2009 (8) TMI 58 - HC - Income Tax

Re-assessment u/s 147 Issue of Notice u/s 148 Earlier AO allowed the deduction u/s 80IA during assessment u/s 143(3) Held that - The law is well settled that the proceedings under Section 147/148 cannot be initiated merely because there is a change of opinion and there are no new facts for justifying the initiation of reassessment proceedings. - According to the Assessing Officer, the activity carried on by the assessee is not a manufacturing activity. - This very issue was duly considered and the assessee furnished detailed note as also its letter dated 10.12.2002 and 24.3.2003 justifying the allowability of deduction under Section 80IA and which was duly allowed by an order passed under Section 143(3) of the Act, it is clear that there is no basis for initiating proceedings under Section 147/148. writ petition allowed notice u/s 148 and assessment order u/s 147 quashed.

Summary

Issues:
1. Quashing of notice and order under Section 147/148 of the Income Tax Act, 1961.

Analysis:
The petitioner company, engaged in manufacturing of cutting and slitting of polyster films in a backward area, filed a return of income for Assessment Year 2001-2002. The Assessing Officer allowed a deduction under Section 80IA after due consideration. However, a notice under Section 148 was issued by the respondent, challenging the deduction claimed by the petitioner. The reasons for reopening the assessment stated that the petitioner was not entitled to claim the deduction under Section 80IA as it was engaged in processing and packing business, not manufacturing. The petitioner challenged the initiation of reassessment proceedings on various grounds.

The petitioner contended that the reasons for reassessment did not allege failure to disclose material particulars, as required under Section 147(2) proviso. They argued that no new facts were presented, indicating a mere change of opinion by the Assessing Officer, which is not a valid basis for reopening. The petitioner also highlighted that deduction was allowed in previous and subsequent years, questioning the inconsistency in disallowing it for the subject year. Additionally, the petitioner pointed out a similar case of a group company where deduction was allowed for a similar activity.

In response, the respondent relied on the order passed by the Income Tax Officer, emphasizing the non-entitlement of the petitioner for claiming the deduction under Section 80IA due to the nature of its business activity. However, the High Court found the petitioner's arguments well-founded. The Court held that the initiation of reassessment proceedings lacked a valid basis as there were no new facts presented, and the petitioner had adequately justified the deduction under Section 80IA previously. The Court also noted the consistency in allowing the deduction for the petitioner in other assessment years and in a similar case involving a group company.

Consequently, the High Court allowed the writ petition, quashing the notice and order under Section 147/148 of the Income Tax Act for the Assessment Year 2001-2002. The Court issued a writ of certiorari, halting the reassessment proceedings initiated by the respondent based on the challenged notice.

This detailed analysis of the judgment highlights the key arguments presented by the petitioner, the respondent's defense, and the High Court's reasoning leading to the decision to quash the notice and order under Section 147/148 of the Income Tax Act.