Court quashes assessment order, demand notice & show cause notice, allows inquiry for reassessment. Petitioners granted opportunity to present case.

The court partially allowed the petition by quashing the assessment order, demand notice, and show cause notice for penalty. However, the notice seeking to reopen the assessment was not disturbed, allowing for further inquiry during reassessment proceedings. The petitioners were granted the opportunity to present their case, with the court emphasizing that the reasons for the notice would be subject to scrutiny during reassessment.

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Issues:
Challenge to notice seeking to reopen assessment for Assessment Year 2005-06 under Article 226 of the Constitution of India, rejection of objections to reopening by Assessing Officer, validity of assessment order dated 30 November 2010, demand notice under Section 156 of the Act, show cause notice for penalty under Section 271 of the Act.

Analysis:
1. The petition challenged a notice seeking to reopen assessment for Assessment Year 2005-06 under Article 226 of the Constitution of India. The notice was issued under Section 148 of the Income Tax Act, 1961, based on discrepancies in claiming deductions under Section 80IB(4) for two units. The reasons for reopening the assessment included issues with the audit certificate and the date of commencement of production for Unit-II. The petitioners objected to the grounds mentioned in the notice, arguing that the certificate requirement was for the auditing accountant of the undertaking, not the petitioner's accounts. They also provided evidence to support the commencement of manufacturing activity in Unit-II before the factory license was issued.

2. The Assessing Officer rejected the petitioners' objections, stating there was no change of opinion as no opinion was formed during the previous assessment. The petitioners then filed a petition challenging the notice, citing a previous court decision that no reassessment should be initiated for four weeks after disposing of objections. Despite this, the Assessing Officer proceeded with the assessment order on 30 November 2010, which was later quashed by the court due to non-compliance with the previous court decision.

3. The court examined the grounds for reopening the assessment, particularly regarding the commencement of manufacturing activity in Unit-II and the eligibility of the auditor's certificate. It was noted that the Assessing Officer must have a prima facie belief that income has escaped assessment to issue a notice under Section 147. The court found that the grounds in the notice indicated a prima facie view, warranting the initiation of proceedings, and did not interfere with the notice at that stage.

4. The court allowed the petition partly, quashing the assessment order, demand notice, and show cause notice for penalty. The court did not disturb the notice seeking to reopen the assessment, leaving the jurisdictional challenge open for the reassessment proceedings. The petitioners were granted the opportunity to present their case during reassessment, emphasizing that the reasons for the notice were subject to further inquiry during the reassessment proceedings.

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