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2012 (12) TMI 688 - HC - Income TaxReassessment of an assessment within four years - Notice u/s 148 - capital assets u/s 2(14) - change of opinion - held that - It is true that the impugned notice has been issued within a period of four years from the end of relevant assessment year. Therefore, the requirement that the income chargeable to tax should have escaped assessment for the reason of the failure on the part of the assessee to disclose truly and fully all material facts need not be established. However, as held by the Apex Court in case of Commissioner of Income-Tax Vs. (1) Kelvinator of India Ltd. (2) Eicher Ltd. (2010 (1) TMI 11 - SUPREME COURT OF INDIA) reopening even within four years would not be permissible on a mere change of opinion. Similarly in a recent decision Full Bench of Delhi High Court by a majority opinion in case of Commissioner of Income Tax Vs. Usha International Ltd. 2012 (9) TMI 767 - DELHI HIGH COURT held that Reassessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the AO does not make any addition in the assessment order. In such situations it should be accepted that the issue was examined but the AO did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because the AO had formed an opinion in the original assessment, though he had not recorded his reasons. Notice quashed - Decided in favor of assessee.
Issues Involved:
1. Legality of reopening completed assessments under Section 148 of the Income Tax Act, 1961. 2. Whether the reopening of assessment was based on a mere change of opinion. Detailed Analysis: 1. Legality of Reopening Completed Assessments: The petitioners challenged the notices issued by the Assessing Officer (AO) under Section 148 of the Income Tax Act, 1961, for reopening completed assessments. The petitioners, a co-operative society, had filed a return of income for the assessment year 2007-08, declaring a total income of Rs. 37,32,950/-. This return was scrutinized by the AO, who raised several queries and received detailed replies from the petitioner. The AO eventually framed the scrutiny assessment under Section 143(3) of the Act, accepting the computation of income as declared by the petitioner. The AO later issued a notice on 29.03.2012 to reopen the assessment, stating that the income from the sale of plots should be treated as business income rather than long-term capital gain. The petitioner objected to this reopening, but the AO rejected the objections, leading to the current petition. 2. Reopening Based on Mere Change of Opinion: The petitioner argued that the reopening was based on a mere change of opinion, as the AO had already scrutinized and accepted the return during the original assessment. The petitioner cited several judgments to support this contention, including the cases of Commissioner of Income-Tax Vs. Kelvinator of India Ltd., Gujarat Power Corporation Ltd. Vs. Assistant Commissioner of Income Tax, and Commissioner of Income Tax Vs. Usha International Ltd. The court noted that during the original assessment, the AO had thoroughly examined the petitioner's claim of long-term capital gain from the sale of plots. The AO had raised specific queries and received detailed responses from the petitioner. The court emphasized that the AO had scrutinized the entire claim before passing the assessment order, and any deviation from this decision would constitute a change of opinion. The court referred to the judgment in the case of Gujarat Power Corporation Ltd. Vs. Assistant Commissioner of Income Tax, which held that reopening an assessment based on a mere change of opinion is not permissible. The court also cited the Full Bench decision of the Delhi High Court in Commissioner of Income Tax Vs. Usha International Ltd., which stated that reassessment proceedings would be invalid if the AO had formed an opinion during the original assessment, even if no reasons were recorded in the assessment order. Conclusion: The court concluded that the AO's attempt to reopen the assessment was based on a mere change of opinion, as the AO had already scrutinized and accepted the petitioner's claim during the original assessment. The court quashed the impugned notice dated 29.03.2012 and allowed the petitions, stating that the respective impugned notices in all petitions would stand quashed.
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