2014 (6) TMI 296 - HC - Income Tax

Validity of assessment u/s 148 of the Act Effect of Explanation to section 80IA of the Act with effect from April 01, 2000 Whether the reassessment proceedings can be initiated only on the basis of insertion of Explanation which had been substituted by the Finance (No.2) Act, 2009 with retrospective effect from April 01, 2000 - Held that - Following Katira Construction Ltd. Versus Union of India & 2 2013 (3) TMI 416 - GUJARAT HIGH COURT - introduction of the explanation did not amount to introduction of a new provision of law with retrospective operation - The assessee was given the benefit of deduction considering the then explanation which was introduced with effect from 1.4.2007, which according to the Court was substantially the same and any attempt on the part of the Revenue thus, to reopen the assessment would be in the nature of second opinion. The claim made for deduction under section 80IA of the Act, which was allowed by the AO in scrutiny assessment - on the reassessment proceedings were initiated only on account of the addition of explanation - if the explanation is added to a statute for the removal of doubts, the implication is that the law was same from the 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, but when all the materials regarding activities of the assessee if are available on record and the benefit of the provision is already made available to such assessee, reassessment proceedings cannot be initiated only on account of addition of such Explanation. The AO on a detailed scrutiny had explained the claim made by the AO u/s 80IA(4) of the Act - Explanation clarified that the deduction u/s 80IA of the Act would not be admissible in the case of an assessee carrying on business in the nature of works contract the AO initiated such proceedings of reopening solely on ground of insertion of explanation and it is to be held as mere change of opinion the assumption of jurisdiction on the AO shall need to be interfered by way of writ jurisdiction thus, the notice u/s 148 of the Act is to be set aside Decided in favour of Assessee.

Issues Involved:

1. Reassessment proceedings under Section 148 read with Section 147 of the Income-tax Act, 1961.
2. Retrospective amendment to Section 80IA(4) of the Income-tax Act, 1961.
3. Validity of reopening assessment based on the retrospective amendment.
4. Change of opinion by the Assessing Officer.
5. Vires of Section 80IA(4) of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Reassessment Proceedings under Section 148 read with Section 147 of the Income-tax Act, 1961:

The petitioner challenged the notice issued under Section 148 read with Section 147 of the Income-tax Act, 1961, on the grounds that the reassessment was based solely on the retrospective amendment to the explanation under sub-section (13) of Section 80IA. The petitioner contended that the reassessment was merely a change of opinion, as the deduction under Section 80IA had already been allowed during the original scrutiny assessment.

2. Retrospective Amendment to Section 80IA(4) of the Income-tax Act, 1961:

The amendment to the explanation under sub-section (13) of Section 80IA, introduced by the Finance (No.2) Act, 2009, with retrospective effect from April 1, 2000, clarified that the deduction under Section 80IA would not be admissible to an assessee carrying on a business in the nature of a works contract. The petitioner argued that this amendment could not justify reopening the assessment, as it was merely clarificatory in nature and did not introduce a new provision of law.

3. Validity of Reopening Assessment Based on the Retrospective Amendment:

The court referred to its previous decisions, including Parikshit Industries v. Assistant Commissioner of Income-tax and Katira Construction Ltd. v. Union of India, which held that the explanation added to Section 80IA was clarificatory and did not amount to the introduction of a new provision of law with retrospective operation. Therefore, reopening the assessment based on this explanation was not permissible, as it would constitute a change of opinion.

4. Change of Opinion by the Assessing Officer:

The court observed that the reassessment proceedings were initiated solely on the basis of the insertion of the explanation to Section 80IA, which had been held to be clarificatory in nature. The court reiterated that if all the materials regarding the assessee's activities were available on record and the benefit of the provision had already been granted, reassessment proceedings could not be initiated based on the addition of the explanation. This constituted a mere change of opinion, which is not permissible for reopening an assessment.

5. Vires of Section 80IA(4) of the Income-tax Act, 1961:

The petitioner had also challenged the vires of Section 80IA(4) by way of a Special Civil Application, which was decided in a group of petitions. The court upheld the validity of the provision, stating that the explanation to sub-section (13) of Section 80IA was introduced to clarify doubts and remove confusions, and it did not amount to a new provision of law with retrospective operation.

Conclusion:

The court concluded that the reassessment proceedings initiated by the Assessing Officer based on the insertion of the explanation to Section 80IA were merely a change of opinion and not permissible. The court allowed all three petitions, quashing the impugned notice issued under Section 148 and all consequential proceedings. The rule was made absolute, with no order as to costs.

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