2018 (2) TMI 1214 - HC - Income Tax

Validity of Re-assessment Under Income Tax Act Upheld, Emphasis on Compliance & Verification

The court upheld the validity of re-assessment proceedings under Section 147 of the Income Tax Act, 1961, finding no change of opinion and directing ... Reopening of assessment - claim of deduction u/s 10B - Held that:- The claim was u/s 10B and as per clause (3) of the provision, deduction claimed had to be of amounts which is brought into the Country, within six months from the close of the previous year. The previous year ended on 31-03-2005 and the assessee ought to have brought in the amounts prior to 30-09-2005, unless extended by the Reserve Bank of India as provided under Explanation to sub-section (3). If such extension has not been granted, definitely, there is a suppression in so far as the assessee having filed return, presumably, only after closure of the previous year, which is long after the date prescribed in sub-section (3) for bringing the amounts into the Country. Re-assessment proposed, within the six year period is perfectly in order, if the said amounts have not already been disallowed in the original assessment order itself. We hence direct that in the re-assessment proceedings, the specific contention raised by the assessee as to the deduction to the extent of US$ 1,23,691/- having already been carried out in the original assessment order is to be verified. The re-assessment having been initiated on the specific ground, it should be confined to that ground alone. The assessee shall be afforded an opportunity of hearing and the exercise shall be completed within a period of three months from the date of receipt of certified copy of the judgment. With the above observations and modifying the judgment of the learned Single Judge, to the limited extent of the directions herein above, we dispose of the Writ Appeal. Issues:1. Validity of re-assessment proceedings under Section 147 of the Income Tax Act, 1961.2. Grounds for re-assessment based on disallowance under Section 10B.3. Allegation of change of opinion and limitation under Section 147.4. Verification of disallowance already made in the original assessment order.5. Compliance with Section 10B(3) regarding bringing amounts into the country.6. Directions for re-assessment proceedings and time frame for completion.Analysis:1. The appellant challenged re-assessment proceedings under Section 147 initiated by the Assessing Officer after the finalization of the assessment for the year 2005-06. The appellant contended that the re-assessment was proposed without providing reasons initially, but reasons were later communicated indicating disallowance under Section 10B. Appeals were pending against the original assessment and the subsequent order under Section 154.2. The appellant argued against the re-assessment on the grounds of change of opinion and limitation under Section 147. The appellant claimed that the deduction sought to be disallowed had already been disallowed in the original assessment order. The court found that the re-assessment was based on specific grounds communicated to the appellant, and there was no change of opinion. The court directed verification of the disallowance already made.3. Compliance with Section 10B(3) was a crucial aspect of the case. The appellant's claim for deduction under Section 10B required bringing amounts into the country within the specified time frame. Failure to comply with this provision could lead to suppression of facts. The court emphasized the importance of verifying compliance with Section 10B(3) during the re-assessment proceedings.4. The court directed the Assessing Officer to verify whether the amounts sought to be disallowed had already been disallowed in the original assessment order. If the disallowance had already been made, there would be no further disallowance on the same ground. The court highlighted the significance of orders passed in the appeal against the original assessment.5. Regarding the limitation under Section 147, the court held that the re-assessment within the six-year period was valid if the amounts had not been previously disallowed. The re-assessment proceedings were directed to be confined to the specific ground communicated to the appellant. The court granted the appellant an opportunity of hearing and set a three-month time frame for completing the exercise.6. In conclusion, the court modified the judgment of the learned Single Judge to provide specific directions for the re-assessment proceedings. The court disposed of the Writ Appeal without any order as to costs, emphasizing the importance of verifying the disallowance and ensuring compliance with Section 10B(3) during the re-assessment process.