2012 (3) TMI 211 - HC - Income Tax

Court quashes reassessment order for lack of valid grounds under Section 147, deeming it illegal.

GANESH HOUSING CORPORATION LTD Versus DY. COMMISSIONER OF INCOME-TAX, CIRCLE 4 & ANR.

The court set aside the notice of reassessment and the order issued by the Assessing Officer, finding that the conditions for reopening the assessment ... Validity of reopening of assessment previously framed after scrutiny – assessment reopened on ground that ‘works contractor’ was not eligible for deduction u/s 80-IB(10) - Explanation to s. 80-IB(10) inserted in year 2009 w.e.f. 1.4.2000 - assessee contesting change of opinion by A.O. - A.Y. 06-07 – Held that:- It is now a settled law that if an explanation is added to a section of a statute for the removal of doubts, the implication is that the law was the same from the very beginning and the same is further explained by way of addition of the Explanation. Thus, it is not a case of introduction of new provision of law by retrospective operation. We find that the petitioner had disclosed all the materials relevant for the purpose of getting the benefit u/s 80IB and there was no suppression of materials. In spite of full disclosure, the A.O. gave benefit of the provision by considering the materials on record and thus, it cannot be said that any income escaped assessment in accordance with law. If the A.O. while passing the original assessment order, chose not to give any finding in this regard, that cannot give him or his successor in office a reason to reopen the assessment. It is a mere formation of second opinion on the selfsame materials without any “tangible material” - Decided in favor of assessee Issues Involved:1. Validity of the notice under Section 148 of the Income Tax Act, 1961.2. Whether the reopening of assessment under Section 147 of the Act is justified.3. Whether there was a mere change of opinion by the Assessing Officer.4. Applicability of the Explanation to Section 80IB(10) of the Act.5. Whether the petitioner failed to disclose fully and truly all material facts necessary for assessment.6. Whether the petitioner was entitled to the deduction under Section 80IB(10) of the Act.Issue-wise Detailed Analysis:1. Validity of the notice under Section 148 of the Income Tax Act, 1961:The petitioner challenged the notice dated 1st March 2011 under Section 148 of the Act, arguing that there was no valid reason for its issuance. The court examined whether the conditions precedent for issuing such a notice were met, focusing on whether the Assessing Officer had 'reason to believe' that income had escaped assessment.2. Whether the reopening of assessment under Section 147 of the Act is justified:The court scrutinized the reasons provided by the Assessing Officer for reopening the assessment. It emphasized that the reopening must be based on 'tangible material' and not merely a change of opinion. The court referred to the Supreme Court's decision in Kelvinator of India Ltd., which clarified that post-1989, the power to reopen is much wider but must still be based on tangible material.3. Whether there was a mere change of opinion by the Assessing Officer:The court found that the reasons recorded for reopening indicated a mere change of opinion on the same issues that were already scrutinized during the original assessment. The court highlighted that having second thoughts on the same material does not justify reopening the assessment.4. Applicability of the Explanation to Section 80IB(10) of the Act:The court noted that the Explanation inserted to Section 80IB(10) by the Finance Act (No.2), Act 2009 with retrospective effect from 01.04.2000, clarified that the deduction shall not be admissible to a contractor in respect of works contracts. However, it found that the petitioner had disclosed all relevant materials, and the original assessment allowed the deduction after thorough scrutiny.5. Whether the petitioner failed to disclose fully and truly all material facts necessary for assessment:The court observed that the petitioner had disclosed all material facts during the original assessment. It rejected the Revenue's contention that the petitioner failed to maintain separate accounts or misrepresented its status as a developer rather than a works contractor. The court concluded that there was no suppression of material facts by the petitioner.6. Whether the petitioner was entitled to the deduction under Section 80IB(10) of the Act:The court held that the petitioner was entitled to the deduction under Section 80IB(10) as all necessary disclosures were made, and the original assessment allowed the deduction after considering all materials. The court found that the reopening was based on a mere change of opinion without any new tangible material.Conclusion:The court set aside the notice of reassessment and the reasoned order issued by the Assessing Officer, finding that the conditions precedent for reopening the assessment under Section 147 were not met. The court emphasized that the reopening was based on a mere change of opinion without any new tangible material, thus acting illegally. The Special Civil Application was allowed, and the reassessment notice and order were quashed.