2014 (1) TMI 1494 - HC - Income Tax

Validity of reopening of assessment u/s 147 - Held that - In the earlier order of the court directing the Tribunal to reconsider the reasons recorded for reopening of assessment - The Tribunal failed to apply its mind whether the reasons recorded constitutes change of opinion - The issue has been restored for fresh adjudication by the Tribunal.

Summary

Issues:
1. Reopening of assessment based on Supreme Court judgment in Orissa State Warehousing Corporation case.
2. Compliance with directions given by the High Court in previous order.
3. Application of law regarding change of opinion in reassessment proceedings.

Analysis:
1. The case involved the reopening of assessment for AY 1995-96 by the Assessing Officer based on the Supreme Court judgment in Orissa State Warehousing Corporation case. The appellant, a statutory corporation, claimed exemption under Section 10(29) for income derived from warehousing activities. The High Court directed the Tribunal to reconsider the matter to determine if the reasons to believe for reopening constituted a mere change of opinion. The Tribunal rejected the appellant's appeal, stating that the AO was justified in reassessing to align with the Supreme Court judgment. The Tribunal held that the reassessment was not a change of opinion but an implementation of the law established by the Supreme Court, thus upholding the reopening of assessment.

2. The High Court found that the Tribunal failed to follow the directions given in the previous order regarding the specific issue of whether the reasons to believe constituted a change of opinion. The Tribunal's order did not address this key aspect, leading to a lack of application of mind to the Court's directions. The Court emphasized the importance of considering the change of opinion aspect in cases challenging notices under Section 148, citing the Supreme Court's ruling in Kelvinator case. As a result, the Court remitted the matter back to the Tribunal for fresh consideration to ensure compliance with its directions and to provide specific findings on whether the reasons to believe indicated a change of opinion.

3. The Tribunal's decision was based on the application of law regarding change of opinion in reassessment proceedings. The Tribunal held that the AO's reassessment was in line with the law established by the Supreme Court, as subsequent judgments constitute the law of the land. The Tribunal found that the reassessment was not a mere change of opinion but a necessary action to align with the Supreme Court's decision. The Court concurred with the Tribunal's decision on the legality and validity of the reassessment, ultimately deciding in favor of the revenue and against the assessee for the assessment years in question. The Court emphasized the importance of applying the law established by the Supreme Court in such cases and upheld the Tribunal's decision on the reopening of assessments.

This detailed analysis highlights the key legal issues, the Court's directions, and the Tribunal's decision, providing a comprehensive overview of the judgment.