2019 (12) TMI 381 - HC - Income Tax

Reopening of assessment - whether they are good reasons, as based on tangible material having live link with formation of the belief? - criteria for deduction under section 80IA - HELD THAT - There is no dispute that for the relevant assessment year, a return under section 139 was filed by assessee. The notice issued under section 143(2) is pursuant to a notice issued under section 142(1). In such circumstances, scrutiny assessment under section 143(3) was made on the Assessing Officer having required disclosure of further particulars and information, to thereupon allow the exemption. Nothing has been disclosed by Revenue to give credence to the statement in the reasons to believe that in spite of repeatedly asking for copies of bills and vouchers towards construction of the bridges, assessee never produced any evidence, in the face of contents of said two notices issued under sections 142(1) and 143 (2). Court has once again looked at notice dated 24th October/19th November, 2007 issued under section 143(2) and earlier notice dated 9th April, 2007 under section 142(1). The assertion in the affidavit-in-opposition that the AO for the first time came to know that assessee was not in the business of infrastructural facility but in the business of outdoor advertisement, thereby not fulfilling criteria for deduction under section 80IA, is not based on any tangible material that has been placed before Court, either by the reasons or by subsequent disclosure. There is no disclosure in the affidavit-in-opposition. Letter of Executive Engineer, PWD (Roads) Department received on 14th January, 2011 in response to notice dated 27th October, 2010 issued under section 133(6), are correspondence post assessment order dated 14th July, 2008, in scrutiny assessment made under section 143(3). The notice dated 27th October, 2010 issued under clause (6) in section 133, according to the Assessing Officer, drew belated response from Executive Engineer PWD (Roads) Department and not relied upon in the reasons, for being of doubtful genuineness. Absence of reliable answer from, such as appears to be given by a government functionary, being noticee under clause (6) in section 133, can be cause for further enquiry but not tangible material having live link with formation of the belief. The letter obviously does not support contention of Revenue. As such no material has been disclosed by Revenue. All this leads to inevitable conclusion that there has been change of opinion. Writ petition succeeds. Impugned notice is set aside

Summary

Issues:
Challenge against notice dated 24th March, 2011 under section 148, Income Tax Act, 1961 for reopening to assess/reassess income for assessment year 2006-07.

Detailed Analysis:

1. Jurisdiction to Reopen:
The petitioner contested the attempt to reopen based on a change of opinion, citing the Supreme Court's judgment in CIT vs. Kelvinator of India Ltd. The petitioner argued that there was no tangible material in the reasons to believe, questioning the link with the formation of the belief. The Revenue, however, maintained that the Assessing Officer had the jurisdiction to reopen and reassess due to the assessee's failure to fully disclose all material facts necessary for assessment. The Revenue emphasized that the notice under section 148 was valid, citing the Supreme Court's ruling in Kelvinator of India Ltd.

2. Disclosure of Material Facts:
The petitioner highlighted previous assessments where deductions under Section 80-IA were allowed, despite the balance sheet showing no fixed assets. The Revenue contended that the assessee did not fulfill the criteria for deduction under Section 80-IA, as it was engaged in outdoor advertising, not infrastructural facilities. The court scrutinized the reasons for belief and found no tangible material establishing the escapement of income, especially considering the lack of evidence produced by the assessee during assessment proceedings.

3. Change of Opinion:
The court examined the reasons provided by the Revenue and the subsequent disclosures, concluding that there was a change of opinion rather than a valid reason to believe that income had escaped assessment. The letter from the Executive Engineer, PWD (Roads) Department, received post-assessment order, was deemed unreliable and did not support the Revenue's contentions. As a result, the court ruled in favor of the petitioner, setting aside the impugned notice and quashing all related proceedings.

In summary, the High Court of Calcutta ruled in favor of the petitioner, finding that the notice issued under section 148 for reopening the assessment for the year 2006-07 lacked tangible material and a live link with the formation of the belief. The court determined that there was a change of opinion rather than a valid reason to reassess, ultimately setting aside the notice and related proceedings.