2012 (2) TMI 407 - HC - Income Tax

Validity of Assessment under 147 after Intimation under 143(1) But no notice under 143(2) - Held That - It is open to Revenue to issue notice u/s 147/148 even if notice u/s 143(2) was never issued or for that matter even if assessment u/s 143(3) had taken place. Income Escaping assessment 147 - Change of opinion - two business - Seprate books of account maintained - common expense pertaining to all unit claimed for deduction under 80IA - Held That - whether appellant was entitled to deductions or not, already stood examined, considered and adjudicated by the Assessing officer in the previous years.Its not the case that assessee suppressed information or relevant facts were not disclosed neither it was based on report of audit party. Re-asseement is invalid

Issues Involved:
1. Justification of the Income Tax Appellate Tribunal in reversing the order of the CIT(A) and confirming the issuance of notice under Section 148 of the Income Tax Act, 1961.
2. Legality of the Income Tax Appellate Tribunal's reliance on audit objections for reversing the order of the CIT(A) and confirming the issuance of notice under Section 148 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Justification of the Income Tax Appellate Tribunal in reversing the order of the CIT(A) and confirming the issuance of notice under Section 148 of the Income Tax Act, 1961:

The appellant, a partnership firm with various business units, filed returns for the years 1997-98, 1998-99, and 2000-2001, claiming deductions under Section 80-IA of the Income Tax Act, 1961. The returns were initially accepted without issuing notices under Section 143(2). However, the Assessing Officer (A.O.) later reopened the assessments under Section 147 by issuing notices under Section 148, citing that common expenses were incorrectly deducted before claiming deductions under Section 80-IA. The reassessment orders were challenged and initially quashed by the CIT(A), but the ITAT reversed this decision.

The High Court examined whether the reopening of assessments was justified. It was noted that the appellant had consistently followed the same practice for previous years, which had been accepted by the revenue. The court emphasized that there was no omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The reasons for reopening did not disclose any new fact or information, merely a change in the method of apportioning expenses. The court held that the Assessing Officer had no reason to believe that income had escaped assessment and that mere change of opinion on the same set of facts is impermissible in law. Therefore, the court found that the ITAT was not justified in reversing the CIT(A)'s order.

2. Legality of the Income Tax Appellate Tribunal's reliance on audit objections for reversing the order of the CIT(A) and confirming the issuance of notice under Section 148 of the Income Tax Act, 1961:

The court addressed whether audit objections could constitute valid information for reopening assessments. It referred to the Supreme Court's decision in Indian & Eastern Newspaper Society v. CIT, which held that the opinion of an audit party on a point of law cannot be regarded as information within the meaning of Section 147(b). The court found that in the present case, the audit objection did not bring any new material to light but merely suggested a different interpretation of existing facts. The court concluded that the reassessment based on audit objections was not valid, as it constituted a mere change of opinion, which is not permissible.

Conclusion:

The High Court concluded that the ITAT's decision to reverse the CIT(A)'s order and confirm the issuance of notice under Section 148 was not justified. It held that there was no new material or information to warrant the reopening of assessments and that the reliance on audit objections was impermissible. The appeals were allowed, and the impugned orders were set aside.

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