2022 (8) TMI 136 - HC - Income Tax

Validity of Reopening of assessment u/s 147 - notice beyond period of four years - Deduction u/s 80IB(8A) denied - as per AO work done by the petitioner was merely that of testing laboratory and was not doing any research and development work and there was no development of technology - HELD THAT - As it is not in dispute that the respondent authority has issued the notice under section 148 beyond a period of four years from the end of relevant assessment year on the basis of reopening notice issued for the assessment year 2010-2011 with regard to the claim of deduction under section 80IB(8A) which is meant for scientific and industrial research and development. The respondent Assessing Officer has recorded reasons for issuing notice disputing the research activities of the petitioner so as to disallow such deduction. AO has merely reproduced the material which forms part of the reopening notice for the assessment year 2010-2011 for issuance of notice for reopening the assessment for assessment year 2011-2012. AO in original scrutiny assessment has examined the claim for deduction under section 80IB(8A) in detail by raising series of queries which were answered at length by the assessee by filing several replies before the Assessing Officer. It is only after considering such documents and replies, the Assessing Officer framed the assessment for year under consideration. Issuance of notice u/s 148 to reopen the assessment for the assessment year 2011-2012 is nothing but would amount to change of opinion on the part of the Assessing Officer as admittedly such notice is issued after a period of four years from the end of the relevant assessment year under consideration and there is nothing on record to show that there is any failure on part of the assessee to disclose fully and truly all material facts relevant for such assessment. - Decided in favour of assessee.

Summary

Issues:
Reopening of assessment for the Assessment Year 2011-2012 based on the previous year's assessment, Validity of notice issued beyond four years, Jurisdiction of Assessing Officer to reopen assessment, Eligibility for deduction under section 80IB(8A) of the Income Tax Act, 1961.

Analysis:

Reopening of Assessment:
The petitioner, a company engaged in providing clinical research solutions, filed its original return for the Assessment Year 2011-2012, claiming a deduction under section 80IB(8A) of the Income Tax Act, 1961. The Assessing Officer framed the assessment without disturbing the deduction claim. However, the assessment for the previous year was reopened, and subsequently, a notice was issued for the Assessment Year 2011-2012 based on the same grounds. The petitioner challenged the reopening, arguing that the facts for both years were identical, and the notice should be quashed.

Validity of Notice Issued Beyond Four Years:
The petitioner contended that the notice issued under section 148 for the Assessment Year 2011-2012 was beyond the four-year limit prescribed by the Act. They argued that all material facts for claiming the deduction were disclosed during the original assessment proceedings. The petitioner maintained that the Assessing Officer had no jurisdiction to reopen the assessment based on a change of opinion without new information justifying such action.

Jurisdiction of Assessing Officer:
The respondent issued the notice for reopening the assessment, alleging that the petitioner was not engaged in research and development work as required for the deduction under section 80IB(8A). The respondent claimed that new facts came to light, indicating that the petitioner provided professional services rather than conducting research and development activities. However, the court found that the Assessing Officer did not have tangible material to support the claim that income had escaped assessment.

Eligibility for Deduction under Section 80IB(8A):
The petitioner argued that they were eligible for the deduction under section 80IB(8A) and had disclosed all relevant information during the original assessment. The respondent's assertion that the petitioner did not engage in research and development work was contested. The court noted that the Assessing Officer had already examined the deduction claim in detail during the original assessment process, and the notice for reopening the assessment was unwarranted.

In conclusion, the court allowed the petition, quashing and setting aside the notice issued by the Assessing Officer for reopening the assessment for the Assessment Year 2011-2012. The court emphasized that the notice was issued beyond the permissible time limit and lacked sufficient grounds to justify reopening the assessment.