2012 (7) TMI 519 - HC - Income Tax

Challenging reopening of assessment - Held that - If an AO calls for specific information relating to or in connection with the material before him, absent anything else, it is reasonable to presume that he had considered the material filed before him as well as the material called for by him before making the assessment order - There is no mention of the disclosure of the nature of payments in the assessment proceedings for A.Y. 2007-2008 which were absent in the proceedings for the relevant assessment year. The basis of the notice was thus unfounded on facts. Nor does he state that the absence of this unspecified lack of disclosure was not noticed by the AO. Disallowing a part of the claim under section 40A(i)for which material had been considered by the TPO and the AO in the assessment proceedings for the A.Y. 2004-2005 - held that - Since the facts were before the Assessing Officer at the time of framing the original assessment, and later a different view was taken by him or his successor on the same facts, it clearly amounts to a change of opinion not permitting the AO or his successor to reopen the assessment of the assessee - in favour of assessee.

Issues Involved:
1. Legality of the notice issued under section 148 of the Income Tax Act, 1961.
2. Validity of the reopening of the assessment for A.Y. 2004-2005.
3. Adequacy of the disclosure made by the petitioner during the original assessment proceedings.
4. Alleged change of opinion by the Assessing Officer (AO).

Detailed Analysis:

1. Legality of the Notice Issued Under Section 148:

The petitioner challenged the notice dated 28.3.2011 issued under section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for A.Y. 2004-2005. The court found that the reopening of the assessment was based only on a mere difference of opinion and not on the basis of any new material or the existence or even the realization of any provision of law or a judgment which had not been noticed earlier. The change of opinion occurred in the assessment proceedings for A.Y. 2007-2008, leading to the present proceedings for A.Y. 2004-2005.

2. Validity of the Reopening of the Assessment for A.Y. 2004-2005:

The petitioner had entered into several business support agreements with its ultimate parent company, Rabobank International, and had disclosed all relevant details during the original assessment proceedings. The court noted that the AO had considered the entire matter, including the arm's length price, in detail during the original assessment. The AO had before him the agreement and had come to the conclusion that the deduction sought was allowable under section 37, although a part was disallowed under section 40A(i) due to the petitioner not having deducted the TDS. The court concluded that the reopening of the assessment was unjustified as it was based on the same material that had already been considered by the AO and the Transfer Pricing Officer (TPO) during the original assessment.

3. Adequacy of the Disclosure Made by the Petitioner During the Original Assessment Proceedings:

The court found that the petitioner had made adequate disclosures during the original assessment proceedings. The details of the transactions, including the agreements between the petitioner and Rabobank International, had been forwarded to the AO and the TPO. The TPO and the AO had considered the same as well as all the relevant documents in connection therewith, including the invoices raised by Rabobank International on the petitioner. The court rejected the respondents' claim that there was a failure on the part of the petitioner to make a full and true disclosure of the nature of the services and assistance received from the holding company.

4. Alleged Change of Opinion by the AO:

The court held that the impugned notice and the subsequent order rejecting the petitioner's objections were based on a mere change of opinion. The reasons for reopening the assessment stated that during A.Y. 2007-2008, the petitioner was asked to produce details of the business support charges received from Rabobank International, and it was found that no substantial or specific services had been rendered. However, the court found that the material considered during A.Y. 2007-2008 was the same as that considered during A.Y. 2004-2005. The court concluded that this was a clear case of a change of opinion and nothing more.

The court cited several judgments, including those from the Bombay High Court and the Delhi High Court, to support its conclusion that a mere change of opinion does not justify the reopening of an assessment under sections 147 and 148 of the Income Tax Act, 1961.

Conclusion:

The Writ Petition was made absolute in terms of prayer (a). The impugned notice dated 28.3.2011 and the impugned order dated 27.3.2012 were quashed and set aside. There was no order as to costs.

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