2017 (3) TMI 899 - HC - Income Tax

Reopening of assessment - Entitled for tax deduction under Section 80IB - Held that - Commissioner of Income Tax-II, Jodhpur vs. M/s PTM Industries, Balotra (2015 (3) TMI 1264 - RAJASTHAN HIGH COURT) affirmed the order passed by the Income Tax Appellate Tribunal upholding the grant of deduction to the assessee PTM Industries (one of the petitioners herein) under Section 80IB of the IT Act for the assessment years 2005-2006, 2007-2008 and 2008-2009. Since for the assessment years preceding and following the questioned assessment year, the issue has already been decided in favour of the assessee, this Court is of the firm opinion that the assessing officer was not at all justified in reopening the matter by exercising the powers under Section 148 of the IT Act. The impugned orders apart from being totally perverse and laconic, also suffer from total non-application of mind and also amount to colourable exercise of power and thus, cannot be sustained. - Decided in favour of assessee

Summary

Issues:
1. Reopening of concluded assessments for AY 2006-2007 under Section 148 of the IT Act.
2. Claim for deduction under Section 80IB of the IT Act by the petitioners.
3. Preliminary objection on the maintainability of the writ petitions.

Analysis:

Issue 1: Reopening of Concluded Assessments
The petitioners, regular income tax assessees in the manufacturing business, claimed tax deduction under Section 80IB of the IT Act for the assessment year 2006-2007. The assessing authority initially allowed the deduction but later issued notices under Section 148 to disallow the deduction, citing reasons related to the manufacturing activity and the number of employees engaged. The petitioners challenged the reopening, arguing that the assessing authority lacked jurisdiction and engaged in a colorable exercise of power. The assessing officer's change of opinion was contested by the petitioners, who cited judgments supporting their claim that their activities fell within the definition of manufacturing and the required number of workers for the deduction was ten, not twenty. Despite objections, the assessing authority rejected them, leading to the writ petitions.

Issue 2: Claim for Deduction under Section 80IB
The petitioners' counsel contended that the assessing authority's actions were arbitrary and sought to quash the notices and orders, relying on a Division Bench judgment related to similar controversies for other assessment years. The respondents' counsel argued for the maintainability of approaching the assessing authority as an alternate remedy. However, it was acknowledged that the Division Bench's decision in favor of another petitioner for different assessment years was applicable to the present case, indicating that the assessing officer's actions were unjustified and lacked proper application of mind.

Issue 3: Preliminary Objection on Maintainability
The respondents raised a preliminary objection against the maintainability of the writ petitions, suggesting that the petitioners should exhaust alternate remedies. However, the Court, considering relevant Supreme Court judgments, held that if the notice and reasons for reopening were without jurisdiction, a writ petition could be entertained. Citing precedents, the Court rejected the preliminary objection and found that the assessing officer's actions were not justified, being deemed as a colorable exercise of power. Consequently, all writ petitions were allowed, and the impugned orders and notices were quashed and set aside due to being unlawful and unsustainable.