2017 (3) TMI 747 - HC - Income Tax

Reopening of assessment - claim of the assessee under Section 80IA - Held that - Assessing Officer, while framing scrutiny assessment under Section 143 3 of the Act, considered the claim in detail of the assessee under Section 80IA of the Act and only thereafter, considering the activities and functionalities of CFS, treated and considered CFS as Port itself. Therefore, after a detailed scrutiny and even after Assessing Officer and Additional Commissioner of Income-tax, Jamnagar personally verifying the activities/functionalities of the CFS, having treated CFS as an Inland Port, granted benefit under Section 80IA pf the Act. Therefore, even if communication dated 29th October 2005 by Jawaharlal Nehru Port Trust to the assessee would have no direct effect on the grant of benefit under Section 80IA of the Act, as on facts and considering the activities of CFS, the Assessing Officer has already held CFS as a Port itself. Under the circumstances it cannot be said that there was any suppression of material facts on the part of the assessee in not disclosing true and correct facts necessary for the assessment. Considering the very CBDT Circular No. 10 of 2005 dated 16th December 2005 as looking to the facilities provided by CFS, the CFS is an Inland Port as it carries out functions of warehousing, customs clearance and transport of goods from its location to sea-port and vice versa by rail or by trucks in containers. - Decided in favour of assessee

Summary

Issues Involved:
1. Reopening of assessment under Section 148 of the Income-tax Act, 1961.
2. Alleged suppression of material facts by the assessee.
3. Whether the Container Freight Station (CFS) qualifies as an Inland Port under Section 80IA of the Act.
4. Change of opinion by the Assessing Officer.

Issue-wise Detailed Analysis:

1. Reopening of assessment under Section 148 of the Income-tax Act, 1961:
The petitioner-assessee challenged the reopening of assessments for the years 2005-2006 and 2006-2007 initiated by the respondent under Section 148 of the Income-tax Act, 1961. The Assessing Officer issued notices dated 28th March 2012 and 9th November 2012, respectively, to reopen the assessments on the grounds that the income chargeable to tax had escaped assessment. The court noted that the reopening was beyond the period of four years, which requires a finding of suppression of material facts by the assessee.

2. Alleged suppression of material facts by the assessee:
The respondent contended that the assessee suppressed a vital document, a letter dated 29th October 2005 from Jawaharlal Nehru Port Trust (JNPT), which stated that the CFS did not belong to the Port. The court observed that the Assessing Officer had already scrutinized the claim under Section 80IA during the original assessment, considering all relevant materials, including the activities and functionalities of the CFS. The court found no suppression of material facts by the assessee, as the document in question was not directly relevant to the assessment of the CFS as an Inland Port.

3. Whether the Container Freight Station (CFS) qualifies as an Inland Port under Section 80IA of the Act:
The court referred to the decisions of the Delhi High Court in Container Corporation of India Limited and the Bombay High Court in Continental Warehousing Corporation (Nhava Sheva) Limited, which held that a CFS qualifies as an Inland Port under Section 80IA of the Act. The court noted that the CFS provided warehousing, customs clearance, and transportation of goods, thus meeting the criteria for an Inland Port. The court concluded that the assessee was entitled to the deduction under Section 80IA.

4. Change of opinion by the Assessing Officer:
The petitioner argued that the reopening of the assessment was based on a change of opinion by the subsequent Assessing Officer. The court agreed, stating that the original assessment under Section 143(3) involved a detailed scrutiny of the claim under Section 80IA, including an inspection by the Additional Commissioner of Income-tax. The court held that the reopening was unsustainable as it was based on a mere change of opinion and not on any new material facts.

Conclusion:
The court quashed and set aside the impugned notices dated 28th March 2012 and 9th November 2012 issued under Section 148 of the Income-tax Act, 1961. The court ruled that the reopening of the assessments was not justified as there was no suppression of material facts by the assessee and the reopening was based on a change of opinion by the subsequent Assessing Officer. The court upheld the assessee's entitlement to the deduction under Section 80IA for the CFS as an Inland Port.