2011 (11) TMI 129 - HC - Income Tax

Reopening of assessment - deductions under section 80IB(10) - Held That - where assessee had disclosed all relevant material facts, assessment cannot be opened in 147. - following the decision in Aayojan Developers v. ITO (2011 (2) TMI 738 - Gujarat High Court), decided in favour of assesee.

Summary

Issues:
Challenge to notice of reopening of assessment and order disposing of objections.

Analysis:
The petitioner-assessee challenged the notice of reopening of assessment dated 28.3.2011 and the order dated 5.10.211 disposing of the objections to such reopening. For the assessment year 2004-05, the petitioner filed its return of income along with necessary documents. The Assessing Officer framed scrutiny assessment under section 143(3) of the Income Tax Act, 1961, on 20th February 2006, granting deductions under section 80IB(10) as claimed by the petitioner.

By Finance Act 2 of 2009, changes were made in section 80IB(10) with retrospective effect from 1.4.2011. The Assessing Officer issued the impugned notice on 28.3.2011, seeking to reopen the assessment for the year 2004-05, stating that income chargeable to tax had escaped assessment. The reasons for reopening indicated that the assessee was not entitled to the deduction under section 80IB(10) due to incorrect claims. The petitioner objected to the reopening, but the objections were rejected, leading to the challenge in the High Court.

Counsel for the petitioner argued that the reopening beyond four years from the end of the relevant assessment year was without jurisdiction since there was no failure to disclose material facts. The Division Bench decision in the case of Aayojan Developers was cited, where it was observed that in the absence of any failure to disclose material facts, jurisdiction under section 147 of the Act after the expiry of four years from the relevant assessment year is illegal and invalid.

The Division Bench found that the issue was squarely covered by the Aayojan Developers case. The assessment was sought to be reopened beyond four years based on a statutory amendment with retrospective effect, without alleging any failure to disclose material facts. The Court held that the notice for reopening was invalid and quashed it, following the principles laid down in previous decisions.

In conclusion, the High Court held that the notice for reopening the assessment was invalid and quashed it, as there was no failure on the part of the petitioner to disclose material facts, rendering the jurisdiction under section 147 of the Act after the expiry of four years illegal and invalid. The decision was based on established legal principles and previous court rulings.