2008 (7) TMI 954 - HC - Income Tax

Initiation of reopening proceedings u/s 148 - mere change of opinion - income has escaped assessment - Whether the original assessment made in AY 1991-92 u/s. 143(1)(a) could resort to proceedings u/s. 147 be termed as based on mere change of opinion? - HELD THAT - The judgment rendered in Phool Chand Bajrang Lal s case 1993 (7) TMI 1 - SUPREME COURT it was held that sufficiency of reasons for forming the belief is not for the Court to judge. Here No subsequent information or material have come to the notice of the AO to enable him to form a requisite belief that any particular income has escaped assessment which was liable to be assessed. we again pointedly asked the learned counsel for the Revenue to point out as to how these findings are wrong and to show even to us if there is any material which might have come to the notice of the AO subsequently but the learned counsel for the Revenue could not point out any one. That being the position in our view it was rightly found by the learned CIT(A) and the learned Tribunal that it was merely a change of opinion on the part of the learned AO about admissibility of claim of depreciation on tractors and in view of the judgment of Hon ble the Supreme Court in CIT vs. Bhanji Lavji s case 1971 (1) TMI 6 - SUPREME COURT the AO could not initiate reassessment proceedings. Therefore question No. 1 is answered against the Revenue and it is held that the resort to proceedings u/s. 147 was outcome of mere change of opinion. So far as question No. 2 is concerned in our view it does not arise in the present case. Thus we do not find any force in the appeal and the same is therefore dismissed.

Summary

Issues:
1. Validity of resorting to proceedings under section 147 based on a change of opinion.
2. Requirement for resorting to section 147 if the Assessing Officer fails to make regular assessment under section 143 within the permitted time.

Issue 1: Validity of resorting to proceedings under section 147 based on a change of opinion

The case involved an appeal by the Revenue against a Tribunal judgment. The primary issue was whether initiating proceedings under section 147 for the assessment year 1991-92, after an original assessment under section 143(1)(a), constituted a mere change of opinion. The Assessing Officer (AO) issued a notice under section 148 in 1997, claiming under-assessment due to depreciation on tractors. The AO disallowed the depreciation claimed by the assessee as it was utilized for agricultural purposes. The CIT(A) and Tribunal found that the AO's action was unjustified as the facts were disclosed in the original return and there was no new information to support the reassessment. The Tribunal cited the Supreme Court judgment in CIT vs. Bhanji Lavji, emphasizing that reassessment cannot be based on a change of opinion. The Tribunal dismissed the Revenue's appeal, affirming that the reassessment was unwarranted.

Issue 2: Requirement for resorting to section 147 if the Assessing Officer fails to make regular assessment under section 143 within the permitted time

The second substantial question of law raised whether resorting to section 147 was permissible if the AO failed to conduct a regular assessment under section 143 within the stipulated time after an assessment under section 143(1)(a). However, the Court found that this issue did not apply to the case at hand, as there was no failure on the part of the AO to make a regular assessment within the prescribed timeframe. Therefore, the Court held that this question did not arise in the present scenario.

In conclusion, the Court dismissed the appeal, ruling against the Revenue and affirming that the resort to proceedings under section 147 was solely based on a change of opinion without any new material or information justifying reassessment. The judgment highlighted the importance of not initiating reassessment proceedings on the grounds of a mere change of opinion, emphasizing the need for valid reasons supported by fresh information to justify reopening completed assessments.