S. 147: Retrospective amendment no basis beyond 4 years. AO not to delay passing objection order
For AY 2005-06, the AO passed a s. 143(3) order in which he allowed s. 80-IA deduction. Thereafter, after the expiry of 4 years, he reopened the assessment u/s 147 on the ground that in view of the retrospective amendment to the Explanation to s. 80-IA by the F (No. 2) Act 2009 w.r.e.f. 1.4.2000, the assessee, being a works contractor, was not eligible for s. 80-IA deduction. The AO took 6 months to deal with the objections and passed the assessment order within 2 weeks. On a Writ Petition filed by the assessee to challenge the assessment order, HELD allowing the Petition:
(i) The fact that by virtue of the Explanation to s. 80IA added with retrospective effect from 1.4.2000, income derived from the works contract would not qualify for deduction u/s 80IA does not mean that an assessment can be reopened beyond 4 years without there being any failure to disclose truly and fully all material facts (Sadbhav Engineering 333 ITR 483(Guj) followed);
(ii) The argument that the assessee failed to disclose the nature of works executed and that the same was executed only as works contractor and not as a developer, cannot be accepted for two reasons. Firstly, the reasons recorded do not refer to such a ground. Secondly, when the assessee filed the return of income, the Explanation in question was not in picture. The assessee cannot be expected to comply with the requirements of such Explanation by making disclosures in this regard which Explanation did not form part of the statute book when he filed his return;
(iii) The AOs have a tendency to delay disposing of the objections and, thereafter at the fag end of final time limit, to frame the assessment. This tendency is not approved. This was not the intention of the Apex Court when GKN Driveshafts (India) Ltd. vs. ITO 259 ITR 19 (SC) was rendered. This should be brought to the notice of the AOs by the Department so that such instances do not recur in future.