2005 (2) TMI 856 - HC - Income Tax

Summary

Issues:
1. Validity of confirming the order of cancellation of assessment made by the Assessing Officer after reopening the case under section 147 of the Income-tax Act, 1961.

Analysis:
The High Court was presented with the issue of whether the Tribunal was correct in law to uphold the cancellation of assessment made by the Assessing Officer after reopening the case under section 147 of the Income-tax Act, 1961. The original assessment for the year 1985-86 was completed by the Assessing Officer under section 143(1) of the Act. Subsequently, a notice was issued for reopening the assessment as the Assessing Officer believed that the investment in National Saving Certificates was made using loans, not taxable income. The Deputy Commissioner of Income-tax (Appeals) canceled the reassessment, stating that a mere change of opinion by the Assessing Officer was insufficient to invoke the provisions of section 147 read with section 148 of the Act. The Tribunal upheld this decision, leading to an appeal by the revenue that was dismissed.

The Court considered the settled legal principles established by various judgments, including the Supreme Court's decisions in Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 and Ganga Saran & Sons (P.) Ltd. v. ITO [1981] 130 ITR 11. Reference was made to the Full Bench judgment of the Delhi High Court in CIT v. Kelvinator of India Ltd. [2002] 256 ITR 12, which emphasized that a mere change of opinion cannot be the basis for reopening a completed assessment. The Court also cited the Division Bench decision in CIT v. Atlas Cycle Industries [1989] 180 ITR 3191, which upheld the cancellation of reassessment due to non-existent grounds.

Based on the established legal precedents and following the law laid down in previous cases, the High Court answered the question referred by the Tribunal in the affirmative, favoring the assessee and ruling against the revenue. The Court reiterated that section 147 of the Act does not empower the Assessing Officer to initiate reassessment proceedings solely on the basis of a mere change of opinion, emphasizing the importance of valid grounds for reopening assessments and the need for proper application of mind in assessment orders.