2017 (2) TMI 277 - HC - Income Tax

Reopening of assessment - Deduction available under section 80-IB - Held that - For reopening of the assessment, notice should be issued within a period of four years from the end of the assessment. In the present case, we notice that the Assessing Officer has issued notice under section 148 of the Income-tax Act on August 10, 2009 which is beyond the period of four years from the end of the assessment year. Even otherwise, no reasons are assigned by the respondent authority to claim that the earlier Assessing Officer has wrongly allowed the claim of the assessee. In that view of the matter, the petition deserves to be allowed and is allowed accordingly - Decided in favour of assessee.

Issues:
1. Validity of notice for reopening the assessment for assessment year 2003-04 beyond the prescribed period.
2. Challenge to the notice under section 148 of the Income-tax Act for reopening the assessment.
3. Comparison of profits with other builders and influence of deduction under section 80-IB on profit rate.
4. Justification for reopening assessment based on abnormal profit rate and possibility of diversion of income.
5. Non-reopening of assessments for other years with identical claims.
6. Interpretation of Section 149 of the Income-tax Act regarding the time limit for issuing a notice under section 148.

Analysis:

1. The petitioner challenged a notice issued by the respondents to reopen the assessment for the 2003-04 assessment year, arguing that the notice was issued beyond the four-year period from the end of the relevant assessment year, as required by Section 149 of the Income-tax Act. The petitioner contended that the notice issued after March 31, 2008, was unlawful. The petitioner also highlighted that the Assessing Officer had already allowed the claim under section 80-IB(10) of the Act, making the notice for reopening the assessment invalid.

2. The respondent defended the reopening of the assessment, stating that the abnormal profit rate declared by the petitioner, influenced by the deduction under section 80-IB, warranted the reopening. The respondent argued that the Assessing Officer had provided reasons for the reopening based on the high profits compared to other builders. However, the petitioner pointed out that similar claims in other assessment years had not led to reopening, questioning the consistency of the respondent's actions.

3. The High Court analyzed the provisions of Section 149 of the Income-tax Act, which stipulate the time limit for issuing a notice under section 148. The Court noted that the notice in question was issued on August 10, 2009, exceeding the four-year period from the end of the assessment year. Additionally, the Court found no valid reasons presented by the respondent to challenge the earlier Assessing Officer's decision to allow the petitioner's claim. Consequently, the Court ruled in favor of the petitioner, quashing the notice for reopening the assessment and the preliminary order for reassessment proceedings.

4. In conclusion, the High Court found that the notice issued under section 148 of the Income-tax Act for reopening the assessment for the 2003-04 assessment year was invalid due to being beyond the prescribed period and the lack of justification for challenging the earlier decision on the claim under section 80-IB. The Court set aside the notice and the order for reassessment proceedings, ruling in favor of the petitioner.

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