2020 (9) TMI 155 - HC - Income Tax

Reopening of assessment u/s 147 - Deduction u/s 80-IA - department had taken a view that the income earned by the Assessee will be treated as income from the house property and not income from the business or profession, so as to become eligible for deduction under Section 80IA - HELD THAT - We are unable to understand as to how the department has taken such a view against the Assessee when the main object of the company is to construct, maintain and lease out of the Software Technologies Park and the main income of the Assessee was lease rentals. As perused the entire order passed by the Assessing Officer under Section 147. But, we are unable to find anything in the order as to what was the object of the assessee company etc., It shows that the Assessing Officer, without application of mind, had passed the re-assessment order, with assumption, presumption and surmise, which will not be permissible under any of the statute. We also tried to find something in statutes to support the finding of the Assessing Officer, but found none. Both the CIT(A)-VI and the Tribunal have thoroughly scrutinised the entire facts and passed the order. The original assessment order was passed by the AO after taking into consideration of all the material facts. During the course of the re-assessment proceeding also, the AO has not found any tangible material by which income has escaped from the assessment. Without any application of mind, the Assessing Officer re-opened the assessment under the pretext that income has escaped assessment and passed the reassessment order under Section 147, which is a patent error committed by the Assessing Officer. Under these circumstances, we do not find any merit in all these three appeals filed by the Revenue and the same are liable to be dismissed on the above said point also. Non-payment of interest - relevant assessment year - HELD THAT - Assessee had paid the interest within the relevant assessment year and all these facts have been disclosed by the Assessee to the Assessing Officer. After taking into consideration all these aspects, the Assessing Officer had passed the original assessment order. Therefore, we do not find any merit in the submissions of the learned counsel on the basis that the deduction was granted without payment of any interest during the relevant financial year and hence, the appeal is liable to be dismissed well on this point also. Limitation for reopening the assessment under Section 147 - HELD THAT - The notice under Section 148, for reopening of the assessment was issued on 17.03.2010 for the assessment year 2003-04. If at all, if the department intended to reopen the assessment under Sections 147 and 148, it should have issued the notice under Section 148 within four years from the end of the relevant assessment year. In the present case, after completion of the period i.e., on 31.03.2008, the department issued a notice under Section 148 for re-assessment. Therefore, we are of the view that the re-opening of the assessment for the assessment year 2003-04 was beyond the period of limitation - Assessee appeal allowed.

Issues Involved:
1. Validity of reopening the assessment under Section 147 of the Income Tax Act.
2. Eligibility of the assessee for deduction under Section 80IA on lease rental income from the Industrial Park.
3. Limitation period for issuing notice under Section 148 for reopening the assessment.
4. Non-payment of interest and its impact on the deduction claim.

Detailed Analysis:

1. Validity of Reopening the Assessment under Section 147:
The primary contention from the appellant/department was that the reopening of the assessment under Section 147 was valid as the Assessing Officer had not considered the issue relating to Section 43B in the original assessment. The department argued that the reassessment was necessary not only for the withdrawal of the deduction under Section 80IA but also because the interest shown as payable towards deduction was allowed without considering Section 43(b) of the Act. However, the court found that the reopening of the assessment was based on a mere change of opinion, which is not permissible under the law. The court cited the Supreme Court judgment in Commissioner of Income Tax, Delhi Vs. Kelvinator of India Ltd., emphasizing that reassessment must be based on tangible material and not on a mere change of opinion. The court concluded that the Assessing Officer had reopened the assessment without any new tangible material, making the reassessment invalid.

2. Eligibility for Deduction under Section 80IA on Lease Rental Income:
The appellant/department contended that the deduction under Section 80IA could only be applied to profits derived from developing, operating, and maintaining facilities and not for rentals received from the property. The court, however, referred to previous judgments, including CIT vs. M/s. Elnet Technologies Ltd. and CIT vs. Chennai Properties and Investments Ltd., which established that lease rental income from an industrial park qualifies as business income and is eligible for deduction under Section 80IA. The court found that the main object of the assessee company was to construct, maintain, and lease out the Software Technologies Park, and the lease rentals constituted the main income, thus qualifying for the deduction.

3. Limitation Period for Issuing Notice under Section 148:
For the assessment year 2003-04, the notice for reassessment under Sections 147 and 148 was issued on 17.03.2010, beyond the four-year limitation period prescribed. The court held that the reopening of the assessment was time-barred as the notice was issued after the four-year period from the end of the relevant assessment year. Consequently, the reassessment for the assessment year 2003-04 was deemed invalid due to the expiration of the limitation period.

4. Non-Payment of Interest:
The department argued that the deduction was allowed without considering the non-payment of interest before the end of the previous year, as required under Section 43(b). However, the court found that the assessee had paid the interest amount within the relevant assessment year and had disclosed all pertinent details to the Assessing Officer during the original assessment. The court noted that the Assessing Officer had considered these details and passed the original assessment order accordingly. Therefore, there was no concealment of material facts by the assessee, and the reassessment on this ground was not justified.

Conclusion:
The court dismissed the appeals filed by the department, finding no merit in the arguments presented. The reassessment proceedings under Section 147 were invalidated due to the lack of tangible material and being based on a mere change of opinion. The lease rental income was deemed eligible for deduction under Section 80IA, and the reassessment notice for the year 2003-04 was found to be time-barred. The court upheld the decisions of the CIT(A) and the Tribunal, confirming that the original assessment was conducted correctly and without any concealment of material facts by the assessee.

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