2011 (5) TMI 665 - HC - Income Tax

Reopening of the assessment and for enhancement of the income returned by the assessee - assessing authority mentioned that the value of the tanker is not included in the capital account and that the expenses was wrongly debited - valuation of the tanker lorry shows that the enhancement is sans any material any document or any information in the possession of the assessing authority of a definite nature - In the absence of these important prerequisites to an exercise of power under section 148/147 of the Act the formation of belief by the assessing authority on an inference drawn by him does not satisfy the test of there being any definite material or information coming within his possession for drawing such a conclusion and cannot be upheld. Rejection of the claim - driver s expenses - assessing authority did take note of the expenses claimed by the petitioner upon verification of the papers books of account etc. and after disallowing 5 per cent. of the such expenses added the amount towards his income - finding of the successor-in-office ignoring the findings of the predecessor on the issue and disallowing the same in its entirety - change of opinion on the same set of facts and cannot be permitted - writ petition is allowed

Issues Involved

1. Validity of the impugned order of assessment under Section 147 of the Income-tax Act, 1961.
2. Justification for reopening the assessment under Section 148 of the Income-tax Act.
3. Legitimacy of the additions made to the petitioner's income by the assessing authority.
4. Jurisdiction of the assessing authority to reassess based on a change of opinion.
5. Rejection of the petitioner's claimed driver's expenses.

Detailed Analysis

1. Validity of the Impugned Order of Assessment under Section 147 of the Income-tax Act, 1961

The petitioner challenged the assessment order passed by the Income-tax Officer under Section 147 of the Income-tax Act, arguing that it did not satisfy the parameters for such exercise. The petitioner contended that the reassessment was based on a mere change of opinion by the successor-in-office of the assessing authority, which is not permissible under the law.

2. Justification for Reopening the Assessment under Section 148 of the Income-tax Act

The court examined whether the reasons recorded for reopening the assessment under Section 148 were valid. The reasons included non-crediting of payment from Indian Oil Corporation in the profit and loss account, non-mention of the number of lorries, and non-inclusion of the value of the tanker in the capital account. The court found that the reasons were not sufficient to justify reopening the assessment, as they were based on presumptions and not on tangible material.

3. Legitimacy of the Additions Made to the Petitioner's Income by the Assessing Authority

The assessing authority had made two additions to the petitioner's income: an estimated value of the tanker lorry at Rs. 1,50,000 and disallowance of truck driver's expenses amounting to Rs. 33,500. The court found that these additions were made without any conclusive finding or definite material, and were based merely on inferences and presumptions. The court held that the assessing authority could not enhance the income on such a basis.

4. Jurisdiction of the Assessing Authority to Reassess Based on a Change of Opinion

The court reiterated that the power vested under Section 148 of the Act cannot be exercised on mere presumption or a different opinion on a given set of facts. The court cited the Supreme Court's judgment in CIT v. Kelvinator of India Ltd., which held that there must be "tangible material" for reopening a case. The court found that the reassessment in this case was a result of a mere change of opinion by the successor-in-office and thus was not justified.

5. Rejection of the Petitioner's Claimed Driver's Expenses

The court noted that the driver's expenses claimed by the petitioner were already considered and partially disallowed (5%) in the original assessment order. The successor-in-office's decision to disallow the entire amount was seen as a change of opinion on the same set of facts, which is not permissible. The court held that the original assessment had already taken these expenses into account, and the reassessment on this ground was not valid.

Conclusion

The court concluded that the impugned order of assessment dated December 18, 2007, and the revisional order dated June 12, 2009, did not meet the legal requirements for reopening an assessment under Sections 147 and 148 of the Income-tax Act. The court set aside these orders and allowed the writ petition without any order as to costs.

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