2019 (2) TMI 175 - HC - Income Tax

Reopening of assessment - issue of sales tax benefit given by the State Government as revenue in nature and qualification for deduction under Section 80IA - Held that - During regular Assessment proceedings under Section 143(3) of the Act the Assessing Officer had occasion to deal with the issue of sales tax benefit given by the State Government is revenue in nature but cannot qualify for deduction under Section 80IA as it is not derived from the Industrial undertaking which forms the basis of the recorded reasons to issue the reopening notice dated 7th July, 2013. In the above facts, the impugned order hold that this would be a clear case of change of opinion. Therefore, as the notice of reopening is without jurisdiction, the consequent orders of Assessment is also bad. It is a settled position in law that reopening of assessment even within a period of four years from the end of the relevant Assessment Year cannot be done on the basis of a change of opinion. If the Assessing Officer had occasion to deal with the issue which is the basis of the reopening notice (as reflected in the recorded reasons), earlier in the regular assessment proceedings under Section 143(3) of the Act, then the notice for reopening would be a case of reviewing the earlier order - Decided in favour of assessee.

Issues:
1. Jurisdiction of the Assessing Officer to issue a reopening notice under Section 147 of the Income Tax Act, 1961.
2. Whether sales tax rebate received by the Company qualifies as profits "derived from the industrial undertaking" for the purposes of section 80IA of the Act.

Analysis:

Issue 1: Jurisdiction of the Assessing Officer to issue a reopening notice:
The Tribunal dismissed the Revenue's appeal, stating that the reopening notice seeking to reopen the Assessment Year 2008-09 was without jurisdiction as it was based on a change of opinion. The Assessing Officer had already dealt with the issue of sales tax benefit during the regular assessment proceedings under Section 143(3) of the Act. The Tribunal held that the sales tax benefit did not qualify for deduction under Section 80IA as it was not derived from the industrial undertaking. The Tribunal concluded that the reopening notice was a clear case of change of opinion, which is impermissible. The counsel for the appellant argued that the notice was issued within four years from the end of the relevant assessment year, so the Assessing Officer had jurisdiction. However, the Supreme Court precedent cited emphasized that reassessment cannot be based on a change of opinion. Therefore, the Tribunal's decision was upheld, and the appeal on this issue was dismissed.

Issue 2: Qualification of sales tax rebate as profits derived from industrial undertaking:
Since the first question regarding the jurisdiction of the Assessing Officer was dismissed, the second question became academic and was not entertained. The Tribunal did not delve into the issue of whether the sales tax rebate received by the Company could be considered as profits "derived from the industrial undertaking" for the purposes of section 80IA of the Act due to the dismissal of the primary issue. Consequently, the appeal on this issue was not considered, and the question remained unanswered.

In conclusion, the High Court of Bombay upheld the Tribunal's decision regarding the jurisdiction of the Assessing Officer to issue a reopening notice based on a change of opinion. The Court dismissed the appeal and did not entertain the question related to the qualification of sales tax rebate as profits derived from the industrial undertaking due to the primary issue being resolved against the Revenue.

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