2014 (5) TMI 404 - HC - Income Tax

Court quashes tax notice, upholds deduction eligibility under Section 80IA(4), and deems income treatment appropriate.

The court quashed the notice for reopening the assessment under Section 147 of the Income Tax Act, citing that it was not justified as it amounted to a ... Validity of notice for reopening of assessment – Mere change of opinion - Infrastructure facilities – Claim of deduction u/s 80IA(4) of the Act – Held that:- Assessee had claimed deduction under section 80IA(4) of the Act - The assessee was entitled to claim deduction u/s 80IA(4), the assessment order was passed - Any attempt on the part of the AO now to revisit such a claim would be based on a mere change of opinion – Relying upon CIT v. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA] - power to re-open is much wider - one needs to give a schematic interpretation to the words “reason to believe” failing which, Section 147 would give arbitrary powers to the AO to re-open assessments on the basis of “mere change of opinion”, which cannot be per se reason to re-open. - The AO has no power to review - he has the power to re-assess. Even within four years, it would not be open for the revenue to reopen the assessment - The agreement between the petitioner and the GSRDC was on record - The assessee had pointed out that GSRDC is a 100% Government owned company - The status of the contractee was very much before the AO – the reopening cannot be permitted – Decided in favour of Assessee. Issues Involved:1. Validity of the reopening of assessment under Section 147 of the Income Tax Act.2. Eligibility of the petitioner for deduction under Section 80IA(4) of the Income Tax Act.3. Treatment of income received from Gujarat State Road Development Corporation (GSRDC).Detailed Analysis:Issue 1: Validity of the Reopening of Assessment under Section 147 of the Income Tax ActThe petitioner challenged the notice dated 24.8.2012 issued by the respondent Assessing Officer for reopening the assessment for the assessment year 2008-09. The petitioner argued that the entire issue was examined in the original scrutiny assessment, and any attempt to revisit the issue would constitute a mere change of opinion. The court noted that the petitioner had raised detailed objections to the reopening notice, emphasizing that the issue had been thoroughly examined during the original assessment, and the claim was accepted after detailed scrutiny. The court cited the Supreme Court's observation in the case of CIT v. Kelvinator of India Ltd., 320 ITR 561 (SC), which emphasized that reopening assessments based on a mere change of opinion is not permissible. The court concluded that the reopening of the assessment was not justified as it was based on a change of opinion rather than any tangible material indicating escapement of income.Issue 2: Eligibility of the Petitioner for Deduction under Section 80IA(4) of the Income Tax ActThe petitioner had claimed a deduction under Section 80IA(4) for developing infrastructure facilities, which was accepted in the original assessment. The respondent sought to disallow this deduction on the grounds that the agreement for the development of the infrastructure facility was not with the Central Government, State Government, local authority, or any statutory body as required under Section 80IA(4)(i)(a) of the Act. The court observed that the petitioner had entered into an agreement with GSRDC, a 100% State Government-owned company, and this fact was on record during the original assessment. The court noted that the Assessing Officer had raised several queries regarding the petitioner's claim during the original scrutiny assessment, and the petitioner had provided detailed responses, including the nature of the agreement with GSRDC. The court found that the Assessing Officer had thoroughly examined the claim and accepted it, thus any attempt to disallow the claim now would be based on a mere change of opinion.Issue 3: Treatment of Income Received from GSRDCThe respondent contended that the amount of Rs.1.98 crores received from GSRDC was not derived from the development of infrastructure facilities and thus was not eligible for deduction under Section 80IA. The court noted that during the original assessment, the petitioner had clarified that the payment from GSRDC was for toll-free passage of two-wheelers and three-wheelers over the railway overbridge (ROB) constructed by the petitioner. The petitioner had explained that this payment was also considered toll income and not a work contract payment. The court found that this explanation was part of the original assessment records and was accepted by the Assessing Officer after detailed scrutiny. Hence, the court concluded that the treatment of income received from GSRDC was appropriately considered during the original assessment, and there was no basis for reopening this aspect.Conclusion:The court allowed the petition, quashing the impugned notice dated 24.8.2012. The court held that the reopening of the assessment was not justified as it was based on a mere change of opinion, and the issues raised by the respondent had already been thoroughly examined and accepted in the original assessment. The petition was disposed of accordingly.