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2023 (8) TMI 724 - HC - Income TaxReopening of assessment u/s 147 - Reason to believe - deduction u/s 80IA - HELD THAT - As noticed that deduction u/s 80IA (4) was virtually the sole claim of the petitioner in the returns filed by it. It is revealed from the record that after filing of return for the A.Y. 2008-09 and framing of assessment for the said year, the assessing officer had issued notice to the petitioner with a questionnaire seeking detailed information not only with regard to the income of the petitioner-assessee but also with regard to nature of its business etc. The petitioner is shown to have submitted reply thereto supplying the requisite information including the nature of its business. The decision for the deduction sought to be made under that section while disclosing the details of its income for the previous years was given in the audit report on requisite form No.10-CCB as required u/s80-IA (7)/80-IC of the Act. Also further revealed from the record produced with regard to A.Y. 2008-09 that the details of the contract which was executed between the Government of Himachal Pradesh and petitioner-assessee had also been provided to the assessing officer which contained information that the contract was for infrastructural development. The assessee is even shown to have appended a note with the return for the year 2008-09 pointing out that a composite agreement had been entered into between the Government of Himachal Pradesh and itself and the work was awarded to it on built, operate and transfer basis. In our opinion, all the primary facts had been disclosed by the petitioner and its duty did not extend beyond the full and truthful disclosure of primary facts and once such facts were put before the assessing authority, the assessee was not required to give any further assistance. Then it was for the assessing officer to make further inquires and draw inferences and if he did not do so at the time of framing original assessment, then it could not be contended by the revenue that there was any failure or omission on the part of the assessee or that he had not fully disclosed the facts. It is only after the detailed scrutiny, after considering all the documents and on being satisfied that the assessee was held entitled to claim deduction under Section 80IA of the Act, that the assessment order for the relevant year had been passed. It cannot be stated that the terms of contract and the nature of the contract between them had come to the notice of the assessing officer only while framing assessment for the A.Y. 2012- 13. The entire claim of the petitioner for deduction u/s 80IA of the Act had been examined and allowed by the assessing officer at the time of framing assessment for the relevant previous years. As such, in our opinion, it could not be claimed by the revenue that the assessee had not fully disclosed the facts. it was also not the case of the revenue that re-opening was initiated by it on the basis of any subsequent information which was found to be definite, specific and reliable. Rather, there is nothing new which is shown to have come to the notice of the revenue for this purpose. As such, the facts which were taken into consideration by the assessing officer cannot be stated to have come to his knowledge after the assessment proceedings for the relevant years had completed. All the primary facts necessary for the assessment had undisputedly been disclosed by the petitioner qua the A.Y. 2008-09. In our opinion by issuing notice beyond a period of four years from completion of that assessment, the revenue could not take benefit of extended period of limitation. No hesitation to conclude that the jurisdictional condition precedent as laid down by the proviso to Section 147 i.e. failure to disclose material fact, which was proximate cause of escapement of income, has not been fulfilled at all in the present case and, therefore, the impugned notices, re-opening the assessment for all the relevant years are liable to be quashed - Decided in favour of assessee.
Issues Involved:
1. Legality and jurisdiction of the impugned notices and orders. 2. Barred by limitation for the assessment year 2008-09. 3. Change of opinion as a basis for re-assessment. Detailed Analysis: 1. Legality and Jurisdiction of the Impugned Notices and Orders: The petitioner, a partnership firm, challenged the re-assessment notices issued for the assessment years 2008-09 to 2011-12. The petitioner argued that the notices were illegal, contrary to the principles of natural justice, and issued in a mala fide exercise of power. The court noted that the revenue is entitled to re-open assessment proceedings under Section 147 of the Income Tax Act if it is revealed that the assessee failed to fully and truly disclose all material facts necessary for assessment. The burden is on the revenue to show that the escapement occurred due to the assessee's failure to disclose material facts. The court found that the petitioner had disclosed all primary facts necessary for the assessment, and the re-opening of the assessment was based on a mere change of opinion, which is not permissible. 2. Barred by Limitation for the Assessment Year 2008-09: The petitioner argued that the re-assessment notice for the assessment year 2008-09 was issued after more than four years from the date of filing the return, making it time-barred. The court agreed, noting that the assessment proceedings for the year 2008-09 had been finalized on 31.03.2009, and the notice of re-assessment was issued on 27.02.2015, beyond the four-year limitation period. The court emphasized that the revenue could not take benefit of the extended period of limitation as all primary facts had been disclosed by the petitioner, and there was no failure on the part of the petitioner to disclose material facts. The court referred to precedents, including Principal Commissioner of Income-tax-2 v. L & T Ltd., to support its conclusion that re-assessment proceedings initiated after four years based on a change of opinion are liable to be set aside. 3. Change of Opinion as a Basis for Re-assessment: The court examined whether the re-assessment proceedings were initiated based on a change of opinion. The revenue argued that the re-assessment was based on information regarding the wrong claim made by the assessee for availing the benefit under Section 80IA of the Act. However, the court found that the petitioner had disclosed all primary facts necessary for the assessment in its returns and replies to the queries put forth by the assessing officer. The court noted that the re-assessment proceedings were initiated based on the same material that was already disclosed by the petitioner, amounting to a mere change of opinion. The court referred to precedents, including Kelvinator of India Ltd., to emphasize that re-assessment based on a change of opinion is not permissible. Conclusion: The court concluded that the jurisdictional condition precedent for re-opening the assessment under Section 147, i.e., failure to disclose material facts, was not fulfilled in this case. Consequently, the impugned notices and the order dated 10.02.2016 were quashed. The petitions were allowed, and the substantial questions of law were decided against the respondents.
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