2008 (6) TMI 193 - HC - Income Tax

Notice u/s 148 assessment was completed u/s 143(3) and in the assessment the assessee was allowed deduction u/s 80HH on Export incentive benefits - on basis of subsequent decision of SC in the case of CIT Vs. Sterling Foods AO changed his opinion and issued reassessment notice beyond time limit of four years forming a belief that income chargeable to tax has escaped assessment because excess deduction was allowed held that since it is not a case of any failure on the part of the assessee notice is quashed as time-barred

Summary

Issues:
Challenge to notice dated 10-05-2000 under section 148 of the Income-tax Act, 1961 for claiming deductions under sections 80HH and 80-I, and whether income chargeable to tax has escaped assessment due to excess deduction and incorrect disclosure.

Analysis:
The court considered petitions challenging a notice issued under section 148 of the Income-tax Act, 1961 for claiming deductions under sections 80HH and 80-I. The Assessing Officer issued the notice based on a Supreme Court decision that export incentive benefits are not eligible for deduction under these sections. The petitioner argued that the notices were invalid as they were issued beyond the four-year limit from the end of the relevant assessment years. The court examined whether there was a failure to disclose fully and truly all material facts necessary for assessment. It was noted that the Assessing Officer allowed the deductions based on the information provided by the assessee, and the subsequent change in law by the Supreme Court did not imply non-disclosure or false disclosure by the assessee.

The court emphasized that the Assessing Officer's change of opinion post the Supreme Court judgment did not indicate any failure on the part of the assessee. The court also highlighted that the provisions of section 147 of the Act restrict reassessment beyond the four-year period unless specific conditions like non-disclosure or false disclosure are met. The court rejected the respondent's argument that the Supreme Court judgment constituted information for reopening the assessment, as the time limit for reassessment had already lapsed. The court further clarified that even if income had escaped assessment, without meeting the conditions specified in the proviso to section 147, no reassessment could be initiated.

In conclusion, the court quashed the impugned notice dated 10-05-2000 for each assessment year, ruling in favor of the petitioners. The court allowed all the petitions, making the rule absolute in each case and did not award any costs.