[Sec 147] Reopening not justified only on the basis of Reversal of Law by higher court

The Honorable Supreme Court in its judgement dated 11th September, 2012 has held that change in legal position due to reversal of a judgement by a higher court is not a valid ground for reopening of assessment u/s 147 when the assessment was finalised on the basis of law in force at the time of assessment. In this case the department intended to reopen assessment u/s 147 when Supreme Court reversed the judgement of High Court with regard to benefit of Section 80HH to Civil Construction. The original assessment of the assessee was completed based on the judgement of High Court and when the same was reversed by the Honorable Supreme Court the department based on the judgement intended to reopen the finalised assessment. The Supreme Court held that reversal of law by higher court is not a valid reason to reopen assessment finalised on the basis of law in force at the time of assessment. The text of the judgement is produced below for your reference.

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.2329 OF 2006

Dy. Commissioner of Income Tax & Ors. …Appellant(s)

Versus

M/s. Simplex Concrete Piles (India) Limited …Respondent(s)

With Civil Appeal No.2331 of 2006, Civil Appeal No.2330/06 and Civil
Appeal No.6404/2012 @ S.L.P.(C) No.18237/2006:

O R D E R

Civil Appeal No.2329 of 2006 and Civil Appeal No.6404 of 2012 @ S.L.P. (C) No.18237 of
2006:

Heard learned counsel on both sides.

Leave granted.

We see no error in the observation made by the Division Bench of the High Court in the impugned judgement that once limitation period of four years provided under Section 147/149(1A) of the Income Tax Act, 1961, [for short, `the Act’] expires then the question of reopening by the Department does not arise. In any event, at the relevant time, when the assessment order got completed, the law as declared by the jurisdictional High Court, was that the civil construction work carried out by the assessee would be entitled to the benefit of Section 80HH of the Act, which view was squarely reversed in the case of Commissioner of Income-Tax vs. N.C. Budharaja and Co. and Another, reported in [1993] 204 ITR 412. The subsequent reversal of the legal position by the judgment of the Supreme Court does not authorise the Department to reopen the assessment, which stood closed on the basis of the law, as it stood at the relevant time.

The civil appeals are, accordingly, dismissed No order as to costs.

Civil Appeal No.2331 and Civil Appeal No.2330 of 2006:

Since the tax amount is meager, the civil appeals are dismissed. No order as to costs.

…………………….CJI.

[S.H. KAPADIA]

………………………J.
[MADAN B. LOKUR]
New Delhi,
September 11, 2012.