2017 (1) TMI 1106 - HC - Income Tax

Reopening of assessment - claim under Section 80IA unseen - Held that - It is required to be noted that the assessee companies running two business (1) Electronic Appliances Division and (2) Power Generation Division. It appears that during year under consideration, the assessee claimed benefit under Section 80IA of the Act of ₹ 56,22,625/in respect of power generation income from Windmill Division at Bhogat. However, submitting return and claiming deduction under Section 80IA of the Act, the assessee did not debit any financial charges and administrative expenses to the Windmill Division. Also appears that in the profit and loss account, the assessee had not debited any administrative expenses and financial charges while computing profits from Windmill Division. It has been noticed by the Assessing Officer that the assessee ought to have apportioned the administrative expenses and financial charges of ₹ 10,83,692/on its windmill unit at Bhogat, on which, it claimed the deduction under Section 80IA of the Act. Under the circumstances, it cannot be said that the assessee disclose true and correct facts necessary for assessment, more particularly with respect to deduction under Section 80IA of the Act, more particularly, with respect to windmill unit at Bhogat. Thus it cannot be said that the impugned notice under Section 148 to reopen the assessment for AY 200910 can be said to be without jurisdiction and / or contrary to the provision of Section 147 of the Act. Under the circumstances, present petition challenging the impugned notice under Section 148 of the Act deserve to be dismissed - Decided against assessee.

Summary

Issues Involved:
1. Validity of reopening assessment under Section 148 of the Income Tax Act.
2. Alleged failure of the assessee to disclose true and correct facts.
3. Applicability of the proviso to Section 147 of the Income Tax Act.
4. Permissibility of reopening assessment based on change of opinion.
5. Relevance of previously dropped proceedings under Section 263 of the Income Tax Act.

Detailed Analysis:

1. Validity of Reopening Assessment under Section 148 of the Income Tax Act:
The petitioner challenged the notice under Section 148, which sought to reopen the assessment for AY 2009-10. The court noted that the reopening was based on the belief that income chargeable to tax had escaped assessment due to the non-apportionment of administrative expenses and financial charges to the Windmill Division. The court found that the reopening was justified as the assessee had not debited any financial charges and administrative expenses to the Windmill Division, which led to an underassessment of income.

2. Alleged Failure of the Assessee to Disclose True and Correct Facts:
The court observed that the assessee did not disclose true and correct facts necessary for assessment, particularly regarding the deduction under Section 80IA for the Windmill Division. The assessee did not apportion administrative expenses and financial charges, which should have been debited to the Windmill Division. This non-disclosure warranted the reopening of the assessment.

3. Applicability of the Proviso to Section 147 of the Income Tax Act:
The petitioner argued that there was no omission or failure on their part to disclose fully and truly all material facts necessary for assessment. However, the court held that the non-apportionment of administrative expenses and financial charges constituted a failure to disclose material facts, making the proviso to Section 147 applicable. This justified the reopening of the assessment beyond four years.

4. Permissibility of Reopening Assessment Based on Change of Opinion:
The petitioner contended that the reopening was based on a mere change of opinion by the successor Assessing Officer, which is not permissible. The court, however, found that the issue of apportionment of expenses was not considered in detail during the original assessment. Therefore, the reopening was not merely a change of opinion but was based on the failure to disclose material facts.

5. Relevance of Previously Dropped Proceedings under Section 263 of the Income Tax Act:
The petitioner referred to the dropping of proceedings under Section 263 for AY 2012-13, arguing that similar reasoning should apply. The court distinguished the two cases, noting that the dropped proceedings for AY 2012-13 involved different circumstances and were not directly relevant to the current case. The court emphasized that the non-disclosure of material facts in the present case justified the reassessment.

Conclusion:
The court concluded that the impugned notice under Section 148 to reopen the assessment for AY 2009-10 was valid and justified. The petition challenging the notice was dismissed, and the interim relief, if any, was vacated.