2015 (7) TMI 1129 - HC - Income Tax

Interim stay granted in challenge to reopening notice under Income Tax Act 1961. Doubts raised on 2008 Scheme applicability.

The Court granted an interim stay in favor of the Petitioner in a challenge to a reopening notice under Section 148 of the Income Tax Act, 1961 for ... Reopening of assessment - Change of opinion - Industrial Park Scheme applicability - Rule 18C of the Income Tax Rules - temporal applicability - Deduction under Section 80IA - rental income as business incomeIndustrial Park Scheme applicability - Rule 18C of the Income Tax Rules - temporal applicability - Applicability of the Industrial Park Scheme 2008 (and Rule 18C) to the Petitioner's undertaking - HELD THAT: - The petition challenges reopening on the ground that the Industrial Park does not qualify for deduction under Section 80IA as it was not notified under the Industrial Park Scheme 2008. The Revenue relied on Rule 18C. The Court noted that Rule 18C applies only to undertakings established after April, 2006 and before March, 2011, whereas the Petitioner was established prior to April, 2006. On this prima facie view, the 2008 Scheme and Rule 18C would not apply to the Petitioner, undermining the stated ground for reopening. [Paras 7]Prima facie the 2008 Scheme (and Rule 18C) is not applicable to the Petitioner, and therefore that ground for reopening is unsustainable.Reopening of assessment - Change of opinion - Deduction under Section 80IA - rental income as business income - Whether reopening is justified on the allegation that rental income was incorrectly treated (business income) at original assessment - HELD THAT: - The Petitioner pointed out that the Assessing Officer had considered and decided the characterisation of rental income as business income while passing the assessment order under Section 143(3) for A. Y. 2009-10. The Court observed that seeking to re-open the same issue now would prima facie amount to a change of opinion, which does not justify reopening. Accordingly, the reopening on this ground lacks prima facie validity. [Paras 5, 7]Prima facie the attempt to reopen on the ground of characterisation of rental income amounts to a change of opinion and is not a valid foundation for reopening.Reopening of assessment - Sufficiency of the Assessing Officer's order disposing of the Petitioner's objections and the other factual grounds relied upon for reopening - HELD THAT: - The Assessing Officer's order disposing of the Petitioner's objections was noted to have relied on judicial decisions but did not specifically address the Petitioner's factual/contentions. The Court treated the remaining objections as essentially factual and observed that, given the order did not deal with those objections specifically, the correctness of reopening on those factual grounds could not be finally determined at this stage. [Paras 6, 7]The Assessing Officer's disposal did not specifically deal with the Petitioner's objections; the factual objections therefore remain to be examined and cannot be finally resolved on the present record.Final Conclusion: Petition challenging the reopening for A. Y. 2009-10: court found prima facie that the 2008 Industrial Park Scheme (and Rule 18C) does not apply to the Petitioner and that reopening to revisit the characterisation of rental income amounts to a change of opinion; factual objections were left for further consideration. Interim stay granted in terms of the petition. Issues:Challenge to reopening notice under Section 148 of the Income Tax Act, 1961 for Assessment Year 2009-10.Analysis:The Petitioner challenged the reopening notice based on various grounds. Firstly, the Petitioner contended that their Industrial Park was notified under the Industrial Park Scheme 2002, making the 2008 Scheme inapplicable. Secondly, the issue of rental income being considered as business income was already addressed during the previous assessment, leading to the argument of a change in opinion. Thirdly, the Petitioner did not claim a reduction in stock, rendering that basis factually incorrect. Fourthly, the exemption claimed under Section 80IA4(iii) of the Act excluded the application of Section 80IA(3) of the Act. Lastly, the Petitioner highlighted that all conditions for approvals were satisfied, and the notifications were not withdrawn.The Assessing Officer disposed of the Petitioner's objections without specifically addressing them, relying on court decisions to justify the reopening. During the hearing, the Revenue emphasized the applicability of the 2008 Scheme under Rule 18C of the Income Tax Rules. However, it was noted that Rule 18C applied to undertakings established after April 2006 and before March 2011, while the Petitioner was established prior to April 2006. This raised doubts about the applicability of the 2008 Scheme to the Petitioner. Additionally, the issue of rental income had already been examined in the previous assessment, potentially constituting a change of opinion. Other objections raised by the Petitioner were deemed factual, and the lack of specific addressing of objections in the order supported the validity of the reopening at that stage.Based on the arguments presented and the examination of relevant rules and past assessments, the Court granted an interim stay in favor of the Petitioner.