Invalid Notice Under Income Tax Act Leads to Unlawful Reassessment

The Tribunal found the notice issued under Section 148 of the Income Tax Act to be invalid as it lacked proper recording of reasons and exceeded the time limit without meeting necessary conditions. Consequently, the reassessment was deemed unlawful, leading to the quashing of the reassessment and allowing the appeal of the assessee. The Tribunal pronounced the order on 10.12.2018, holding the reassessment to be without jurisdiction.

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Issues Involved:
1. Validity of the reassessment under Section 143(3) read with Section 147 of the Income Tax Act.
2. Legality of the notice issued under Section 148 of the Income Tax Act.
3. Denial of deductions claimed under Sections 80IA and 80IB of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of the reassessment under Section 143(3) read with Section 147 of the Income Tax Act:
The assessee challenged the validity of the reassessment dated 31.03.2016, arguing that the notice issued under Section 148 and the subsequent assessment were bad in law. The reassessment was initiated despite repeated examinations and verifications of the return of income and books of accounts. The reasons for reopening the assessment were based on findings from assessments for AY 2005-06 and 2011-12. However, the Tribunal noted that the reasons for reopening were undated, implying they were recorded either on or before 24.03.2015. This led to the conclusion that the notice under Section 148 was issued without proper recording of reasons, violating Section 148(2) of the Act, rendering the reassessment proceedings without jurisdiction.

2. Legality of the notice issued under Section 148 of the Income Tax Act:
The Tribunal observed that the notice under Section 148 was issued after four years from the end of the relevant assessment year, invoking the first proviso to Section 147. This proviso necessitates a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The Tribunal found no such failure by the assessee, as the facts were already on record, and the deduction claims were properly disclosed and supported by audit reports. The Tribunal referenced several judgments, including those from the Delhi High Court and the Punjab & Haryana High Court, which held that the absence of a finding of failure to disclose material facts makes the action under Section 147 without jurisdiction. Additionally, the Tribunal noted that no new tangible material came to the Assessing Officer’s notice to justify reopening, and the reopening was based on a mere change of opinion, which is not permissible.

3. Denial of deductions claimed under Sections 80IA and 80IB of the Income Tax Act:
The Tribunal found that the reasons for denying the deductions under Sections 80IA and 80IB were influenced by findings from assessments for AY 2005-06 and 2011-12. However, the Tribunal highlighted that the deductions had been allowed to the assessee since AY 2000-01 in assessments framed under Section 143(3). The Tribunal emphasized that without disturbing the initial assessment years of the claim, denying the claim in subsequent years based on reopening was a change of opinion. The Tribunal referred to the Supreme Court’s decision in Kelvinator of India Limited, which held that a change of opinion does not justify reopening. Furthermore, the Tribunal noted that the original assessment order had merged with the CIT(A)’s order, and reassessment on the same issue amounted to a change of opinion.

Conclusion:
The Tribunal concluded that the notice issued under Section 148 was bad in law, as it was issued without recording reasons and beyond the permissible time limit without fulfilling the necessary conditions. Consequently, the reassessment framed pursuant to the said notice was quashed, and the appeal of the assessee was allowed. The reassessment was held to be bad in law, and the Tribunal pronounced the order in the open court on 10.12.2018.

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