2019 (6) TMI 997 - HC - Income Tax

Reopening of assessment u/s 147 - validity of reasons to believe - disallowance of deduction u/s 80IB(10) as assessee sold the flats to related persons - HELD THAT - It is well settled that under the Income tax Act, 1961, the assessment for each year is a separate assessment and has to be assessed separately. While making the assessment for a particular year, the AO has to see whether the assessee is entitled to claim a deduction in that assessment year. Insofar as assessment year 2011-12 is concerned, the assessee had duly complied with the requirements of section 80IB(10) and was therefore, entitled to the deduction claimed thereunder. However, now, the AO seeks to reopen the assessment and disallow such deduction on the ground that in the previous year relevant to assessment year 2013-14, the petitioner had sold flats to related persons. In the opinion of this court, if, in the year 2013-14, any event has taken place that disentitles the petitioner from claiming deduction under section 80IB(10) it would relate to that year alone. The assessments of the earlier years wherein deduction had been allowed because the petitioner/assessee was, otherwise, entitled to such deduction, cannot be reopened to disallow a claim, which was valid in the year under consideration. In the aforesaid premises, this court is of the considered opinion that on the reasons recorded for reopening the assessment, no reasonable person could have formed the belief that income chargeable to tax has escaped assessment. The impugned notice u/s 148 therefore cannot be sustained. - Decided in favour of assessee.

Summary

Issues:
Challenge to notice under section 148 of the Income Tax Act, 1961 for reopening assessment for the assessment year 2011-12.

Analysis:
The petitioner challenged the notice dated 26.03.2018 issued by the respondent under section 148 of the Income Tax Act, 1961, proposing to reopen the assessment for the assessment year 2011-12. The petitioner had initially filed its return of income for the said assessment year, claiming a deduction under section 80IB of the Act. However, the respondent issued the impugned notice under section 148, stating that income chargeable to tax had escaped assessment. The petitioner objected to the reasons recorded for reopening, arguing that there was no failure to disclose all necessary facts during the initial assessment. The petitioner contended that the assumption of jurisdiction by the Assessing Officer was without legal authority, seeking to quash the notice.

The respondent, on the other hand, justified the reopening of assessment based on information gathered during proceedings for the assessment year 2013-14. It was noted that the petitioner had sold flats to related parties, contravening provisions of section 80IB(10) of the Act. The Assessing Officer believed that income chargeable to tax had escaped assessment due to the disallowed deduction. The petitioner raised objections, highlighting that the disallowance should not apply to earlier years, as the assessments are separate for each year. The Assessing Officer rejected the objections without proper consideration, leading to the petitioner filing the present petition.

The court analyzed the reasons for reopening the assessment and concluded that the Assessing Officer could not have reasonably believed that income chargeable to tax had escaped assessment based on the events from the subsequent year. It was emphasized that assessments for each year are separate, and deductions claimed should be assessed accordingly. The court held that disallowing a deduction allowed in a previous year due to events in a subsequent year was not justified. Therefore, the court allowed the petition, quashing the impugned notice seeking to reopen the assessment for the assessment year 2011-12.

In conclusion, the court ruled in favor of the petitioner, setting aside the notice issued under section 148 of the Income Tax Act for the assessment year 2011-12. The court highlighted the importance of separate assessments for each year and the inadmissibility of disallowing deductions in earlier years based on events from subsequent years.