2021 (5) TMI 120 - HC - Income Tax

Reopening of assessment u/s 147 - reopening beyond the period of four years - deduction under Section 80IA - HELD THAT - The reasons itself record that on verification of the case records, it is also observed that . The observations of the Assessing Officer found in the reasons recorded are based on the assessment records of the year under consideration. It is not the case of the Revenue that full details pertaining to the assessee's claim for deduction under Section 80IA were not furnished. Even the assessment order passed under Section 143(3) of the Act contains a reference to the claim of deduction under Section 80IA of the Act. Merely because while framing assessment for the subsequent year, the AO noticed certain irregularity in the claim by itself would not be sufficient to satisfy requirements of the proviso to Section 147 - It is possible that the specific angle of the depreciation earlier claimed to be set off against the income of the current year of the eligible business may not have been in the mind of the Assessing Officer. Nevertheless, the entire claim of the assessee for deduction under Section 80IA of the Act along with the reasons for revising the return of income with respect to claim under Section 80IA of the Act was before the Assessing Officer and such claim was also processed. Such being the facts, in our opinion, the notice for reopening issued beyond four year, cannot be sustained - Decided in favour of assessee.

Issues Involved:
1. Reopening of assessment beyond four years.
2. Failure to disclose material facts.
3. Validity of the notice issued under Section 148 of the Income Tax Act.
4. Claim of deduction under Section 80-IA of the Income Tax Act.
5. Alleged under-assessment of income.

Issue-wise Detailed Analysis:

1. Reopening of Assessment Beyond Four Years:
The primary issue is the reopening of the assessment for the Assessment Year (A.Y.) 2012-13, which is beyond the statutory period of four years. The original return was scrutinized, and an assessment order under Section 143(3) was passed. The reopening notice was issued on 25.03.19, which is beyond the four-year limit. According to the court, the reopening of the assessment beyond four years requires the fulfillment of the proviso to Section 147 of the Income Tax Act, which mandates that there must be a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment.

2. Failure to Disclose Material Facts:
The Assessing Officer (AO) contended that the assessee failed to disclose fully and truly all material facts necessary for the assessment, particularly regarding the set-off of brought forward losses/depreciation against the income of the windmill units. However, the court noted that the reasons recorded for reopening were based on the assessment records of the year under consideration. The court observed that full details pertaining to the assessee's claim for deduction under Section 80-IA were furnished during the original assessment proceedings.

3. Validity of the Notice Issued Under Section 148:
The court examined whether the notice issued under Section 148 to reopen the assessment was valid. The court emphasized that the notice was issued based on the material already on record and not on any new information. The court held that the reopening of the assessment on a mere change of opinion is not permissible in law. The notice for reopening was quashed as it did not meet the requirements of the proviso to Section 147.

4. Claim of Deduction Under Section 80-IA:
The assessee claimed a deduction under Section 80-IA for the operation of windmill units. The AO's reason for reopening included that the assessee did not set off brought forward losses/depreciation of the windmill units for the earlier years (A.Y. 2010-11 and 2011-12) against the income of A.Y. 2012-13, thereby enhancing the deduction. The court noted that the entire claim for deduction under Section 80-IA, along with the reasons for revising the return, was before the AO during the original assessment, and the claim was processed.

5. Alleged Under-assessment of Income:
The AO alleged that the failure to set off brought forward losses/depreciation resulted in an excess allowance of deduction and under-assessment of income amounting to ?6,18,57,625/-. The court observed that the AO's observations were based on the assessment records and that the specific angle of depreciation may not have been in the AO's mind during the original assessment. However, this by itself was not sufficient to satisfy the requirements of the proviso to Section 147.

Conclusion:
The court concluded that the notice for reopening the assessment issued beyond four years could not be sustained as the conditions stipulated under the proviso to Section 147 were not met. The writ application was allowed, and the impugned notice was quashed.

← Previous Next →