2014 (6) TMI 263 - HC - Income Tax

Validity of notice for reopening u/s 148 of the Act Effect of amendment w.e.f. 1.4.2000 of explanation to sub-section (13) of section 80IA of the Act Held that - The AO has made a mention of the amendment brought by Finance Act, 2009 with effect from 1.4.2000 by which an explanation to sub-section (13) of section 80IA has been inserted - The requirement of law since is not fulfilled by the assessee for being the work contractor and not the developer, according to the AO, he is found not entitled to claim deduction u/s 80IA of the Act and therefore huge sum of Rs.6.40 crores claimed by way of deduction escaped the assessment Constitutional validity of retrospective amendment through explanation below sub-section (13) of section 80IA by Finance Act, 2009 has been decided in Katira Construction Ltd. v. Union of India 2013 (3) TMI 416 - GUJARAT HIGH COURT has upheld the validity of the same. 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 - it is not a case of introduction of new provision of law by retrospective operation the assessee had disclosed all the materials regarding its activities and there was no suppression of materials - the AO gave benefit of the provision by considering the then Explanation which was substantially the same and thus, it could not be said that any income escaped assessment in accordance with the then law - the AO has now given a second thought over the same materials and according to him, as the assessee is a contractor or supplier of irrigation products, it cannot be called a developer of any new infrastructural facility. The only ground which had made the AO to initiate proceedings of reassessment is the insertion of explanation to sub-section (13) of section 80IA which substituted earlier explanation giving retrospective effect to the said provision from 1.4.2000 - Such provision being always there on the record and the AO having already scrutinized the entire issue threadbare, even though notice is issued within four years from the end of the relevant assessment year, issuance of such notice has to be held as nothing but a change of opinion on the part of the AO - assumption of jurisdiction itself is not permissible thus, the order is set aside - Decided in favour of Assessee.

Summary

Issues Involved:
1. Legality of the reopening notice under Section 148 of the Income Tax Act, 1961.
2. Applicability of the retrospective amendment to Section 80IA(4) by Finance Act, 2009.
3. Determination of whether the petitioner qualifies as a developer or a works contractor under Section 80IA(4).

Detailed Analysis:

1. Legality of the Reopening Notice under Section 148:
The petitioner challenged the notice of reopening issued under Section 148 for the assessment year 2006-07. The initial return was scrutinized under Section 143(3) and the reassessment was initiated based on an amendment introduced by the Finance Act, 2009, with retrospective effect from 1.4.2000. The court noted that the reasons recorded for reopening did not indicate any suppression of facts by the petitioner. The original assessment order had already scrutinized the petitioner's activities and found no concealment. Therefore, the court held that the reopening was based on a mere change of opinion, which is not permissible.

2. Applicability of the Retrospective Amendment to Section 80IA(4):
The reassessment proceedings were initiated due to the explanation added to sub-section (13) of Section 80IA by the Finance Act, 2009, which was given retrospective effect from 1.4.2000. The court referred to previous judgments, including Katira Construction Ltd. v. Union of India, which upheld the constitutional validity of the retrospective amendment, stating it was clarificatory in nature. The court reiterated that such clarificatory amendments do not provide new material for the Assessing Officer to assume jurisdiction for reopening.

3. Determination of Whether the Petitioner Qualifies as a Developer or a Works Contractor:
The original assessment order discussed the petitioner's eligibility for deduction under Section 80IA(4), noting that the petitioner was engaged in developing and constructing infrastructural projects. The Assessing Officer initially denied the deduction for certain projects, concluding that the petitioner did not meet the conditions of having an agreement with the government or statutory bodies and was involved only in maintenance, not development. The court observed that the reassessment was initiated solely due to the retrospective amendment, without any new facts or suppression by the petitioner. The court concluded that the reassessment based on the explanation to Section 80IA(4) was not justified, as it constituted a change of opinion.

Conclusion:
The court allowed the petitions, quashing the impugned notices and consequential proceedings. The reassessment was deemed impermissible as it was based on a change of opinion rather than new material facts. The court emphasized that the retrospective amendment did not provide grounds for reopening the assessment, as it was merely clarificatory and not a new provision of law.