2023 (1) TMI 429 - HC - Income Tax

Reopening of assessment u/s 147 - Container Freight Station (CFS) is not an eligible infrastructural facility as provided in Explanation to Section 80-IA(4) of the Act and that the claim of deduction of the assessee on this account was not in order which had resulted in under-assessment of income and the same has escaped assessment - HELD THAT - Admittedly, since the notice u/s. 148 was being issued after the expiry of four years from the end of the relevant assessment year, no action could be taken u/s. 147, after expiry of the said period unless it could be shown that the income chargeable to tax had escaped assessment by reason of the failure on the part of the assessee, inter-alia, to disclose fully and truly all material facts necessary for the assessment for that assessment year. In the present case, from the record, it is quite clear that when the return fled by the petitioner was taken up for scrutiny assessment, information was called for by the Assessing Officer. The petitioner, in response to the notices so received, had submitted a note in regard to the claim for deduction under Chapter VI-A which is on record. The reasons recorded by the AO do not at all elucidate as to what material was not disclosed fully and truly, failure of which had led to the income escaping assessment. This Court, in the case of Continental Warehousing Corporation Ltd. 2015 (5) TMI 656 - BOMBAY HIGH COURT was considering the order passed by the Tribunal which had held the assessee in that case entitled to the benefit under section 80-IA(4) of the Act based upon the earlier view expressed by a Special Bench of the Tribunal as also the Delhi High Court in Container Corporation of India Ltd. (Supra). The Special Bench had held that the case of Container Freight Station was similarly situate as that of an Inland Container Depot (ICD) inasmuch as both carried out similar functions of warehousing, customs clearance and transport of goods from its location to sea-ports and vice-versa. This Court in Continental Warehousing Ltd. (Supra) upheld the view of the Tribunal. In the present case, even the objections raised by the Director General of Audit (Central) Mumbai leading to the initiation of reassessment proceedings would not anymore furnish a sound basis for alleging that the income had escaped assessment on account of a claim having been wrongly allowed under the said section. Be that as it may, we have no hesitation in holding that the notice impugned as also the order rejecting the objections, are unsustainable in law and are accordingly quashed.

Summary

Issues:
Challenging notice issued under section 148 of the Income Tax Act for reassessment for the assessment year 2015-16.

Detailed Analysis:

1. Background and Assessment Details:
The petitioner, a company engaged in infrastructure development and running a Container Freight Station, filed its income tax return for the assessment year 2015-16, claiming a deduction under section 80IA(4) of the Act. The Assessing Officer disallowed a portion of the deduction claimed and passed the assessment order on 12th June 2017.

2. Reopening of Assessment:
A notice under section 148 of the Act was issued on 26th March 2021 for reopening the assessment, alleging that the Container Freight Station was not an eligible infrastructural facility for the deduction claimed. The reasons provided for reopening highlighted that the income had escaped assessment due to the deduction claimed on ineligible grounds.

3. Legal Challenge:
The petitioner challenged the reopening of the assessment, arguing that the notice was issued beyond the permissible period and failed to establish any failure on their part to disclose material facts. The petitioner contended that full disclosure was made during the scrutiny assessment, and previous court judgments supported their eligibility for the deduction claimed.

4. Court's Analysis:
The Court examined the reasons recorded for reopening and found them lacking in specificity regarding the alleged failure to disclose material facts. The Court emphasized the importance of clear and unambiguous reasons for reopening assessments, as established in previous legal precedents.

5. Basis for Reassessment:
The reassessment was initiated based on an audit objection stating that the Container Freight Station was not eligible for the deduction claimed. However, subsequent developments, including the dismissal of a Special Leave Petition by the Supreme Court, undermined the basis for the reassessment.

6. Judgment and Conclusion:
The Court held that the notice for reassessment and the order rejecting objections were unsustainable in law and quashed them. The Court emphasized that the objections raised by the audit objection no longer provided a valid basis for alleging an escape of income assessment due to the deduction claimed.

In conclusion, the Court ruled in favor of the petitioner, allowing the petition and quashing the notice for reassessment and the order rejecting objections.