2021 (12) TMI 316 - HC - Income Tax

Reopening of assessment u/s 147 - eligibility of deduction under Section 80HH/HHA/IA - HELD THAT - The proviso of Section 147 of the Act shall therefore apply. Under Section 147 of the Act the assessment under Sub Section (3) of Section 143 can be reopened after a period of four years only if the assessee has failed to disclose fully and truly all material facts necessary for his assessment in that Assessment Year. The reasons as quoted above does not indicate initially what was the material fact that has not been disclosed fully and truly by petitioner. Therefore, on this ground alone, notice dated 30th March, 2004 has to be set aside. In the assessment order dated 30th January, 2004 the deduction claimed by petitioner have been disallowed and therefore question of any income escaping assessment also will not arise. Therefore, on the date when the impugned notice dated 30th March, 2004 was issued the Assessing Officer could not have any reason to believe that income chargeable to tax has escaped assessment u/s 148 of the Act. As noted earlier in the block assessment order dated 30th January, 2004 the deduction claimed under Section 80I, 80 HA and 80 IA of the Act had been disallowed.

Issues:
1. Validity of the notice dated 30th March, 2004 issued under Section 148 of the Income Tax Act, 1961 for reopening assessment proceedings for the Assessment Year 1997-98.
2. Proper examination of deduction claims under Sections 80HH, 80HHA, 80IA in the regular assessment.
3. Application of Section 147 of the Act for reopening assessments after four years.
4. Statutory bar under Section 158BA (2) prohibiting subjecting income to tax under regular assessment if already assessed under block assessment.

Detailed Analysis:
1. The petitioner challenged a notice issued under Section 148 of the Income Tax Act, 1961, proposing to reopen assessment proceedings for the Assessment Year 1997-98. The notice alleged that the income chargeable to tax had escaped assessment. The petitioner contended that the notice should be set aside as it was issued after the expiry of four years from the relevant assessment year, and the reasons provided did not disclose any material fact not fully disclosed by the petitioner during the original assessment.

2. The petitioner had claimed deductions under Sections 80HH, 80HHA, and 80IA in its return of income. During block assessment proceedings, these deductions were disallowed. The petitioner argued that the issue of eligibility for these deductions was governed by regular provisions, not Chapter XVIB of the IT Act. The notice for reopening assessment did not properly examine these deduction claims in the regular assessment, leading to a dispute regarding the excessive claim and allowance of deductions under these provisions.

3. Section 147 of the Act allows reopening of assessments after four years only if the assessee failed to disclose all material facts necessary for assessment. In this case, the notice was issued after the four-year period, and the reasons provided did not specify any material fact not fully disclosed by the petitioner. Therefore, the notice was challenged on the grounds of non-disclosure of material facts and improper application of Section 147.

4. Additionally, the petitioner argued that the deductions claimed had already been disallowed in a previous assessment order, and there was no income escaping assessment at the time the impugned notice was issued. The statutory bar under Section 158BA (2) prohibits subjecting income to tax under regular assessment if it has already been assessed under block assessment. The court referred to previous judgments supporting this interpretation and held that the notice for reopening assessment was not valid due to the statutory bar and lack of grounds for income escaping assessment.

In conclusion, the court set aside the notice dated 30th March, 2004, and made the rule absolute with no order as to costs, disposing of the petition.

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