High Court affirms jurisdiction to reopen assessments under Income Tax Act for specific years

The High Court upheld the jurisdiction of reopening assessments for Assessment Year 2006-07 and 2008-09 under Section 148 of the Income Tax Act. The court found the notices valid, noting that the pharmacy store activity came to light during later assessment proceedings and approval under Section 10(23C)(via) for a subsequent year did not impact the current assessment years. Compliance with Section 11(4A) regarding the pharmacy store activity was deemed necessary, even if incidental to charitable objects. The court rejected the petitioner's plea, emphasizing the importance of compliance and factual determinations in reassessment proceedings.

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Issues:
1. Jurisdiction of reopening assessment for Assessment Year 2006-07 and 2008-09 under Section 148 of the Income Tax Act, 1961.
2. Compliance with the provisions of Section 11(4A) regarding the pharmacy store activity.
3. Consideration of approval under Section 10(23C)(via) of the Act for Assessment Year 2006-07 and 2008-09.

Jurisdiction of Reopening Assessment:
The High Court addressed the challenge against two impugned notices dated 28 March 2013 issued under Section 148 of the Income Tax Act for Assessment Year 2006-07 and 2008-09. The notice for 2006-07 was found to be beyond the 4-year period, while the notice for 2008-09 fell within the timeframe. The petitioner contended that all material facts were disclosed during the original assessment. However, the Assessing Officer rejected the objections, leading to the petition. The court held that the impugned notices were not without jurisdiction as the activity of the pharmacy came to light during later assessment proceedings, and the approval under Section 10(23C)(via) for a subsequent year did not impact the current assessment years.

Compliance with Section 11(4A) - Pharmacy Store Activity:
The reasons provided for reopening the assessment highlighted the failure to maintain separate books of accounts for the pharmacy store activity, which was deemed necessary under Section 11(4A) of the Act. The petitioner argued that the pharmacy store served the dominant object of the Trust by supporting the hospital's operations. However, the court emphasized that even if the activity was incidental to charitable objects, compliance with Section 11(4A) was essential. The court noted that factual determinations regarding turnover and compliance needed to be made during reassessment proceedings, indicating that the impugned notices were valid.

Consideration of Approval under Section 10(23C)(via):
The petitioner's reliance on approval under Section 10(23C)(via) for a subsequent assessment year was deemed irrelevant to the current assessment years. The court clarified that each assessment year's approval needed separate evaluation. The court rejected the petitioner's plea to set aside the impugned notices, allowing the petitioner to raise contentions during reassessment. Additionally, the court advised expeditious disposal of pending approval applications under Section 10(23C)(via) while emphasizing that reassessment proceedings were not stayed.

In conclusion, the High Court rejected both petitions, emphasizing the need for compliance with statutory provisions and factual determinations during reassessment proceedings.

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