Amendment to S.80HHC of Income Tax Act Cannot be applied Retrospectively: Delhi HC Quashes Notices u/s 147/148 [Read Order]

In a recent ruling, the Delhi High Court, reinforcing taxpayer certainty and limits on retrospective taxation, quashed a reassessment notice issued to a petitioner, holding that the reopening of the assessment based on a retrospective amendment to Section 80HHCof the Income Tax Act, 1961 was legally unsustainable.

The petitioner, Goldtex Furnishing Industries, challenged the notice dated 30 March 2007 issued by income tax department under sections 147 and 148 of the Act.

The reassessment proceedings were initiated, allegedly based on retrospective amendments to Section 80HHC, which governs deductions in respect of profits derived from the export of goods.

The section gave tax deduction on profit from exports for eligible Indian companies and residents. Profit calculation differs for manufactured and trading goods.

In the present case, Kanika Sethi appeared on behalf of the petitioner, Goldtex Furnishing Industries, and on the side of the respondents, the Union of India and others, was represented by Shlok Chandra, SSC, Naincy Jain and Madhavi Shukla, and Udit Dad.

The court noted that the retrospective option of amendments to Section 80HHC had already been settled to be ultra vires by the Gujarat High Court, and said view was later affirmed by the Supreme Court in the case of Commissioner of Income Tax v. Avani Exports reported in (2015) and Saroj Dassani v. UOI (2006).

Saroj Dassani v. UOI, their it was held:-

“Having seen the twin conditions and since 80HHC benefit is not available after 1.4.05, we are satisfied that cases of exporters having a turnover below and those above 10 cr. Should be treated similarly. This order is in substitution of the judgment in Appeal”.

6. The consequence of the judgment dated 30.03.2015 of Hon’ble the Supreme Court, is that irrespective of the amount involved, the amendment brought in Section 80HHC of the Act of 1961 cannot be given retrospective effect.”

The bench of Justice Dinesh Mehta and Justice Vinod Kumar held that the impugned notice under Section 148 was legally invalid, as it was founded entirely on an amendment that had been declared non-retrospective by the Supreme Court.

Accordingly, the petition was allowed, and the court quashed the reassessment notice and disposed of all pending applications.

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