HC Strikes Down Reopening of Accepted Section 80-IA Claim

The Bombay High Court quashed reassessment proceedings initiated against Chennai Container Terminal Pvt. Ltd. for AY 2014-15, holding that the reopening was based on an incorrect interpretation of Section 80-IA and was barred by the first proviso to Section 147 as there was no failure by the assessee to fully and truly disclose material facts.

The petitioner, engaged in developing, operating and maintaining the container terminal at Bharathi Dock, Chennai Port, had been claiming a deduction under Section 80-IA since AY 2008-09. The deduction was consistently allowed in scrutiny assessments, including for AY 2014-15. However, in March 2021, the Assessing Officer reopened the assessment, alleging that the infrastructure enterprise was owned by a Mauritius-based company and that the assessee was merely operating an existing facility rather than developing a new infrastructure facility.

The assessee contended that all relevant facts, including its shareholding structure, licence agreement, nature of business, and eligibility for deduction under Section 80-IA, had been fully disclosed through its return of income, annual reports, tax audit reports and transfer pricing documentation. It further argued that the reopening amounted to a mere change of opinion.

Agreeing with the assessee, the High Court held that the Revenue had wrongly equated the petitioner company with the “enterprise” referred to in Section 80-IA(4). The Court observed that the relevant enterprise was the Bharathi Dock undertaking owned by the petitioner, which was an Indian company satisfying the statutory requirement. The Court also noted that the authorities had ignored substantial infrastructure investments made by the petitioner, including the installation of quay gantry cranes and rubber-tyred gantry cranes costing over Rs 352 crore.

The Court further found that all facts relied upon in the reasons recorded for reopening were already available on record and had been disclosed during the original scrutiny assessment. Since the notice under Section 148 was issued after the expiry of four years from the end of the assessment year, reopening was permissible only if there had been a failure to disclose material facts, which was absent in the present case.

Holding that the reassessment proceedings were unsustainable, the Court quashed the notice issued under Section 148, the order rejecting objections, and the subsequent show-cause notice along with the draft assessment order.

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