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2017 (8) TMI 1299 - HC - Income TaxReopening of assessment u/s 147 - Eligibility to claim deduction u/s 80-IC - business of information technology - objection in claiming deduction is being that since the Assessee does not possess NIC code and Excise Classification, it is not entitled to the statutory deduction - Held that - We find the Assessing Officer to have committed grave illegality in correctly and completely construing the provisions of the Schedule. In fact, from the observations of the Assessing Officer, reproduced supra, it stands admitted that the code/ classification, reproduced supra, is required only for such of those activities, which fall under the category of manufacture . Whether the Assessee is required to obtain sanction/permission/code, so prescribed or not, is not in dispute. It is true that notice is only subjective satisfaction and not final opinion, but then the Assessing Officer has decided the objections, already expressing an opinion on the assessee s entitlement for statutory deduction. The question is not whether the action taken is in good faith or not. What is important is that the Assessing Officer has exceeded its jurisdiction erroneously. Which, in our considered view, he has so done, rendering the action to be absolutely illegal and unsustainable in law. - Decided in favour of assessee.
Issues Involved:
1. Interpretation of Part-C of the Fourteenth Schedule under Section 80-IC of the Income Tax Act, 1961. 2. Eligibility of the Assessee for statutory deductions under Section 80-IC. 3. Legality of reopening assessments under Section 147/148 of the Income Tax Act. 4. Jurisdiction of the High Court to interfere with the orders of the Assessing Officer. Issue-wise Detailed Analysis: 1. Interpretation of Part-C of the Fourteenth Schedule under Section 80-IC of the Income Tax Act, 1961: The core issue is the interpretation of Part-C of the Fourteenth Schedule under Section 80-IC of the Income Tax Act, 1961. The Assessee is engaged in the business of information technology services and Call Centre, and it was assessed to income tax. The Assessing Officer initially accepted the Assessee's eligibility for statutory deductions under Section 80-IC, as the business activities were specified in the Fourteenth Schedule. However, a new Assessing Officer later interpreted the clauses differently, holding that the Assessee did not have the required Central Excise classification or National Industrial Classification (NIC) Code, thus denying the deductions. 2. Eligibility of the Assessee for statutory deductions under Section 80-IC: The Assessee's eligibility for deductions was initially accepted for the assessment years 2006-2007, 2007-2008, 2008-2009, and 2009-2010. The dispute arose for the assessment year 2010-2011 when the new Assessing Officer denied the deductions based on the absence of the required classifications. The court found that the Assessee's activities, specifically running a Call Centre, do not fall under the manufacturing category that requires such classifications. The Assessee's operations are distinct from manufacturing or production activities, and thus, the requirement for the code/classification does not apply. 3. Legality of reopening assessments under Section 147/148 of the Income Tax Act: The Assessing Officer issued notices under Section 148 for reopening assessments for the years 2007-2008, 2008-2009, and 2009-2010, claiming income had escaped assessment. The court found that the reopening was based on a misinterpretation of the Assessee's activities and the statutory provisions. The Assessee had made full disclosures, and there was no failure to file returns or disclose material facts. The court held that the action to reopen the assessments beyond four years was barred by limitation, as the conditions for such reopening were not met. 4. Jurisdiction of the High Court to interfere with the orders of the Assessing Officer: The court addressed the jurisdictional issue, affirming its authority to interfere with the Assessing Officer's orders when there is a jurisdictional error or the action is arbitrary. The court referred to precedents, including the Supreme Court's decision in Commissioner of Income Tax, Delhi v. Kelvinator of India Limited, which emphasized that reopening assessments based on a mere change of opinion is not permissible. The court also cited its previous decisions, highlighting that statutory remedies must be exhausted unless exceptional circumstances justify direct intervention. Conclusion: The court concluded that the Assessing Officer had committed a grave illegality by misinterpreting the provisions of the Schedule and denying the Assessee's eligibility for statutory deductions. The action to reopen the assessments was found to be barred by limitation and based on an erroneous interpretation. Consequently, the court quashed the impugned show cause notices and communications disposing of the objections, allowing all the writ petitions filed by the Assessee.
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