ROYAL INFRASTRUCTURE vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1(2)(1)

Facts

The petitioner, Royal Infrastructure, filed its return of income for Assessment Year 2012-13 on August 4, 2012, claiming a deduction of Rs. 35,99,664 under Section 80IB of the Income Tax Act, 1961. The case was selected for scrutiny, and notices under Section 143(2) and 142(1) were issued. The Assessing Officer (AO) specifically asked for justification of the deduction under Chapter VI, particularly Section 80IB(10), and the petitioner provided details of buyers for its Springwood Residency project. The AO passed an order under Section 143(3) on February 4, 2015, accepting the return. Subsequently, on March 28, 2018, the respondent Deputy Commissioner of Income Tax issued a notice under Section 148 to reopen the assessment for AY 2012-13. The petitioner objected, but the objections were rejected. This petition challenges the Section 148 notice.

Held

The High Court held that the Assessing Officer (AO) had validly assumed jurisdiction under Section 147 of the Income Tax Act, 1961, to reopen the assessment. The court found that the reopening was sought beyond four years from the end of the relevant assessment year. Crucially, the court determined that the petitioner had disclosed all material facts necessary for its assessment during the original scrutiny. The AO had examined the claim for deduction under Section 80IB(10) in detail, calling for various information and accepting the claim. The fact that the AO did not examine the claim from the specific angle of clauses (e) and (f) of Section 80IB(10) (regarding allotment of multiple units to one individual or their family) did not constitute a failure on the part of the assessee to disclose material facts. Instead, it amounted to a mere change of opinion by the AO. The court relied on its decision in Cliantha Research Ltd. v. Deputy Commissioner of Income-tax, [2014] 225 Taxman 102 (Gujarat), which held that a reassessment based on a change of opinion, even within four years, is not permissible if all facts were disclosed. Therefore, the assumption of jurisdiction by the AO under Section 147 was invalid, rendering the impugned notice unsustainable. The petition was allowed, and the notice was quashed and set aside.

Key Issues

1. Whether the Assessing Officer has validly assumed jurisdiction under Section 147 of the Income Tax Act, 1961, to reopen the assessment for Assessment Year 2012-13, beyond a period of four years from the end of the relevant assessment year, when the reopening is based on material already on record and a mere change of opinion? Assessee's contentions: The assessee argued that the reopening notice dated March 28, 2018, is beyond four years from the end of AY 2012-13. The reasons for reopening are based on material already available during the original assessment, including details of buyers for the Section 80IB(10) deduction, which the AO had examined and accepted. Therefore, the reopening is based on a mere change of opinion and lacks the necessary failure of the assessee to disclose material facts fully and truly. Revenue's contentions: The revenue contended that seven flats were sold to family members or the same individual, contravening clauses (e) and (f) of Section 80IB(10), which restrict allotment of more than one residential unit in a housing project to any one individual, their spouse, or minor children. This violation disentitles the assessee to the deduction.