2016 (10) TMI 95 - HC - Income Tax

Reopening of assessment - petitioner company is not entitled to claim any deduction after the lapse of 10 years under section 80IB - Held that - If we examine the stand of the petitioner with respect to its set up and commencement of manufacturing process, the documents attached to the petition compilation reveal that with respect to single piece and foldable lens manufacturing, the eligible business set up in the assessment year 2001-02, and therefore, the tenure of 10 years to be commenced for the purpose of eligibility from 2001 onwards and therefore there appears to be justification in stand of the petitioner which is further elaborated with cogent material to be dealt with hereunder. In view of settled position of law without disturbing earlier years authority can t deny exemption, the preceding year s solitary circumstance can t be made a subject matter of reopening of assessment which was been scrutinized and accepted. With respect to another contention of Revenue, the total investment of the unit in question is not more than ₹ 1 crores, but the fact of that has already been explained by the petitioner vide communication dated 30.11.2006, precisely in para 2 of the said communication, and therefore, this issue is already been a part of the record and therefore, the conditions which are laid down in section 80IB appears to have not been violated in terms of aforesaid explanation. Learned counsel for the petitioner has submitted that on earlier occasion as well as in subsequent years, the exemption has been permitted and therefore, it is not open for the respondent authority can t make attempt to deprive the said exemption benefit in the mids of the year which has already been considered and granted, under the guise of reopening. Thus clear from the record that on prior period to 2005-06, the benefit of section 80IB was already granted to the petitioner unit and after the year 2005-06 also, the said benefit has been granted and recognized and therefore, learned counsel rightly pointed out that it is not open for the authority to pick up in between period and to disturb the benefit which has already been considered and for that purpose relying upon the decision in case of Saurashtra Cement & Chemical Industries Ltd. v. Commissioner of Income Tax GujaratV 1979 (2) TMI 21 - GUJARAT High Court It appears that since the authority cannot take up an in between period to deny the benefit, the reopening for period for which has been granted is not permissible. It is also prevailing on record that with respect to these years, right from 2001-02 onwards except in assessment year 2005-06, an opinion was already formulated that the petitioner unit is entitled to exemption and deduction under section 80IB, such opinion may not be allowed to be changed. There is no tangible material additionally available with the authority which would permit it to reopen the assessment to seek the reopinion for the assessment year 2006-07. If this be allowed, the same would be based upon a mere change of opinion - Decided in favour of assessee.

Issues Involved:
1. Legality and validity of the notice issued under section 148 of the Income Tax Act, 1961.
2. Whether the reopening of the assessment for the year 2006-07 constitutes a mere change of opinion.
3. Justification of the claim for deduction under section 80IB of the Income Tax Act.
4. Examination of the eligibility period for claiming deduction under section 80IB.

Issue-wise Detailed Analysis:

1. Legality and Validity of the Notice Issued under Section 148:
The petitioner challenged the notice dated 04.03.2011 issued under section 148 of the Income Tax Act, 1961, which aimed to reopen the assessment for the year 2006-07 on the grounds that the income of the assessee had escaped assessment. The petitioner argued that the notice was issued without proper application of mind and that adequate material was already available to justify the claim of deduction under section 80IB. The court found that the reasons recorded for reopening the assessment were based on an erroneous assumption that the unit was set up in 1994-95, whereas it was actually established in 2001-02. Therefore, the notice was deemed ill-founded and not permissible.

2. Reopening of Assessment as a Change of Opinion:
The petitioner contended that the issue of deduction under section 80IB was examined in detail during the original assessment, and reopening the assessment would constitute a change of opinion, which is not permissible. The court agreed, noting that the issue had been scrutinized and accepted in prior and subsequent years, except for the assessment year 2005-06. The court held that there was no tangible material to justify reopening the assessment, and doing so would be based on a mere change of opinion.

3. Justification of the Claim for Deduction under Section 80IB:
The petitioner provided a detailed explanation and supporting documents to justify the claim for deduction under section 80IB. The court noted that the claim had been allowed in prior and subsequent years, and the petitioner had provided all relevant material during the original assessment. The court found that the petitioner's unit, established in 2001-02, was eligible for the deduction, and the reasons for reopening the assessment were not valid.

4. Examination of the Eligibility Period for Claiming Deduction under Section 80IB:
The respondent argued that the initial assessment year for claiming deduction under section 80IB was 1995-96, and the deduction was allowable for ten consecutive assessment years, up to 2004-05. The court found that the unit in question was established in 2001-02, making the petitioner eligible for the deduction for ten years from that date. The court held that the respondent's assumption was incorrect and that the petitioner was entitled to the deduction for the assessment year 2006-07.

Conclusion:
The court quashed and set aside the impugned notice dated 04.03.2011 and the order dated 29.09.2011, allowing the petition and making the rule absolute. The court concluded that the reopening of the assessment was not justified and was based on an erroneous assumption, constituting a mere change of opinion without any tangible material.

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