2012 (8) TMI 806 - HC - Income Tax

Re-opening of assessment - Held that - As that power to reopen an assessment is not a power to review an assessment the power to reassess has to be exercised only on fulfilment of certain pre conditions such as tangible material to come to a conclusion that there has been escapement of income - As in the present notice, it is an admitted position that facts had been disclosed and the AO passed his order of assessment on 28/3/2003 for the assessment year 2000-01. Further, the issue on which the assessment is being sought to be reopened was considered by the AO and accepted by his order dated 28/3/2003 and the present proceedings emanating from the notice dated 28/12/2004 under Section 147/148 is bad in law as the same is based on mere change of opinion - in favour of assessee.

Summary

Issues Involved:
Reopening of assessment under Section 147 of the Income Tax Act, 1961 based on change of opinion.

Analysis:
The appeal before the High Court pertained to the reopening of assessment for the assessment year 2000-01 by the revenue. The main issue raised was whether the notice issued under Section 148 of the Income Tax Act was valid, considering that the assessee had disclosed all facts truly and fully during the original assessment proceedings. The respondent-assessee had declared its income and explained the treatment of the sale of shares in its return of income. The Assessing Officer accepted the explanation and completed the assessment under Section 143(3) without making any addition to the book profit under Section 115JA of the Act.

Upon issuance of a notice under Section 148 in 2004, the Assessing Officer sought to reopen the assessment, alleging that income had escaped assessment due to the failure of the assessee to disclose all material facts. However, the Commissioner of Income Tax (Appeals) set aside the order of the Assessing Officer, citing the decision of the Supreme Court in Apollo Tyres Ltd. case, and held that the Assessing Officer had no reason to believe that income had escaped assessment.

The Tribunal also dismissed the revenue's appeal, noting that the reopening of the assessment was based on a change of opinion, as the Assessing Officer had already considered and accepted the explanation provided by the assessee during the original assessment proceedings. The Tribunal emphasized that the power to reopen an assessment is not a power to review, and it must be based on tangible material indicating income escapement, which was lacking in this case.

The High Court concurred with the findings of the Tribunal and held that the reopening of the assessment was unjustified as it was merely a change of opinion without any new material indicating income escapement. The Court highlighted that the Assessing Officer had duly applied his mind before accepting the assessee's explanation during the original assessment. Therefore, no substantial question of law arose for consideration, and the appeal was dismissed.

This judgment underscores the importance of adhering to the legal requirements for reopening assessments under the Income Tax Act and emphasizes that such actions must be based on concrete evidence of income escapement rather than a mere change of opinion.