S. 147: Reopening, even within 4 years, solely on the basis of a clarificatory retrospective amendment, is not permissible

In AY 2005-06 the assessee claimed deduction u/s 80IA(4) which was allowed u/s 143(3). Thereafter, within 4 years, the AO reopened the assessment on the basis that the retrospective amendment to s. 80IA(4) w.e.f. 1.4.2000 prohibited deduction to an assessee who was carried on business is in the nature of a works contract. The assessee challenged the reopening on the ground that the retrospective amendment was merely clarificatory of the existing law and amounted to a ‘change of opinion’. HELD by the High Court allowing the plea:

In Katira Construction 352 ITR 513 (Guj) it was held that the Explanation to s. 80IA(4) was purely explanatory in nature and did not mend the existing statutory provisions. If an Explanation is added to a statute for the removal of doubts, the implication is that the law was same from the beginning and the same is further explained by way of addition of the Explanation. Therefore, it is not a case of introduction of new provision of law by retrospective operation, but when all the materials regarding activities of the assessee are available on record and the benefit of the provision is already made available to such assessee, reassessment proceedings cannot be initiated only on account of addition of such Explanation. On facts, as the AO had conducted a detailed scrutiny before allowing the s. 80-IA(4) deduction, the reopening based only on the retrospective insertion of the Explanation is on mere “change of opinion” (Parikshit Industries 352 ITR 349 (Guj) & Agrawal J.V. 83 DTR 101 (Guj) followed)