2021 (4) TMI 612 - HC - Income Tax

Reopening of assessment - Assessee has erroneously applied CBDT Circular No.09/2014 dated 23/04/2014 and claimed amortization expenses for the financial year 2014-15 - As submitted that since the assessee was entitled to deduction under Section 80IA of the Income Tax Act, 1961, there was no question of any escapement of tax as increase in income by not claiming amortization would not result in the assessee paying any further tax as the same was 100% deductible under Section 80IA - HELD THAT - Commissioner of Income Tax should have looked into the fact as to whether there could not be an escapement of tax because of the fact of the deduction available to the petitioner under Section 80IA. It is to be noted that this was the last year of deduction that was available to the petitioner out of the ten consecutive years that is available. As the reassessment proceeding is based on the fact that there was an escapement of tax, this issue was required to be answered and taken care of by the Commissioner of Income Tax. This not having been done, the impugned order is quashed and set aside with a direction upon the Officer to pass a further reasoned order after granting an opportunity of hearing to the petitioner. The Commissioner of Income Tax is specifically directed to deal with all points including the point in relation to escapement of tax because of deduction available to the petitioner under Section 80 IA of the Act.

Summary

Issues:
Reopening of assessment under Sections 147 to 150 of the Income Tax Act for the assessment year 2015-16 based on the application of CBDT Circular No.09/2014 by the assessee and the denial of the circular's applicability by the Income Tax Department. The contention regarding the eligibility of the assessee for deduction under Section 80IA and the tax neutrality aspect due to the availability of deduction.

Analysis:
The judgment pertains to an application under Section 226 of the Constitution of India challenging an order by the Assistant Commissioner of Income Tax regarding the reopening of assessment for the assessment year 2015-16. The main issue revolves around the application of CBDT Circular No.09/2014 by the assessee for claiming amortization expenses, which the Income Tax Department contested, stating the circular was not applicable as the assessee was a BOT operator receiving amenities, not toll. The petitioner argued for the circular's applicability based on paragraphs 4 and 5, emphasizing the enduring benefit of expenditure on infrastructure projects under BOT agreements. The respondent, relying on the first paragraph of the circular, contended that as the assessee did not have the right to collect toll, the circular did not apply.

The petitioner further contended that due to eligibility for deduction under Section 80IA, there was no tax escapement even if amortization was not claimed. The judgment highlighted that the impugned order did not address the tax neutrality aspect concerning the deduction under Section 80IA. While acknowledging that other objections raised by the petitioner were addressed, the Court emphasized the necessity for the Commissioner of Income Tax to consider the potential tax escapement due to the available deduction. As the reassessment was based on the assumption of tax escapement, the Court quashed the impugned order, directing the Officer to pass a reasoned order after granting a hearing to the petitioner. The Commissioner was specifically instructed to address all points, including the tax escapement issue due to the deduction under Section 80IA.

The Court concluded by disposing of the writ petition and clarified that the allegations in the petition were not admitted by the respondent due to the absence of affidavits. It further directed the provision of an urgent certified copy of the order to the parties upon completion of formalities.