2021 (4) TMI 701 - HC - Income Tax

CIT non disposing of the objections filed by the assessee with regard to reopening of assessment under Sections 147 to 150 - main reason for reopening of the assessment is that the assessee has erroneously applied CBDT Circular No.09/2014 dated 23/04/2014 and claimed amortization expenses for the financial year 2014-15 - as submitted that since the assessee was entitled to deduction under Section 80IA there was no question of any escapement of tax as increase in income by not claiming amortization would not result in the assessee paying any further tax as the same was 100% deductible under Section 80IA.- HELD THAT - CIT's impugned order does not address the issue in relation to the tax neutrality because of the fact that the assessee was eligible for deduction under Section 80IA. All other issues raised by the petitioner have been dealt with. Whether the same have been dealt with correctly or not, has not been gone into by me in this writ petition. Commissioner of Income Tax should have looked into the fact as to whether there could not be an escapement of tax because of the fact of the deduction available to the petitioner under Section 80IA. It is to be noted that this was the last year of deduction that was available to the petitioner out of the ten consecutive years that is available. As the reassessment proceeding is based on the fact that there was an escapement of tax, this issue was required to be answered and taken care of by the Commissioner of Income Tax. This not having been done, the impugned order is quashed and set aside with a direction upon the Officer to pass a further reasoned order after granting an opportunity of hearing to the petitioner. The Commissioner of Income Tax is specifically directed to deal with all points including the point in relation to escapement of tax because of deduction available to the petitioner under Section 80 IA of the Act.

Summary

Issues:
1. Application under Section 226 of the Constitution of India challenging an order of the Assistant Commissioner of Income Tax regarding reopening of assessment for the assessment year 2015-16.
2. Interpretation of CBDT Circular No. 09/2014 and its applicability to the petitioner as a BOT operator.
3. Claim of amortization expenses by the assessee and its impact on tax liability.
4. Consideration of tax neutrality due to the availability of deduction under Section 80IA of the Income Tax Act, 1961.
5. Adequacy of addressing objections raised by the petitioner in the impugned order.
6. Quashing of the impugned order and direction for a further reasoned order by the Commissioner of Income Tax.

Analysis:
1. The petitioner challenged the order of the Assistant Commissioner of Income Tax, contending that the reopening of assessment was based on the erroneous application of CBDT Circular No. 09/2014. The Circular allowed amortization of expenses for infrastructure projects under BOT agreements. The petitioner, a BOT operator receiving amenities, claimed amortization under Section 80IA, asserting tax neutrality. However, the Assistant Commissioner's order did not consider this aspect, prompting the Court to quash the order and direct a reassessment.

2. The dispute centered on the interpretation of CBDT Circular No. 09/2014 regarding the eligibility of the petitioner as a BOT operator for amortization benefits. The petitioner argued that being eligible for Section 80IA deduction, there was no tax escapement. In contrast, the respondent contended that the Circular did not apply as the petitioner did not collect tolls. The Court emphasized the necessity for the Commissioner to address the tax neutrality issue due to the petitioner's deduction eligibility.

3. The Court highlighted the failure of the impugned order to address the crucial aspect of tax neutrality resulting from the petitioner's entitlement to Section 80IA deduction. As the deduction was significant in determining tax liability, the Commissioner was directed to reevaluate the matter comprehensively. The Court stressed the importance of considering all relevant points, especially the impact of available deductions on tax liability, in reassessing the petitioner's case.

4. Despite addressing other objections raised by the petitioner, the Court found the omission regarding tax neutrality and the impact of Section 80IA deduction crucial for a fair assessment. The Court's decision to quash the order and instruct a detailed reconsideration by the Commissioner underscored the significance of analyzing all aspects affecting the petitioner's tax liability, particularly in the context of available deductions under the Income Tax Act, 1961.

5. The Court's detailed analysis highlighted the necessity for the Commissioner to delve into the tax implications of the petitioner's entitlement to Section 80IA deduction, emphasizing the need for a thorough examination to ensure fairness and accuracy in determining the tax liability. The judgment underscored the importance of addressing all relevant issues, especially those impacting tax neutrality, to facilitate a comprehensive and just reassessment process.