2018 (2) TMI 61 - HC - Income Tax

Reopening of assessment - disallowance u/s 80-IB(8A) - change of opinion - Held that - It is pertinent note that the Assessing Officer while reworking the deduction has observed that The detailed scrutiny of the claim of the assessee revealed that while claiming the deduction the assessee has not excluded the notice pay income and other income being not eligible for deduction under section 80IB of the Income Tax Act, 1961 . The said observation belies the contention of the department that no detailed analysis was done by AO in the original scrutiny in relation to the activities carried out by the petitioner. As observed in the preceding paragraphs, the petitioner had supplied all the details of the activities in response to the notice dated 12.11.2012. Thus, it can be assumed that the claim of the petitioner was processed in detail. The assessment cannot be reopened by forming an opinion that the activities carried on by the petitioner was professional service of research not leading to technology development only on the basis that the Assessing Officer failed to raise a particular question to that effect. The earlier claim of deduction was examined and processed after calling for detailed explanation from the petitioner, and the same was accepted after forming an opinion on the activities carried out by the Company. There was no failure on the part of the petitioner as to full and true disclosure. The aforesaid analysis unveils that the reopening the petitioner s case for reassessment under section 147 of the Act is based on change of opinion and hence, the same is not justifiable as per the settled position of law. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961 for reopening the assessment.
2. Whether the reopening is based on a change of opinion.
3. Eligibility of the petitioner for deduction under Section 80-IB(8A) of the Income Tax Act.
4. Whether the reopening is beyond the permissible period of four years.
5. Whether the reopening is based on audit objection.

Detailed Analysis:

1. Validity of the Notice Issued Under Section 148:
The petitioner challenged the notice dated 31.03.2017 issued under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the year 2010-11. The petitioner argued that the income chargeable to tax had not escaped assessment as all material facts were fully and truly disclosed during the original assessment. The respondent contended that the petitioner was not eligible for the deduction under Section 80-IB(8A) as it was providing professional services rather than engaging in technology development.

2. Reopening Based on Change of Opinion:
The petitioner argued that the reopening was merely based on a change of opinion, which is not permissible under the law. The original assessment was completed after thorough scrutiny, where the Assessing Officer had examined all the details and consciously made a disallowance of ?9,82,226/- under Section 80-IB(8A). The court noted that the reasons recorded for reopening indicated that the assessment was being reopened because the petitioner was providing professional research services, which did not lead to technology development. However, this issue had already been examined during the original assessment.

3. Eligibility for Deduction Under Section 80-IB(8A):
The petitioner claimed that it fulfilled all the conditions for deduction under Section 80-IB(8A) and had obtained the necessary approval from the "Prescribed authority." The court observed that during the original assessment, the petitioner had provided detailed information about its activities, and the claim for deduction was examined and partially disallowed. The court found that the reopening was not justified as the petitioner had fully disclosed its activities, and the deduction claim was processed in detail during the original assessment.

4. Reopening Beyond Four Years:
The court noted that the reopening was beyond the permissible period of four years. According to the law, reopening beyond four years is permissible only if the income chargeable to tax has escaped assessment due to the assessee's failure to disclose fully and truly all material facts. The court found that there was no such failure on the part of the petitioner.

5. Reopening Based on Audit Objection:
The petitioner argued that the reopening was based on an audit objection, which is not a valid ground for reopening. The court did not delve into this issue in detail as it was inclined to set aside the impugned notice on the ground of change of opinion.

Conclusion:
The court concluded that the reopening of the assessment was based on a change of opinion, which is not permissible under the law. The petitioner had fully and truly disclosed all material facts during the original assessment, and the deduction claim was thoroughly examined. Therefore, the impugned notice dated 31.03.2017 was quashed and set aside. The petition was allowed.