2021 (4) TMI 132 - HC - Income Tax

Reopening of assessment u/s 147 - benefit of deduction under Section 80IB denial - HELD THAT - Admittedly, in this case, the manufacturing activity was carried out as it is evident from the reading of the impugned order that it was with the aid of power inasmuch as one of the process namely 'holes notching' was with the aid of power. Therefore, the only requirement for the petitioner to satisfy for claiming deduction was regarding the number of workers employed by it for manufacturing process. In the impugned order dated 11.07.2011, there are three tabulations. Each of the tabulations gives the number of workers employed by the petitioner during the months. For the Assessment Year 2004-2005, the tabulations indicates that more than 10 employees were worked at any given point of time. In case during the Assessment Year 2004-2005, the number of employees were more than 15 per month and the average between 15 to 23. Though at the time of original assessment, no documents appears to have been filed by the petitioner to substantiate the same, nevertheless, the survey conducted under Section 133(a) of the Act, indicates that there were more than 10 employees employed during the Assessment Year 2004-2005, even though not all the employees worked right through the period. There is the substantial compliance of the conditions by the petitioner. Therefore, the invocation of Section 148 of the Act is without any merits. There was no justification in re-opening of the assessment for the Assessment Year 2004-2005. Similarly, for the Assessment Year 2005-2006 also the tabulation in the impugned order indicates that there were more than 10 employees employed by the petitioner though not all of them worked right through the month. There are months which indicates that there was no production. Nevertheless, there are indications in the table that more than 10 employees were employed. That apart, at the time of passing of original assessment order on 31.12.2010, the issue regarding the number of workers employed by the petitioner was considered by the Assessing Officer. Re-opening of the assessment for the Assessment Year 2005-2006 is not sustainable. Assessment Year 2006-2007 - The tabulations indicates that during some of the months there were less than 10 workers employed by the petitioner. Therefore, there is sufficient ground for re-opening of the assessment under Section 148 read with 147 of the Income Tax Act, 1961. Therefore, no merits in the writ petition as far as the Assessment Year 2006-2007 is concerned. It is therefore for the petitioner to satisfy before the officers namely the respondent that it was indeed eligible for deduction under Section 80IB of the Act, for the Assessment Year 2006-2007 with sufficient records. Therefore, the writ petition as far as the Assessment Year 2006-2007 is concerned is dismissed. The petitioner is therefore directed to participate in the proceedings before the respondent. Though certain observations have been made in this order touching on the merits for the Assessment Year 2006-2007, the respondent is directed to refrain from referring to the same while passing the order on merits as the observations are merely come to a conclusion that the petitioner has not made out a case for interference at this stage.

Summary

Issues:
Reopening of assessment for Assessment Years 2004-2005, 2005-2006, and 2006-2007 based on notices and communication challenging eligibility for deduction under Section 80IB of the Income Tax Act, 1961.

Analysis:
1. The petitioner contested the reopening of assessments for the years 2004-2005, 2005-2006, and 2006-2007. The initial assessment orders were challenged and set aside by the court, directing the respondent to consider the objections raised by the petitioner and pass speaking orders for each Assessment Year.

2. The petitioner argued that for the year 2004-2005, the assessment order already considered the exemption claim under Section 80IB, so there was no basis for reopening. However, for the subsequent years, the petitioner's eligibility for the deduction was disputed, leading to a series of appeals and reversals culminating in the Tribunal allowing the benefit.

3. The petitioner contended that the denial of the deduction for the years 2005-2006 and 2006-2007 was based on a change of opinion, contrary to established legal principles. The petitioner also cited precedents emphasizing the requirement of reasons for invoking Section 147 for reassessment.

4. The respondent defended the reopening by highlighting the lack of evidence provided by the petitioner to justify the eligibility for the deduction under Section 80IB. The respondent argued that the conditions for the deduction were not met based on the number of workers employed in the manufacturing process.

5. The court analyzed the requirements for claiming the deduction under Section 80IB, focusing on the number of workers employed in the manufacturing process without or with the aid of power. The court found that the petitioner satisfied the conditions for the deduction in the years 2004-2005 and 2005-2006 based on the number of workers employed.

6. The court concluded that there was no justification for reopening the assessment for the year 2004-2005 and 2005-2006, as the issues had been considered and finalized in previous proceedings. However, for the year 2006-2007, where the number of workers employed fluctuated, there were grounds for reassessment under Section 147.

7. The court directed the petitioner to participate in the proceedings for the year 2006-2007 and emphasized that the assessment order for that year should be passed independently on merits. The court allowed the writ petitions for the years 2004-2005 and 2005-2006 but dismissed the petition for the year 2006-2007, with no costs incurred.