2013 (7) TMI 452 - HC - Income Tax

Dediction u/s 80IB(8A) - Notice of re-assessment - Petitioner s objection to re-assessment was dismissed - Held that - When a claim was processed at length and after calling for detailed explanation from the assessee, the same was accepted, merely because a certain element or angle was not in the mind of the Assessing Officer while accepting such a claim, cannot be a ground for issuing notice for reassessment. - If the Assessing Officer, therefore, after scrutinizing the claim minutely during the assessment proceedings, does not reject such a claim, but chooses not to give any reasons for such a course of action that he adopts, it can hardly be stated that he did not form an opinion on such a claim. If the Assessing Officer on his own for reasons best known to him, chooses not to assign reasons for not rejecting the claim of an assessee after thorough scrutiny, it can hardly be stated by the revenue that the Assessing Officer can not be seen to have formed any opinion on such a claim - If a claim is scrutinized by the Assessing Officer during assessment, it means he was convinced about the validity of the claim. His formation of opinion is thus complete. In a situation where the Assessing Officer during scrutiny assessment, notices a claim of exemption, deduction or such like made by the assessee, having some prima facie doubt raises queries, asking the assessee to satisfy him with respect to such a claim and thereafter, does not make any addition in the final order of assessment, he can be stated to have formed an opinion whether or not in the final order he gives his reasons for not making the addition - Following decisions of Gujarat Tea Processors & Packers Ltd. v. Deputy Commissioner of Income-Tax 2012 (12) TMI 899 - GUJARAT HIGH COURT and CIT v. Usha International Ltd. 2012 (9) TMI 767 - DELHI HIGH COURT - Decided in favour of assessee.

Issues Involved:
1. Challenge to the notice under Section 148 of the Income Tax Act, 1961.
2. Examination of the validity of the reopening of assessment under Section 147 of the Act.
3. Determination of whether the reopening was based on a change of opinion.

Issue-wise Detailed Analysis:

1. Challenge to the notice under Section 148 of the Income Tax Act, 1961:
The petitioner, a company regularly assessed to tax, challenged a notice dated 21.3.2012 issued by respondent No.1 under Section 148 of the Income Tax Act, 1961 ("the Act"). The notice aimed to reopen the scrutiny assessment for the Assessment Year 2007-08, where the petitioner's principal claim of deduction under Section 80-IB(8A) for scientific research was substantially allowed after scrutiny.

2. Examination of the validity of the reopening of assessment under Section 147 of the Act:
The Assessing Officer (AO) issued the notice for reopening based on the belief that the petitioner's activities did not fulfill the conditions for eligibility under Section 80-IB(8A). The AO contended that the petitioner's role was merely providing professional services to pharmaceutical companies, which bore the risk and investment for the research. The AO concluded that the irregular deduction resulted in under-assessment of Rs.11,64,52,937/-.

3. Determination of whether the reopening was based on a change of opinion:
The petitioner argued that the entire claim was examined in detail during the original assessment, and reopening the assessment would be based on a mere change of opinion. The petitioner relied on the Supreme Court decision in CIT v. Kelvinator of India Ltd., which held that reassessment based on a change of opinion is not permissible.

The court examined the original assessment proceedings where the AO had raised several queries regarding the petitioner's transactions with pharmaceutical companies and the claim under Section 80-IB(8A). The petitioner had provided detailed responses and documents supporting their claim. The AO had accepted the claim after thorough scrutiny, disallowing only a small portion related to sample storage income.

The court noted that the AO's queries during the original assessment were not limited to sample storage income but also included detailed transactions with companies and compliance with Rule 18DA. The AO had formed an opinion on the petitioner's eligibility under Section 80-IB(8A) after considering the petitioner's detailed submissions.

The court held that reopening the assessment on the ground that the petitioner was doing scientific research for and on behalf of other companies would be based on a mere change of opinion. The court reiterated that once a claim is scrutinized and accepted, reopening the assessment merely because a certain aspect was not considered by the AO is not permissible.

The court referred to several judgments, including Gujarat Power Corpn. Ltd. v. Assistant Commissioner of Income-Tax and Gujarat Tea Processors & Packers Ltd. v. Deputy Commissioner of Income-Tax, which emphasized that reassessment based on a change of opinion is not valid. The court also cited the Delhi High Court's full bench decision in CIT v. Usha International Ltd., which held that reassessment is invalid if the issue was examined during the original assessment, even if not explicitly recorded in the order.

Conclusion:
The court allowed the petition, quashing the impugned notice dated 21.3.2012, and held that the reopening of the assessment was based on a mere change of opinion, which is not permissible under the law.

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