted a change of opinion. Furthermore, the retrospective amendment could not be used to reopen an assessment beyond four years unless there was a failure to disclose material facts, which was not the case here. The petition was disposed of, and the rule was made absolute.

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