2018 (2) TMI 1094 - HC - Income Tax

Reopening of assessment - Deduction u/s. 80IA in respect of three Windmills situated at Bogat - eligibility of reasons to believe - Held that - Assessee s claim for deduction under section 80IA of the Act was examined by the Assessing Officer minutely during the scrutiny assessment proceedings. He has given detailed reasons for reducing the claim by ₹ 3.8 lacs and accepting the rest of the claim. Any attempt now on part of the Assessing Officer to modify this position would be based on change of opinion. May be that an angle or an element of the claim may not have been directly addressed by the Assessing Officer during the original assessment to the satisfaction of the present Assessing Officer, nevertheless, same cannot be a ground for reopening of the assessment which was previously framed after scrutiny. - Decided in favour of assessee.

Summary

Issues:
1. Challenge to notice seeking to reopen assessment for assessment year 2011-2012.
2. Failure to furnish separate Profit and Loss account and balance sheet for the relevant year.
3. Adjustment of expenses attributed to windmill division affecting deduction under section 80IA of the Act.
4. Objections raised by petitioner against the notice of reopening and subsequent rejection.

Issue 1 - Challenge to Notice Seeking to Reopen Assessment:
The petitioner challenged a notice dated 9.3.2016 seeking to reopen the assessment for the assessment year 2011-2012. The Assessing Officer had restricted the deduction claimed under section 80IA of the Act in the original assessment. The reasons given for reopening the assessment included the failure of the assessee to submit separate Profit and Loss account and balance sheet for the relevant year and an adjustment of expenses attributed to the windmill division affecting the deduction allowed under section 80IA of the Act.

Issue 2 - Failure to Furnish Separate Profit and Loss Account and Balance Sheet:
The Assessing Officer contended that the deduction under section 80IA of the Act could not have been allowed due to the failure of the assessee to furnish separate Profit and Loss account and balance sheet of the undertaking for the relevant year. This non-compliance led to the Assessing Officer's belief that income chargeable to tax had escaped assessment, warranting the reopening of the assessment under Section 147 of the IT Act.

Issue 3 - Adjustment of Expenses Affecting Deduction under Section 80IA:
The Assessing Officer also argued that an expense of ?16.36 lacs should have been attributed to the windmill division, affecting the profit calculation and consequently the deduction under section 80IA of the Act. The allocation of common expenses between different business divisions was deemed necessary to arrive at the correct profit of each business for claiming deductions accurately.

Issue 4 - Objections Raised by Petitioner Against Reopening Notice:
The petitioner raised objections to the notice of reopening, arguing that the issue of deduction under section 80IA had already been scrutinized during the original assessment, and any attempt to disallow the claim would amount to a change of opinion. The petitioner also cited principles of consistency and merger of the matter in appeal before the Commissioner as reasons to challenge the reopening notice.

In the final judgment, the High Court held that the Assessing Officer had minutely examined the deduction claim under section 80IA during the original assessment. The court concluded that any attempt to modify this position through reopening the assessment would constitute a change of opinion. Therefore, the notice dated 9.3.2016 seeking to reopen the assessment was set aside, and the petition was allowed and disposed of accordingly.