2018 (4) TMI 748 - HC - Income Tax

Reopening of assessment - deduction under Section 80M - change of opinion - Held that - In the present facts, we find that the claim of the Petitioner for deduction under Section 80M of the Act was made in the return of income. The computation of income had a note appended on it, stating that though it is eligible for deduction under Section 80M of the Act, same was not being claimed as gross total income was nil. AO passed an Assessment Order u/s 143(3) determining a positive income of ₹ 50.26 Crores, after having granted the benefit of deduction of ₹ 1.98 Crores as claimed under Section 80M of the Act. This was after having made enquiry during the Assessment Proceedings and the Petitioner justifying its claim for deduction of ₹ 1.98 Crores to the Assessing Officer as is evident from its letter dated 24th July, 1998. Thus, this is a clear case of change of opinion and the Assessing Officer could not have any reason to believe that income chargeable to tax has escaped Assessment. - Decided in favour of assessee.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for reopening Assessment Year 1995-96.

Analysis:
1. The petitioner filed a petition challenging a notice dated 21st July, 2000, issued by the Assessing Officer under Section 148 of the Income Tax Act, seeking to reopen the Assessment for the year 1995-96. The petitioner had claimed a deduction of ?1.98 Crores under Section 80M of the Act in its return of income, which was allowed during the Assessment Proceedings. The Assessing Officer passed an order under Section 143(3) of the Act, determining the petitioner's income at ?50.27 Crores after granting the deduction. The Commissioner of Income Tax (Appeals) further reduced the total income to ?4.06 Crores by allowing the same deduction. Despite this, the impugned notice was issued to reopen the assessment.

2. The reasons cited for the notice alleged excess deduction claimed under Section 80M and failure to reduce expenditure incurred in earning dividend income. However, the petitioner had made a full and true disclosure of material facts during the regular Assessment Proceedings, and the claim for deduction was examined by both the Assessing Officer and the CIT(A) before granting it. The petitioner had justified its claim for deduction in a letter to the Assessing Officer, indicating a clear case of change of opinion rather than a reason to believe that income had escaped assessment.

3. The High Court found that the Assessing Officer had already applied his mind to the claim for deduction under Section 80M during the original assessment process. The petitioner had disclosed the claim in its return of income, and the Assessing Officer had allowed the deduction after due consideration. Therefore, the court concluded that there was no valid reason to believe that income had escaped assessment, and the notice issued under Section 148 was unwarranted. As a result, the petition was allowed, and no costs were imposed.

This comprehensive analysis of the judgment highlights the key legal issues, arguments presented, and the court's reasoning leading to the decision to allow the petition challenging the notice for reopening the assessment.