2012 (7) TMI 529 - HC - Income Tax

Challenging the reopening of the assessment order passed by AO - justification on the position of an order u/s 245D (4)passed by the Income Tax Settlement Commission ITSC - Held that - Since the exclusive jurisdiction to exercise the powers and perform the functions of an income tax authority in relation to the case vests with the ITSC after an order is passed u/s 245D (1) till the final settlement order is passed u/s 245D (4), it is not possible to countenance a situation where it can be said that the assessee s claim for deduction under Section 80IB (10) was not the subject matter of the order passed by the ITSC u/s 245D (4) - The provisions of Chapter XIX-A suggest that all matters in relation to the case of the assessee shall be dealt with by the ITSC just as an assessing authority would deal with them while completing an assessment u/s 143 (3) and at this position, it would be difficult to sustain the argument of the revenue that the matter relating to the deduction under Section 80IB (10) was not the subject matter of the final order of settlement. It follows that the Assessing Officer had no jurisdiction to reopen the assessment for the assessment year by issuing a notice u/s 148 on the ground that the deduction was wrongly allowed - an assessment by way of a settlement order passed by the ITSC cannot be reopened by a different authority, viz., the Assessing Officer - in favour of assessee.

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Jurisdiction of the Assessing Officer to reopen the assessment after an order by the Income Tax Settlement Commission (ITSC).
3. Conclusiveness of the order passed by the ITSC under Section 245D(4) of the Income Tax Act.
4. Applicability of Section 80IB(10) deductions in the context of ITSC orders.
5. Interpretation of relevant provisions of the Income Tax Act, particularly Sections 245C, 245D, 245F, and 245I.

Detailed Analysis:

1. Validity of the Notice Issued under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice dated 30.06.2010 issued by the Assistant Commissioner of Income Tax under Section 148 of the Income Tax Act, 1961, asserting that income chargeable to tax had escaped assessment for the assessment year 2006-07. The reasons for reopening the assessment included the claim that the deduction under Section 80IB(10) was not allowable due to the commercial area in the projects exceeding the prescribed limit. The petitioner contended that this notice was invalid as the assessment had already been concluded by the ITSC.

2. Jurisdiction of the Assessing Officer to Reopen the Assessment after an Order by the ITSC:
The core argument was that once the ITSC passes a final order of settlement under Section 245D(4), the assessment becomes conclusive, and the Assessing Officer lacks jurisdiction to reopen any matter related to that assessment year under Section 148. The petitioner highlighted Section 245I, which states that the order of settlement is conclusive and cannot be reopened in any proceeding under the Act or any other law.

3. Conclusiveness of the Order Passed by the ITSC under Section 245D(4):
The ITSC had passed a final order on 17.03.2008, computing the total income of the petitioner, which included the claimed deduction under Section 80IB(10). The Assessing Officer's attempt to reopen the assessment was argued to be in violation of Section 245I, which ensures the conclusiveness of the ITSC's order. The court emphasized that the ITSC has exclusive jurisdiction to exercise the powers and perform the functions of an income tax authority once an application is allowed to be proceeded with until the final order is passed.

4. Applicability of Section 80IB(10) Deductions in the Context of ITSC Orders:
The petitioner's return included a deduction under Section 80IB(10), which was considered by the ITSC when determining the total income. The court found that the deduction was indeed a matter covered by the ITSC's final order, making it conclusive. The court rejected the Revenue's argument that the deduction was not adjudicated by the ITSC and hence could be reopened by the Assessing Officer.

5. Interpretation of Relevant Provisions of the Income Tax Act:
The court analyzed various provisions, including Sections 245C, 245D, 245F, and 245I, to conclude that the ITSC is vested with comprehensive powers to settle an assessee's case, and its order is final and conclusive. The court referenced judgments from other High Courts and the Supreme Court to support its interpretation that the ITSC's order precludes any further assessment or reassessment by the Assessing Officer for the same assessment year.

Conclusion:
The court quashed the notice issued under Section 148 and the reassessment order dated 08.11.2011, holding that the Assessing Officer had no jurisdiction to reopen the assessment for the assessment year 2006-07 after the ITSC's final order. The writ petition was allowed, emphasizing that the ITSC's order is conclusive and cannot be reopened except in cases of fraud or misrepresentation.

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