2022 (7) TMI 1454 - HC - Income Tax

Reopening of assessment u/s 147 - deduction claimed u/s 80IA - assessment for the year under consideration was framed u/s 143(3) and the same is sought to be reopened beyond the period of four years from the end of relevant assessment year - HELD THAT - On perusal of the reasons recorded for reopening the assessment, it nowhere reveals that the assessee has failed to disclose truly and fully all material facts relevant for the assessment. The petitioner assessee availed the deduction u/s 80IA - On the basis of the audit report in Form 10CCB, the reasons assigned by the AO to reopen the assessment questioning the apportionment of common expenses between exempted unit and non-exempted unit on the basis of the total turnover of the petitioner company was already considered during the course of the regular assessment u/s 143(3). Moreover, the petitioner assessee has relied upon the appellate order for the AY 2009-2010 to point out that the books of accounts were separately maintained by the petitioner assessee consistently and the claim of deduction u/s 80IA on similar method was accepted by the department in earlier years as well as in the immediately preceding AY 2010-2011 and after taking into consideration such facts, AO accepted the claim of the assessee in the regular assessment under section 143(3) of the Act in the assessment order for the AY 2011-2012. Thus, reopening the assessment is nothing but a mere change of opinion on the part of AO with regard to apportionment of common expenses between the exempted unit and non-exempted unit vis-a-vis the quantum of deduction u/s 80IA of the Act which was consistently accepted by the department. AO issued notice u/s 148 of the Act only to make a roving inquiry into the facts which were already considered by the Assessing Officer at the time of framing the original assessment u/s 143(3) - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961, for reopening the assessment for the Assessment Year 2011-2012.
2. Validity of the reopening of assessment beyond four years from the end of the relevant assessment year.
3. Alleged failure of the petitioner to disclose fully and truly all material facts necessary for assessment.
4. Whether the reopening of assessment was based on a mere change of opinion by the Assessing Officer.

Issue-Wise Detailed Analysis:

1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice dated 31.03.2018 issued under Section 148 of the Income Tax Act, 1961, proposing to reopen the assessment for the Assessment Year 2011-2012. The petitioner argued that the notice was illegal, contrary to law, and violated the fundamental rights guaranteed under Article 14 of the Constitution of India. The petitioner contended that the assessment was framed under Section 143(3) of the Act and sought to be reopened beyond the period of four years from the end of the relevant assessment year without any failure on the part of the petitioner to disclose fully and truly all material facts necessary for assessment.

2. Validity of the reopening of assessment beyond four years from the end of the relevant assessment year:
The court noted that the assessment for the year under consideration was sought to be reopened beyond the period of four years from the end of the relevant assessment year. The court observed that the reasons recorded for reopening the assessment did not reveal any failure on the part of the petitioner to disclose truly and fully all material facts relevant for the assessment. The court emphasized that the claim of deduction under Section 80-IA of the Act was duly disclosed by the petitioner in the return of income, Tax Audit Report, and Form No. 10CCB.

3. Alleged failure of the petitioner to disclose fully and truly all material facts necessary for assessment:
The petitioner argued that there was no failure on their part to disclose fully and truly all material facts necessary for assessment. The petitioner maintained that the claim of deduction under Section 80-IA of the Act was disclosed in the return of income, Tax Audit Report, and Form No. 10CCB. The court found that the reasons assigned by the Assessing Officer to reopen the assessment, questioning the apportionment of common expenses between exempted and non-exempted units, were already considered during the regular assessment under Section 143(3) of the Act.

4. Whether the reopening of assessment was based on a mere change of opinion by the Assessing Officer:
The court referred to the Supreme Court's judgment in Commissioner of Income Tax v. Kelvinator of India Ltd., which held that the concept of "change of opinion" is an in-built test to check abuse of power by the Assessing Officer. The court observed that the reopening of the assessment was based on a mere change of opinion regarding the apportionment of common expenses between exempted and non-exempted units. The court concluded that the Assessing Officer issued the notice under Section 148 of the Act to make a roving inquiry into facts already considered during the original assessment, which is not permissible.

Conclusion:
The court held that the impugned notice dated 31.03.2018 issued under Section 148 of the Act was illegal and quashed it. Consequently, the order dated 06.11.2018 of the Assessing Officer disposing of the objections against the impugned notice was also quashed. The petition was allowed, and the rule was made absolute to the extent mentioned. No order as to costs was made.