2010 (2) TMI 26 - HC - Income Tax

Reopening of an assessment claim of benefit u/s 80IB - The challenge in these proceedings under Article 226 of the Constitution of India is to the reopening of assessments for Assessment Years 2003-2004 and 2004-2005 by notices dated 24th March 2009 and 31st March 2009 in purported exercise of powers under Section 148 of the Income Tax Act, 1961. held that - the reopening of the assessment has taken place within a period of four years from the expiry of the relevant assessment year. However, so far as this case is concerned, it is apparent that the Assessing Officer did not have before him any additional material at all to form a belief that income had escaped assessment. The assessee had admittedly placed on record before the Assessing Officer for A.Y. 2003-2004 the circumstance that the plans have been approved for the building on 12th September 1988. There was no material before the Assessing Officer, that would lead to a formation of belief that the income had escaped assessment. We may also note that in the present case as well the Assessing Officer appears to have relied exclusively on an audit objection, which has already been dealt with while considering the facts of Writ Petition no.269 of 2010. There was hence a total absence of tangible material , as explained in the judgment of the Supreme Court in Kelvinator to justify the conclusion that income had escaped assessment. Finally, it would be necessary to note, as we have observed earlier, that mere existence of the land and building since 1988 is not a circumstance which would disentitle the assessee to the benefit of a deduction under Section 80IB of the Act, once other requirements of the provisions are fulfilled notice u/s 147 quashed

Summary

Issues Involved:
1. Reopening of assessments under Section 148 of the Income Tax Act.
2. Entitlement to deduction under Section 80IB of the Income Tax Act.
3. Validity of reasons recorded by the Assessing Officer for reopening assessments.
4. Alleged nondisclosure of material facts by the assessee.
5. Reliance on audit objections for reopening assessments.

Detailed Analysis:

1. Reopening of assessments under Section 148 of the Income Tax Act:
The petitioner challenged the reopening of assessments for the Assessment Years (A.Y.) 2003-2004 and 2004-2005 by notices dated 24th March 2009 and 31st March 2009, respectively, under Section 148 of the Income Tax Act, 1961. The court noted that the reopening for A.Y. 2003-2004 was beyond four years from the end of the relevant assessment year, while for A.Y. 2004-2005, it was within four years.

2. Entitlement to deduction under Section 80IB of the Income Tax Act:
The petitioner claimed deductions under Section 80IB starting from A.Y. 2001-2002, asserting the establishment of an industrial undertaking in an industrially backward area at Nani Daman. The petitioner had been granted the deduction for several years, and the assessments were scrutinized and processed under Section 143(3) of the Act.

3. Validity of reasons recorded by the Assessing Officer for reopening assessments:
The Assessing Officer's reasons for reopening included the observation that the factory plan was approved by the Sarpanch on 12th September 1988, suggesting the industrial unit pre-existed and was used by another entity for availing benefits. The court found this basis factually incorrect, as the details were already disclosed during the original assessment proceedings, and the reopening was based on previously available information.

4. Alleged nondisclosure of material facts by the assessee:
The court observed that the petitioner had disclosed all relevant details, including the approval of plans in 1988, during the initial assessments. The reopening notices failed to establish any failure on the part of the assessee to disclose material facts fully and truly, which is a prerequisite for reopening assessments after four years.

5. Reliance on audit objections for reopening assessments:
The court noted that the reopening appeared to be influenced by an audit objection, which was not accepted by the Assessing Officer but led to reopening as a precautionary measure. The court emphasized that mere audit objections without tangible material do not justify reopening assessments.

Conclusion:
The court quashed the notices dated 24th March 2009 and 31st March 2009 for reopening the assessments for A.Y. 2003-2004 and 2004-2005. The court held that the reopening was based on incorrect facts and lacked tangible material, thereby constituting an abuse of power. The petitioner had duly disclosed all necessary facts, and the reopening was unjustified. The rule was made absolute, and no order as to costs was passed.