A Division bench of the Bombay High Court held that the notice for reopening of assessment is invalid on mere belief of escapement of income when the deduction under Section 80JJAA had been consistently allowed in earlier years without a change in law.
The petitioner is engaged in information technology consulting, software development and business process services. Respondent no.1 is the Assistant Commissioner of Income Tax and Jurisdictional Assessing Officer (JAO), who issued the impugned notice of reassessment to the petitioner.
The respondent-revenue had passed the impugned order wherein it was held that, “The revenue audit has raised objection on the issue of claim of deduction under Section 80JJAA of the Act and hence, the objection of petitioner that there is no information which suggests that escapement of income is not tenable.”
On behalf of the petitioner, it was held that, “No income chargeable to tax which is represented in the form of ‘an asset’ has escaped assessment and, hence, the extended period of time limit specified in Section 149(1)(b) of the Act cannot apply.”
The only issue which remains for issuing the impugned notice is the claim of deduction under section 80JJAA of the Act. An issue of correctness of claim of deduction can never represent escapement of income in the form of an asset.
The claim of deduction under Section 80JJAA has been allowed to petitioner consistently since Assessment Year 2010-2011 and hence, respondent no.1 cannot allege escapement of income on account of claim being wrongly allowed in Assessment Year 2015-2016 when such claim stands allowed for earlier years on identical facts, i.e., with respect to the same business activity, the petitioner counsel further submitted.
The Division Bench of Justices Dr. Neela Gokhale and K R Shriram analyzed when the claim of deduction under Section 80JJAA of the Act has been consistently allowed in favour of petitioner by the Assessing Officers/ Appellate Authorities in the earlier years, can the Assessing Officer have a belief that there is escapement of income.
Notably, it was held that, “There is also no allegation regarding income escaping tax on account of any undisclosed asset. In the impugned order, the Assessing Officer has restricted the escapement of income only with regard to Rs.6,54,04,038/- on the claim of deduction under Section 80JJAA of the Act and disallowance of excess claim of Forex loss of Rs.6,90,80,180/-. On the Forex loss, respondent has prima facie accepted the contentions of petitioner that there was a Forex loss. Therefore, the same cannot be justified as an escapement of income.”
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