2012 (4) TMI 464 - HC - Income Tax

Reopening - Deduction u/s 80IA - assessee having challenged the notice of reassessment in a proceeding under Article 226 of the Constitution - contractor or supplier of irrigation products versus developer of any new infrastructural facility. - held that - It is now a settled law that if an explanation is added to a section of a statute for the removal of doubts, the implication is that the law was the same from the very beginning and the same is further explained by way of addition of the Explanation. Assessing Officer earlier did not arrive at such conclusion and thus, the amended Explanation subsequently added cannot be of any help to him in arriving at the second opinion based on the alleged new law. In the absence of existence of any tangible material to come to the conclusion that there was escapement of income from assessment, the Assessing Officer exceeded his authority to reopen the assessment merely on the basis of a change of opinion and accordingly, it is a fit case of quashing the notice. - Decided in favor of the assessee

Summary

Issues Involved:
1. Legitimacy of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Whether the reassessment under Section 147 is based on a "change of opinion."
3. Scope of interference by the High Court under Article 226 of the Constitution of India.

Issue-wise Detailed Analysis:

1. Legitimacy of the notice issued under Section 148 of the Income Tax Act, 1961:
The writ-petitioner challenged the notice issued under Section 148 of the Act, arguing that it was based on a mere change of opinion. The petitioner had previously submitted a return for the Assessment Year 2006-07, claiming a deduction under Section 80-IA of the Act, which was scrutinized and accepted by the Assessing Officer during the original assessment under Section 143(3). The petitioner contended that the reassessment notice was unjustified as it did not introduce any new material facts but was based on the same information already considered.

2. Whether the reassessment under Section 147 is based on a "change of opinion":
The court examined the reasons provided by the Assessing Officer for reopening the assessment, which stated that the petitioner was engaged in manufacturing irrigation products and acted as a contractor, not a developer of new infrastructure facilities. This led to the conclusion that the petitioner wrongly claimed the deduction under Section 80-IA. The court found that all relevant facts were disclosed during the original assessment, and the Assessing Officer had allowed the deduction after considering these facts. The court referred to the Supreme Court's decision in Commissioner of Income Tax vs. Kelvinator of India Ltd., emphasizing that mere change of opinion cannot justify reassessment. The court concluded that the reassessment notice was based on a second thought on the same materials, which does not fall within the purview of Section 147.

3. Scope of interference by the High Court under Article 226 of the Constitution of India:
The court discussed its jurisdiction to interfere in reassessment proceedings under Article 226. Citing the Supreme Court's rulings in Calcutta Discount Co. Ltd. v. ITO and The Commissioner of Income Tax, Gujarat v. M/s. A. Raman and Co., the court noted that it could issue a writ prohibiting the Income Tax Officer from proceeding with reassessment if the conditions precedent were not met. The court reiterated that the High Court could ascertain whether the Assessing Officer had any information leading to the belief that income had escaped assessment and whether such belief was reasonable. In this case, the court found that the Assessing Officer's belief was not based on new information but on a reinterpretation of existing facts, which amounted to a change of opinion.

Conclusion:
The court quashed the notice issued under Section 148 and the subsequent reassessment proceedings, holding that they were based on a change of opinion without any new tangible material. The court emphasized that the Assessing Officer's action exceeded his authority and violated the principles laid down by the Supreme Court, thereby justifying interference under Article 226. The court ordered in favor of the petitioner, granting the relief sought and setting aside the reassessment notice and proceedings.