2017 (1) TMI 1003 - HC - Income Tax

Reopening of assessment - deduction under section 80IB (10) claimed - Held that - Considering the reasons recorded to reopen the assessment for the A.Y. 2010-2011 and even considering the material on record, more particularly facts narrated in the speaking order disposing of the objections, it is not the case on behalf of the revenue that during the year under consideration i.e. A.Y. 2010-2011 and 2011-2012, there was any violation and/or breach of any of the conditions of section 80IB(10) of the Act. At the relevant time and during the years under consideration i.e. A.Y. 2010- 2011 and 2011-2012 when the assessee claimed deduction under section 80IB(10) of the Act with respect to the units for which deduction under section 80IB(10) of the Act was claimed, the same was in order and there was no allegation with respect to those units for which deduction under section 80IB(10) of the Act was granted and/or there was no breach of any of the conditions of section 80IB(10) of the Act. During the years under consideration when the assessee claimed deduction under section 80IB(10) of the Act with respect to the units sold during the years under consideration, the same was found to be in order. Therefore, the same cannot be withdrawn for any act or omission on the part of the assessee in the subsequent assessment year. Thus, it cannot be said that there was any failure on the part of the assessee in not disclosing true and correct facts necessary for the assessment for the years under consideration i.e. A.Y. 2010-2011 and 2011-2012. Therefore, assumption of jurisdiction under section 147 of the Act to reopen the assessment beyond the period of four years is without authority of law and as such contrary to section 147 of the Act. - Decided in favour of assessee

Summary

Issues:
1. Reopening of assessment for A.Y. 2010-2011 under section 147 of the Income Tax Act.
2. Reopening of assessment for A.Y. 2011-2012 under section 147 of the Income Tax Act.

Analysis:

Issue 1: Reopening of assessment for A.Y. 2010-2011
The petitioner, engaged in construction work, claimed deductions under section 80IB for a project named Laxmi Residency. The Income Tax Authority issued a notice under section 148 to reopen the assessment for A.Y. 2010-2011, alleging that the income chargeable to tax had escaped assessment. The reasons recorded for reopening highlighted violations of section 80IB(10) in a subsequent year, leading to the withdrawal of claimed deductions. The petitioner objected to the reopening, arguing that no breach occurred during the relevant assessment years. The court noted that the alleged breaches were related to transactions in subsequent years, not during A.Y. 2010-2011. It concluded that the jurisdiction to reopen the assessment beyond four years was unfounded as there was no failure to disclose correct facts during the relevant assessment years. Consequently, the court quashed the notice and reassessment proceedings.

Issue 2: Reopening of assessment for A.Y. 2011-2012
Similar to the first issue, the petitioner challenged the notice issued under section 148 for A.Y. 2011-2012 based on the same grounds as the A.Y. 2010-2011 assessment. The court, after considering the arguments and facts, found that there was no breach of conditions of section 80IB(10) during the relevant assessment years. The court emphasized that the alleged violations were related to subsequent transactions and not relevant to the deductions claimed during A.Y. 2011-2012. Consequently, the court quashed the notice and reassessment proceedings for A.Y. 2011-2012 as well.

In both cases, the court ruled in favor of the petitioner, quashing the notices to reopen the assessments for A.Y. 2010-2011 and A.Y. 2011-2012. The court found that the jurisdiction to reopen the assessments beyond the prescribed period was not justified as there was no failure on the part of the assessee to disclose correct facts during the relevant assessment years.