2016 (12) TMI 1281 - HC - Income Tax

Validity of reopening of assessment - assessee entitlement to exemption under Section 10(38)- Held that - From the assessment order passed by the Assessing Officer which was passed after scrutiny assessment and which was passed after calling for the relevant materials from the petitioner assessee the Assessing Officer considering the purchase of shares of Unitech International Ltd. purchased in the year 2007 granted the exemption accordingly and therefore the subsequent reopening would tantamount to change of opinion and as held by the Hon ble Supreme Court and this Court in catena of decisions mere on change of opinion the reopening of the assessment is not permissible. At this stage it is required to be noted that as such there is no tangible material available with the Assessing Officer in support of the claim to treat the purchase of the shares in the year 2010-11. On the contrary it is evident from the record that the petitioner assessee purchased the shares of Unitech International Ltd. in physical form in the year 2007 and the same were reflected /disclosed in his books of accounts produced with return of income in the earlier years more particularly in the preceding year of Assessment Year 2011-12. The aforesaid is evident from the material produced on the query raised by the Assessing Officer in the scrutiny proceedings. Under the circumstances also the impugned notice to reopen the assessment cannot be sustained. - Decided in favour of assessee Non deduction of TDS - Held that - It is an admitted position that the petitioner assessee did not claim any interest under Section 40(a)(ia) of the Income Tax Act and therefore on the aforesaid ground the Assessing Officer is not justified in reopening the assessment.- Decided in favour of assessee

Summary

Issues Involved:
1. Validity of the reopening of the assessment under Section 148 of the Income Tax Act for the Assessment Year 2011-12.
2. Whether the reopening was based on a change of opinion.
3. Justification of the exemption claimed under Section 10(38) of the Income Tax Act.
4. Applicability of Section 40(a)(ia) regarding interest payment without TDS deduction.

Issue-Wise Detailed Analysis:

1. Validity of the Reopening of the Assessment:
The petitioner challenged the impugned notice dated 16/03/2016 issued under Section 148 of the Income Tax Act for reopening the assessment for the Assessment Year 2011-12. The reasons for reopening were communicated on 27/06/2016. The court noted that the original assessment was completed under Section 143(3) after detailed scrutiny and consideration of all relevant materials. The reopening was questioned on the grounds of being based on a change of opinion, which is not permissible as per the established legal principles.

2. Change of Opinion:
The petitioner argued that the reopening of the assessment was merely a change of opinion by the subsequent Assessing Officer. The court observed that the original assessment was finalized after considering the detailed submissions and materials provided by the petitioner regarding the purchase and sale of shares, which were accepted by the Assessing Officer. The court emphasized that reopening on the basis of a change of opinion is not permissible, citing precedents from the Supreme Court and other relevant judgments.

3. Exemption under Section 10(38):
The petitioner claimed an exemption of ?2,87,81,495/- under Section 10(38) for long-term capital gains from the sale of shares of Unitech International Ltd. The Assessing Officer initially accepted the claim during the original assessment. However, during the reopening, the Assessing Officer questioned the genuineness of the purchase date of the shares and suggested that the shares were acquired within 12 months, thus not qualifying for the exemption. The court found that the shares were indeed purchased in 2007 and were reflected in the books of accounts for the relevant years. Therefore, the reopening on this ground was unjustified.

4. Section 40(a)(ia) and Interest Payment:
The second issue for reopening was the alleged non-deduction of TDS on interest payment of ?90,00,000/- to Kapadia Investment. The petitioner contended that no interest expense was claimed under Section 40(a)(ia), and thus, there was no basis for reopening on this ground. The court concurred with the petitioner, noting that the interest payment was not claimed as an expense in the profit and loss account, rendering the reopening on this ground invalid.

Conclusion:
The court concluded that the reopening of the assessment for the Assessment Year 2011-12 was not justified on both grounds. The notice under Section 148 and the subsequent reassessment order were quashed and set aside. The ruling emphasized that reopening based on a change of opinion is impermissible and that the petitioner had validly claimed the exemption under Section 10(38) while no interest expense was claimed under Section 40(a)(ia). The rule was made absolute with no order as to costs.