2010 (10) TMI 803 - HC - Income Tax

Notice u/s 148 - Petitioner let out its plant and machinery and treated the income received to be business income - claimed deductions on the account of business expenses - Assessing Officer noticed that income of the assessee being from house property, business expenses could not be allowed to be deducted therefrom Held that - Reference may be made to CIT v. Rajesh Jhaveri (2007 -TMI - 6563 - SUPREME Court) noticing the scheme of law after 1.4.1989. The judgments relied upon do not deal with the case of reassessment after processing and are, thus, distinguishable. Plea of reassessment being illegal, when no satisfactory assessment was earlier made, cannot be accepted on the ground that the same was based on mere change of opinion

Summary

Issues:
1. Quashing of notice under Section 148 of the Income Tax Act, 1961
2. Rejection of objection to the notice for reassessment based on change of opinion

Analysis:
1. The petitioner sought to quash a notice under Section 148 of the Income Tax Act, 1961, and an order rejecting objections to the reassessment notice. The petitioner had treated income received from letting out plant and machinery as 'business income' and claimed deductions for business expenses. However, the Assessing Officer later realized that the income should have been categorized as from house property, disallowing the business expenses deduction. The petitioner argued that the reassessment was based on a mere change of opinion, citing relevant case laws.

2. The court noted that no scrutiny assessment had been conducted for the relevant assessment year, and only the return had been processed. Therefore, the Assessing Officer's decision was not a mere change of opinion but based on the income escaping assessment due to impermissible deductions claimed by the petitioner. The court referred to the case law of CIT v. Rajesh Jhaveri, highlighting the post-1.4.1989 legal framework. The court distinguished the judgments cited by the petitioner, emphasizing that they did not address reassessment after processing. The court held that the plea of illegal reassessment based on a mere change of opinion was not valid when no satisfactory assessment had been previously made. Consequently, the court dismissed the petition.

This judgment clarifies the distinction between reassessment based on a change of opinion and reassessment due to income escaping assessment. It underscores the importance of the legal framework post-1.4.1989 and the relevance of case laws in determining the validity of reassessment decisions.