2024 (10) TMI 1154 - HC - Income Tax

Reopening of assessment u/s 147 - reason to believe - deduction u/s 80IC - scope of change of opinion - HELD THAT - As noticed that the return filed by the assessee for the AY2016-17 was selected for scrutiny and thereafter the assessment order u/s 143 (3) was passed. Prior to assessment order u/s 143 (3), a notice u/s 142 (1) was issued whereby details with regard to claim of deduction u/s 80IC of the Act were called for. To the said notice, assessee responded on 08.12.2018 with the details called for in relation to deduction u/s 80IC of the Act. Thereafter, assessment order u/s 143 (3) dated 24.12.2012 was passed accepting the return. Thereafter, notice u/s 148 was issued for the reason that the assessee has stated that M/s. Alpha Pharma Roorkee was merged with assessee company w.e.f. 01.10.2014. Assessee company as stated above has claimed deduction u/s. 80IC in respect of profit earned by Alpha Pharma Roorkee (undertaking). Since, the undertaking availing deduction u/s. 80IC was merged with the assessee company w.e.f. 01.10.2014, as per the provision of sub-section 12 of Section 80IA r.w.s. 12A of the Act, the undertaking is not eligible for tax benefit u/s.80IC of the Act. Thus no reason to believe that income of the assesse has escaped assessment for A.Y. 2016-17 within the meaning of section 147 of the I.T. Act, because of the non-disclosure of fully and truly all the material facts necessary for assessment for A.Y.2016-17. Assessee at the original assessment stage disclosed fully and truly all material facts relevant for assessment. The details in relation to deduction claimed under Section 80IC were called for and responded by the assessee. Therefore, the assesse s contention of reopening based on mere change of opinion merits acceptance. In this case also it is not a case where the details called for in relation to deduction under Section 80IC of the Act were not submitted by the assessee. The query raised and responded shows that the deduction claimed by the assessee was fully explained and thereafter the order of assessment under Section 143 (3) was passed. Therefore, in our opinion, the reasons recorded for reopening of the assessment under Section 147 for Assessment Year 2016-17 would amount to mere change of opinion by the respondents. The notice for reopening of assessment cannot be sustained. In this view of the matter validity or otherwise of the claim for deduction under section 80IC of the Act is not necessary to be examined. Petition succeeds and is accordingly allowed. Impugned notice u/s 148 is hereby quashed and set aside.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act 1961 for Assessment Year 2016-17 based on change of opinion by the Assessing Officer, consequential order of assessment under Section 147 read with Section 144B dated 31.03.2022, and notice of demand under section 156 dated 31.03.2022.

Analysis:

1. Jurisdiction of Notice under Section 148:
The petitioner challenged the notice under Section 148 on the grounds of full disclosure of material facts necessary for assessment for A.Y. 2016-17. The petitioner argued that the notice was issued solely based on a change of opinion by the Assessing Officer, which is illegal and without jurisdiction. The petitioner contended that since the original assessment was framed after verifying the details provided in relation to the deduction under Section 80IC of the Act, the notice for reopening was unjustified.

2. Legal Basis for Challenge:
The petitioner relied on the decision of the Hon'ble Supreme Court in CIT Vs. Kelvinator of India Ltd. to support the argument that reopening based on a mere change of opinion is impermissible. Additionally, the petitioner cited a decision of the Court in Special Civil Application No. 5651 of 2021, emphasizing that the reasons recorded for reopening did not have a live link or nexus with the material relied upon during the regular assessment proceedings.

3. Respondent's Argument and Court's Analysis:
The respondent contended that the notice under Section 148 was issued because income chargeable to tax had escaped assessment concerning the deduction claimed under Section 80IC of the Act. The respondent argued that the assessee's undertaking was not eligible for the deduction under Section 80IC as per the provisions of the Act. However, upon revisiting the facts, the Court observed that the assessee had fully disclosed all material facts relevant for assessment at the original stage. The Court concluded that the reasons recorded for reopening the assessment were merely a change of opinion by the respondents.

4. Court's Decision:
The Court held that the notice dated 28.03.2021 for reopening the assessment could not be sustained. Consequently, the impugned notice under Section 148, the Assessment Order under Section 147 read with Section 144B dated 31.03.2022, and the demand notice dated 31.03.2022 were quashed and set aside. The Court made the rule absolute to the aforementioned extent, ruling in favor of the petitioner.

This detailed analysis of the judgment highlights the legal arguments presented by both parties, the Court's assessment of the jurisdictional issues, and the ultimate decision rendered by the Court.