2021 (5) TMI 330 - HC - Income Tax

Reopening of assessment u/s 147 - Claim of deduction under Section 80-IA - assessee is eligible only for 30% pay of the deduction claim and remaining 70% is to be taxed - HELD THAT - As there is a definite 'reason to believe' that the deduction of ₹ 61,10,78,973/- is excess deduction to the tune of income chargeable to tax as escaped assessment. When it is categorically stated that on account of certain informations provided by the assessee, a wrong assessment has been made and the excess deduction was made, so as to cause loss to the Revenue, then it is to be construed that the assessee has not disclosed fully and truly all material facts. Facts regarding the deduction claim u/s 80-IA, all would have stated by the assessee in the return of income. However, during the scrutiny and while passing that the final order of assessment by the Assessing Officer, which was done based only on the informations provided by the assessee and thereafter, if the authorities identified some materials for reopening of assessment, then they have got every reason to believe that the assessment is to be reopened. In the event of not reopening the assessment, the interest of the Revenue would be prejudiced. This Court is of the considered opinion that the petitioner cannot merely say that he has produced all the informations. Certain informations, which were not provided fully and truly caused loss to the Revenue with reference to the deductions made u/s 80-IA of the Act and such materials identified by the Department, while reopening the assessment must be adjudicated with reference to the documents and evidences available and the petitioner is at liberty to defend his case by submitting his objections or by producing documents and evidences. High Court cannot adjudicate the intricacies in the Accounting System made by the assessee, which was scrutinized by the Income Tax Department. When prima facie case made out by the respondents to arrive a conclusion that there is a reason to believe, then the Revenue must be permitted to proceed with the reopening proceedings and mere reopening would not cause any prejudice to the assessee and during adjudication, the assessee would get an opportunity to defend his case in the manner known to law. Thus, the mere initiation based on some new materials would not cause any prejudice or violate the rights of the assessee. However, if the assessee could able to establish that there is absolutely no new materials or informations made available for the purpose of reopening of assessment, then alone, the High Court may interfere and not otherwise. This being the principles to be followed, the petitioner is at liberty to defend the case by availing the opportunities to be provided by the respondents as contemplated under the provisions of the Income Tax Act.

Issues Involved:
1. Validity of reopening assessments under Section 147 of the Income Tax Act.
2. Alleged change of opinion by the Income Tax Department.
3. Compliance with principles of natural justice.
4. Interpretation of Section 80-IA of the Income Tax Act.
5. Allegation of failure to disclose fully and truly all material facts by the petitioner.
6. Impact of a sanctioned Resolution Plan under IBC Code on the assessment proceedings.

Issue-wise Detailed Analysis:

1. Validity of Reopening Assessments under Section 147 of the Income Tax Act:
The court examined the initiation of proceedings under Section 147 for reopening assessments for the Assessment Years 2006-07, 2007-08, and 2009-10. The petitioner argued that the reopening was a classic case of change of opinion and not based on new facts or materials. The court noted that the scope of Section 147 is wide enough to cover under-assessment and that the Assessing Officer (AO) has the authority to reopen assessments if there is "reason to believe" that income has escaped assessment. The court emphasized that the sufficiency of reasons for reopening is not to be adjudicated by the High Court in writ proceedings.

2. Alleged Change of Opinion by the Income Tax Department:
The petitioner contended that the reopening was based on a change of opinion, as the AO had already scrutinized and accepted the claims under Section 80-IA during the original assessments. The court, however, observed that the AO had identified new materials and erroneous application of Section 80-IA, which constituted a valid reason to believe that income had escaped assessment. The court held that the reopening was not merely a change of opinion but based on new materials.

3. Compliance with Principles of Natural Justice:
The petitioner argued that the issuance of notice under Section 143(2) seeking details and fixing a hearing date without providing sufficient reasons for reopening violated the principles of natural justice. The court acknowledged this argument but concluded that the petitioner would still have ample opportunity to defend its case during the reassessment proceedings.

4. Interpretation of Section 80-IA of the Income Tax Act:
The petitioner claimed deductions under Section 80-IA, arguing that the deduction could be claimed for any ten consecutive years out of fifteen years from the commencement of business operations. The court referred to the CBDT Circular dated 15.02.2016, which clarified that the term 'initial assessment year' allows the assessee to choose the year for claiming deductions. However, the court noted that the AO had reason to believe that the petitioner’s eligibility for deductions fell under the pre-amended provisions of Section 80-IA, which did not allow such flexibility.

5. Allegation of Failure to Disclose Fully and Truly All Material Facts by the Petitioner:
The court found that the AO had concluded there was a failure on the part of the petitioner to disclose fully and truly all material facts necessary for assessment. The AO identified that the petitioner was eligible only for 30% of the deduction claim, and the remaining 70% should be taxed. The court held that the reopening of assessment was justified based on the AO's identification of excess deductions and erroneous claims.

6. Impact of a Sanctioned Resolution Plan under IBC Code on the Assessment Proceedings:
The petitioner mentioned that a Resolution Plan had been sanctioned under the IBC Code. The court allowed the petitioner to submit all particulars regarding the resolution plan before the Income Tax authorities, who would consider the documents and make an appropriate decision under the law.

Conclusion:
The court dismissed all writ petitions, holding that the reopening of assessments was justified based on new materials identified by the AO. The court emphasized that the petitioner would have ample opportunity to defend its case during the reassessment proceedings. The court also allowed the petitioner to present details of the sanctioned Resolution Plan to the Income Tax authorities for consideration.

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