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2020 (5) TMI 490 - HC - Income TaxReopening of assessment u/s 147 - denial of deduction u/s 80IB - change in opinion of an AO - HELD THAT - In the impugned communications dated 14.12.2015 and 28.11.2016, the respondent has not denied that the petitioner had truly and fully disclosed all the materials that were required for completing the assessments. The respondent has merely stated that while passing the respective assessment orders, the Assessing Officer did not examine the issue or has formed any opinion and since no opinion was formed in the 1st place question of change of opinion does not arise. To invoke Section 148 for the purpose of proviso to Section 147 there should be a case of failure to truly and fully disclose material facts required for the assessment. In this case, I find that there were deliberations on the very issue as to whether the activity undertaken by the petitioner amounted to manufacture or not before the respective assessment orders were passed for the respective Assessment Years by the respondent s predecessor. Unable to countenance this stand of the respondent. In any event it would not clothe the Assessing Officer with the power to reopen the completed assessment under Section 148 of the Income Tax Act, 1961 for the purpose of proviso to Section 147 of the Income Tax Act, 1961 if there was truly and fully disclosure for assessment. Central Excise Department has also accepted the fact that the petitioner was engaged in the manufacture of excisable goods which were eligible for exemption under Notification No.56 of 2002-CE dated 14.11.2002 as amended by Notification No.34 of 2008CE dated 10.06.2008. Therefore, a change of opinion based on report of Asst. Commissioner of Income Tax, Circle 1, Jammu under Section 131 of the Income Tax Act, 1961 cannot amount to failure on the part of an assessee to truly and fully disclose information/documents required for the purpose of completing the assessments. Reopening of the assessment to deny the deduction under Section 80IB is therefore without jurisdiction. If in the course of such proceedings the respondent comes to a conclusion that there were other grounds on which assessment can be reopened, the respondent can assess or reassess such income in the light of Explanation 3 to Section 147. Direct the petitioner to participate in the proceedings before the respondent. The respondent is however precluded from disturbing the deductions allowed to the petitioner in the respective assessment orders under Section 80IB. The respondent may however look for such other aspects which may come within the purview of Explanation 3 to Section 147 to demand tax while passing orders. Since the dispute pertains to the Assessment Years 2009-10 and 2010-2011, the respondent is directed to bring a closure to the proceedings within a period of three months from the date of receipt of a copy of this order in the light of the above observations. - Decided in favour of assessee.
Issues Involved:
1. Validity of the notices issued under Section 148 of the Income Tax Act, 1961. 2. Whether the activities undertaken by the petitioner amounted to "manufacture" under Section 2(29BA) of the Income Tax Act, 1961. 3. Whether there was a "change of opinion" by the Assessing Officer. 4. Jurisdiction of the Assessing Officer to reopen the completed assessments. Detailed Analysis: 1. Validity of the Notices Issued Under Section 148 of the Income Tax Act, 1961: The petitioner challenged the notices dated 30.03.2015 and 30.03.2016 issued by the respondent under Section 148 of the Income Tax Act, 1961, to reopen the completed assessments for the Assessment Years 2009-10 and 2010-11. The respondent rejected the objections of the petitioner, stating that the proceedings were validly initiated under Section 148. 2. Whether the Activities Undertaken by the Petitioner Amounted to "Manufacture" Under Section 2(29BA) of the Income Tax Act, 1961: The petitioner, engaged in the manufacture of flavour essences, mixed seasoning powders, and formulated perfumery compounds, claimed deductions under Section 80IB. The respondent argued that the petitioner’s activities did not amount to "manufacture" as per Section 2(29BA), which requires a transformation resulting in a different name, character, and use. The respondent's stance was based on a report from the Asst. Commissioner of Income Tax, Circle 1, Jammu, which stated that the petitioner’s activities involved merely blending and mixing, not manufacturing. 3. Whether There Was a "Change of Opinion" by the Assessing Officer: The petitioner contended that the reopening of assessments was based on a mere change of opinion, which is not permissible under the law. The court noted that the issue of whether the activities amounted to manufacture was deliberated upon before the original assessments were completed. The court referenced the Supreme Court rulings in CIT Vs. Kelvinator of India Ltd and Income Tax Officer Vs. Techspan India Private Limited, emphasizing that a mere change in opinion does not justify reopening assessments. 4. Jurisdiction of the Assessing Officer to Reopen the Completed Assessments: The court held that reopening the assessments based on a change of opinion was contrary to law. The proviso to Section 147 of the Income Tax Act, 1961, requires a failure to truly and fully disclose material facts for reopening assessments. The court found that the petitioner had fully disclosed all required materials, and the Central Excise Department had accepted the petitioner’s activities as manufacturing. Therefore, the respondent lacked jurisdiction to reopen the assessments under Section 148. Conclusion: The court concluded that the reopening of assessments to deny the deduction under Section 80IB was without jurisdiction. The respondent was precluded from disturbing the deductions allowed in the original assessments. However, the respondent could investigate other aspects under Explanation 3 to Section 147. The court directed the petitioner to participate in the proceedings, and the respondent to conclude the proceedings within three months. The writ petitions were disposed of with these observations, and no costs were awarded.
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