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2012 (2) TMI 283 - HC - Income TaxValidity of reopening of assessment A.Y. 06-07 sought to be reopened on the basis of an order of assessment for A.Y. 07-08 framed after scrutiny - Petitioner, wholly owned subsidiary of a non resident shipping line retention of US 1.5 per day per container collected on behalf of the principal between 1993 to 2009 as administration charges in accordance with norms prescribed by RBI - offered the same as its own income during the period 1993 to 2009 for A.Y. 2010-11 Held that - The Assessee in the present case had made a disclosure in the notes forming part of the accounts of the nature of payments required to be made to the foreign principal on account of Container Detention Charges. Moreover, entire amount has been offered to tax. There was no tangible material, no new information and no fresh material which came before the Revenue in the course of assessment for A.Y. 2007-08 which can justify the reopening of the assessment for Assessment Year 2006-07 Decided in favor of assessee.
Issues Involved:
1. Reopening of Assessment 2. Disclosure of Material Facts 3. Change of Opinion 4. Tangible Material 5. Jurisdiction of Assessing Officer Issue-wise Detailed Analysis: 1. Reopening of Assessment: The case involves the reopening of an assessment for the Assessment Year 2006-07 by a notice dated 28 March 2011. The reopening was challenged by the Petitioner under Article 226 of the Constitution. The Petitioner argued that the reopening was based on an order of assessment for a subsequent year (2007-08) and constituted a mere change of opinion, which is impermissible under the law. The Court emphasized that even within a period of four years, an assessment cannot be reopened on the basis of a mere change of opinion. The Supreme Court in Commissioner of Income Tax v/s Kelvinator of India Ltd. [2010] 320 ITR 561 (SC) stated that there must be "tangible material" to come to a conclusion that there is an escapement of income from assessment. 2. Disclosure of Material Facts: The Petitioner had made a full disclosure of facts regarding the Container Detention Charges (CDCs) in the notes forming part of accounts and in a letter dated 18 November 2009 during the course of assessment proceedings. The statutory auditors also included a note in their report. The Court noted that the Assessing Officer did not make any specific observation on the CDCs in the original assessment order, indicating that the matter was considered and accepted. 3. Change of Opinion: The Court held that the reopening of the assessment based on a different conclusion reached by the Assessing Officer for a subsequent year (2007-08) does not justify the reopening for the earlier year (2006-07). The Court cited the Division Bench's observation in Idea Cellular Ltd. v/s Deputy Commissioner of Income Tax [2008] 301 ITR 407 (Bom), which stated that if all material was before the Assessing Officer and he chose not to deal with it in his final assessment order, it cannot be said that he had not applied his mind. 4. Tangible Material: The Court found that there was no new information or material brought on record during the assessment proceedings for the subsequent year (2007-08) that was not available during the original assessment for the year 2006-07. The Supreme Court in Raymond Woollen Mills Ltd. v/s Income Tax Officer [1999] 236 ITR 34 (SC) held that reopening is valid if new information is obtained in the assessment proceedings of a subsequent year. However, in this case, all relevant material was already available during the original assessment. 5. Jurisdiction of Assessing Officer: The Court emphasized that the power to reopen assessments is structured by law and must be based on tangible material. The guiding principles laid down by the Supreme Court in Kelvinator (supra) must be fulfilled. The Court concluded that there was no tangible material, new information, or fresh material that justified the reopening of the assessment for the year 2006-07. Conclusion: The Court allowed the petition, quashing and setting aside the impugned notice dated 28 March 2011. The reopening of the assessment for the year 2006-07 was deemed unjustified as it was based on a mere change of opinion without any tangible material or new information. The entire amount collected between 1993 to 2009 was offered to tax in the subsequent Assessment Year 2010-11, further supporting the Petitioner's position. There was no order as to costs.
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