2022 (4) TMI 1235 - HC - Income Tax

Reopening of assessment u/s 147 - Deduction u/s 80IC - HELD THAT - The deductions have been first of all explained in the documents filed alongwith the return of income. Moreover, during the assessment proceedings, a notice under Section 142(1) of the Act was issued to petitioner calling upon petitioner to furnish reasons for revising the income if the return has been revised. In its reply petitioner has given the reason for revising its income and has expressly stated that the deduction that it claimed under Section 80-IC for the two eligible units was inadvertently claimed at 30% when it was entitled to claim 100%. Petitioner had received another notice dated 8th November 2017 under Section 142(1) of the Act calling upon petitioner to justify the claim of the deduction under Section 80-IC in respect of two units wherein the claim of deduction has been revised to 100% with supporting evidences. Petitioner has provided those details. In the assessment order, Mr. Sharma submitted that, there is no specific discussion regarding the 100% deduction claimed for the two units. In our view, that would not help Mr. Sharma because it is settled law that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. If the Assessing Officer has considered the objection raised in the grounds for issuing notice under Section 148 of the Act during the original assessment proceedings but has not rejected those objections, the Assessing Officer is deemed to have accepted the objection. In the assessment order dated 22nd February 2018, the Assessing Officer has discussed on the unit wise details of income and expenses claimed under various heads as 80-IC units and non 80-IC units and has also disallowed certain interest. Therefore, it is quite clear that the issue of deductions claimed by petitioner under Section 80-IC of the Act was under active consideration of the AO during the assessment proceedings. The fact that queries were raised and answers were given also indicate that there is no failure on the part of petitioner to truly and fully disclose material facts.

Summary

Issues:
1. Claim for 100% deduction under Section 80-IC of the Income Tax Act for two manufacturing units.
2. Validity of the notice issued under Section 148 of the Act for reopening the assessment.
3. Allegation of failure to disclose material facts leading to escapement of income.

Analysis:
1. The petitioner claimed 100% deduction for profits from two manufacturing units under Section 80-IC of the Income Tax Act. The Assessing Officer contended that the deduction should have been 30% and reopened the assessment. The court found that the Assessing Officer's opinion for restricting the deduction to 30% was a clear case of impermissible change of opinion to reopen the assessment.

2. The notice issued under Section 148 of the Act alleged escapement of income for the Assessment Year 2014-2015. The petitioner argued that the reasons provided for reopening indicated a change of opinion, which is not allowed after the completion of the assessment under Section 143(3) of the Act. The court agreed with the petitioner, stating that there was no failure to disclose material facts, and the reasons for reopening were insufficient and based on an overruled judgment.

3. The court noted that the Assessing Officer's reliance on a judgment that had been overruled and the allegation of failure to disclose material facts were unsubstantiated. The petitioner had explained the deductions claimed under Section 80-IC during the assessment proceedings, and the Assessing Officer had actively considered the issue. Queries were raised, and the petitioner provided explanations, indicating no failure to disclose material facts. The court concluded that the petition was justified, quashing the notice and order issued for reopening the assessment.

This detailed analysis highlights the court's findings regarding the deduction claim, validity of the notice for reopening, and the alleged failure to disclose material facts, providing a comprehensive overview of the judgment delivered by the Bombay High Court.