2012 (9) TMI 645 - HC - Income Tax

Re-assessment proceedings u/s 148 - profit on sale of investment should be credited to P/L A/C for the purpose of computing the book profit u/s 115JA - Held that - Power to reopen an assessment is not a power to review an assessment as held in CIT Vs. Kelvinator India Limited 2010 (1) TMI 11 - SUPREME COURT OF INDIA . 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. 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, thus 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. 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 - no failure to disclose fully and truly all material facts on the part of the assessee and due consideration of the same was done before passing the assessment order dated 28/3/2003 - against Revenue.

Issues Involved:
Reopening of assessment under Section 147/148 of the Income Tax Act, 1961 based on change of opinion, failure to disclose true and full particulars during original assessment, applicability of the decision in Apollo Tyres Ltd. case, power of Assessing Officer to reassess, and the legality of the reassessment notice issued within the statutory time frame.

Analysis:

1) Reopening of Assessment Based on Change of Opinion:
The main issue in this case revolves around the legality of reopening the assessment for the assessment year 2000-01 under Section 147/148 of the Income Tax Act. The appellant-revenue contended that the assessment was reopened merely on account of a change in opinion, which is impermissible under the law. The Tribunal dismissed the revenue's appeal, stating that the reassessment was indeed based on a change of opinion, as the respondent had already addressed the Assessing Officer on the matter in question during the original assessment proceedings. The Tribunal found that the Assessing Officer had accepted the respondent's explanation before, indicating that there was no failure to disclose true and full particulars. Therefore, the reassessment was deemed invalid.

2) Failure to Disclose True and Full Particulars:
Another significant issue was whether the respondent had failed to disclose all material facts necessary for the assessment during the original assessment proceedings. The Commissioner of Income Tax (Appeals) and the Tribunal both held that the respondent had indeed disclosed all relevant facts, and the Assessing Officer had considered and accepted these disclosures before finalizing the original assessment. The Tribunal concluded that there was no failure on the part of the respondent to provide true and full particulars, further supporting the decision to dismiss the appeal.

3) Applicability of Apollo Tyres Ltd. Decision:
The decision in the Apollo Tyres Ltd. case was crucial in this judgment. The Commissioner of Income Tax (Appeals) emphasized that the Assessing Officer's actions were in line with the principles laid down in the Apollo Tyres Ltd. case. The Tribunal also referenced this decision in determining that the reassessment notice was invalid. The case law played a significant role in establishing the legality of the original assessment and the subsequent reassessment attempt.

4) Power of Assessing Officer to Reassess:
The judgment highlighted the distinction between the power to reassess and the power to review an assessment. Citing the Commissioner of Income Tax Vs. Kelvinator India Limited case, it was noted that the Assessing Officer can reassess under Section 147 of the Act but cannot review the assessment. The conditions for reassessment, including the existence of tangible material indicating income escapement, were underscored. The Tribunal found that the reassessment notice in this case lacked the necessary grounds for valid reassessment, further reinforcing the dismissal of the appeal.

5) Legality of Reassessment Notice within Statutory Time Frame:
Lastly, the judgment addressed the timing of the reassessment notice issued under Section 148 of the Act. The Tribunal found that the notice issued on 20/12/2004 for the assessment year 2000-01 was invalid as it was based on a change of opinion and not on any new material indicating income escapement. The Tribunal's decision to dismiss the appeal was supported by the conclusion that the reassessment notice was legally flawed and did not meet the requirements for valid reassessment.

In conclusion, the High Court of Bombay dismissed the appeal by the appellant-revenue, emphasizing that no substantial question of law arose for consideration. The judgment highlighted the importance of adhering to legal principles, including the prohibition on reassessment based solely on a change of opinion and the necessity of full and true disclosure of material facts during assessment proceedings.

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