Reassessment under section 148 quashed as mere change of opinion on fully disclosed section 10A deduction claim

HC quashed the reassessment notice issued under section 148, holding it to be a mere change of opinion on the assessee's already examined and accepted claim for deduction under section 10A. The Assessing Officer, in the recorded reasons, relied upon figures and details that were admittedly drawn from the original assessment record and information furnished by the assessee, including facts about multiple units and their profits/losses. Since all primary and material facts were fully and truly disclosed, reopening to reconsider adjustment of losses of one unit against profits of others constituted an impermissible review of an earlier view. The reassessment proceedings were therefore invalid and the assessee succeeded.

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Issues Involved:
1. Challenge to the notice under Section 148 of the Income Tax Act, 1961.
2. Validity of the reassessment order dated 27th February 2015.
3. Compliance with the directions of the Hon'ble Supreme Court and the Division Bench of the High Court.
4. Assessment reopening after four years and the requirement of recording satisfaction under the proviso to Section 147.
5. Alleged failure of the assessee to disclose fully and truly all material facts.

Detailed Analysis:

1. Challenge to the notice under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice issued under Section 148 of the IT Act, intended to reopen the assessment for the assessment year 2007-08. The reasons recorded for reopening the assessment were scrutinized, and it was found that the notice was issued to revisit the claim of deduction under Section 10A of the IT Act. The court noted that the reasons recorded by the Assessing Officer did not indicate any failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessment.

2. Validity of the reassessment order dated 27th February 2015:
The reassessment order dated 27th February 2015 was assailed on the grounds that the directions of the Division Bench of the High Court and the Hon'ble Supreme Court were not followed. The court observed that the respondents were obliged to abide by the directions and not pass an order of assessment for a period of four weeks from the date of service of the order rejecting the objections. The court found that the respondents had delayed the proceedings at their own end and could not justify their conduct.

3. Compliance with the directions of the Hon'ble Supreme Court and the Division Bench of the High Court:
The court referred to authoritative pronouncements by the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. vs. Income Tax Officer and the Division Bench of the High Court in the case of Asian Paints vs. Deputy Commissioner of Income Tax. The court noted that the respondents had not followed the directions in these judgments, which required them to communicate the order rejecting the objections and not proceed with the assessment for a period of four weeks thereafter.

4. Assessment reopening after four years and the requirement of recording satisfaction under the proviso to Section 147:
The court emphasized that the proviso to Section 147 mandates that in the event the assessment is sought to be reopened after four years, the Assessing Officer must record satisfaction that the income chargeable to tax has escaped assessment due to the failure of the assessee to disclose fully and truly all material facts. The court found that the reasons recorded by the Assessing Officer did not meet this requirement, as they did not indicate any failure on the part of the petitioner to disclose material facts.

5. Alleged failure of the assessee to disclose fully and truly all material facts:
The petitioner contended that all relevant facts were disclosed during the original assessment proceedings, including the deduction under Section 10A of the IT Act. The court found that the material facts were indeed disclosed and were on record, and the reasons recorded by the Assessing Officer were based on a change of opinion rather than any failure to disclose material facts. The court held that the reopening of the assessment was not justified and was based on revisiting the claim of deduction under Section 10A, which was impermissible.

Conclusion:
The court allowed the writ petition, quashing the notice under Section 148 of the IT Act and all steps taken in furtherance thereof. The court held that the mandatory precondition for reopening the assessment was not met, and the reassessment order could not be sustained. The rule was made absolute in terms of prayer clause (a), with no order as to costs.

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