2018 (2) TMI 1473 - HC - Income Tax

Reopening of assessment - eligibility to deduction u/s 10B - eligibility of reasons to believe - change of opinion - Held that - The assessment in question was framed without scrutiny when the assessee s return was accepted under section 143(1). AO had objections to the assessee s claim of deduction under section 10A of the Act. Similar claims made by the assessee for the assessment years 2009-2010 and 2011-2012 were not accepted by the Assessing Officer. CIT(Appeals) in both cases did allow the assessee s appeal upon which the Revenue had filed the appeals before the Tribunal and such appeals were pending when the Assessing Officer recorded the reasons and issued the impugned notice for reopening. As held by the Supreme Court in case of Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers P. Ltd. reported in (2007 (5) TMI 197 - SUPREME Court), in case where the original assessment is not framed after scrutiny, Assessing Officer cannot be stated to have formed any opinion and therefore, the concept of change of opinion would not apply. It is undisputedly true that despite such wider latitude available to the Assessing Officer to reopen the assessment, the requirement that he had reason to believe that income chargeable to tax had escaped assessment must still be fulfilled. In this context, Revenue s stand is that assessee s claim for deduction under section 10A is not eligible. That is how the Assessing Officer had framed the assessments for the assessment years 2009-2010 and 2011-2012 that is immediately preceding and succeeding the assessment years. When the Tribunal has allowed such claim of the assessee, Revenue is in appeal before the High Court. For the present year, under such circumstances, the reopening would have to be allowed. Mere ground that the Assessing Officer made a wrong reference to the issue before the High Court instead of Tribunal, would not shake the very foundation of the reasons recorded by the Assessing Officer. It was obviously and apparently an inadvertent error in referring to the forum before which such issue is pending. - Decided against assessee.

Summary

Issues:
Challenge to notice for reopening assessment for assessment year 2010-2011 based on incorrect reasons and change of deduction claim from section 10B to section 10A.

Analysis:
1. The petitioner challenged a notice issued by the Assessing Officer for reopening the assessment for the assessment year 2010-2011. The petitioner, a company in the Software Technology Park of India, had claimed deductions under section 10B and later under section 10A of the Income Tax Act. The Assessing Officer issued the notice based on the belief that income had escaped assessment due to the incorrect claim of deduction. The petitioner contended that the Assessing Officer proceeded on erroneous grounds by mentioning the issue pending before the High Court instead of the Tribunal at the time of notice issuance.

2. The petitioner's first contention was that the Assessing Officer's reasons for reopening were flawed as the issue was pending before the Tribunal, not the High Court, at the time of notice issuance. The second contention was regarding the change in the deduction claim from section 10B to section 10A, which the petitioner argued was permissible under the law. The petitioner cited a CBDT circular emphasizing the duty of officers to assist taxpayers in claiming reliefs.

3. The department opposed the petition, asserting that the original assessment was done without scrutiny under section 143(1) of the Act, and the Assessing Officer had valid reasons for reopening the assessment. The department highlighted that similar deduction claims by the assessee for other assessment years were not accepted by the Assessing Officer.

4. The High Court noted that the original assessment was not scrutinized, and the Assessing Officer had objections to the deduction claim under section 10A. The court referred to a Supreme Court ruling stating that in cases where original assessments are not scrutinized, the Assessing Officer can reopen assessments without the concept of "change of opinion" applying. The court emphasized that the Assessing Officer must still have a valid reason to believe that income has escaped assessment.

5. Despite the Assessing Officer's error in referencing the issue pending before the High Court instead of the Tribunal, the court held that this did not invalidate the reasons for reopening. The court concluded that under the circumstances, the reopening of the assessment for the assessment year 2010-2011 was justified, and the petition was dismissed, with interim relief vacated.