2014 (2) TMI 659 - HC - Income Tax

Reopening of completed assessment Power of the AO u/s 147 and 148 of the Act Held that - The power to reassess cannot be exercised on the basis of mere change of opinion i.e. if all facts are available on record and a particular opinion is formed, then merely because there is change of opinion on the part of the Assessing Officer notice under Section 147/148 of the Act is not permissible - Once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment - It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised - If an Assessing Officer has to record the consideration bestowed by him on all issues raised by him during the assessment proceeding even where he is satisfied then it would be impossible for the Assessing Officer to complete all the assessments which are required to be scrutinized by him under Section 143(3) of the Act. The notice dated 28 March2013 under Section 148 of the Act seeking to reopen the assessment for A.Y.2008-09 and the order dated 20 November 2013 rejecting the petitioner s objection to reopen the assessment for A.Y. 2008-09 are not sustainable in law - The entire proceeding for reopening the assessment for A.Y. 2008-09 had emanated only on account of change of opinion on the part of the Assessing Officer thus, the assessment order set aside - there was no reason for the Assessing Officer to have had a reasonable belief that income chargeable to tax has escaped assessment thus, the Notice issued u/s 148 of the Act also set aside Decided in favour of Assessee.

Issues Involved:
1. Legality of the notice dated 28 March 2013 under Section 148 of the Income Tax Act, 1961 for reopening the assessment for A.Y. 2008-09.
2. Validity of the order dated 20 November 2013 rejecting the petitioner's objection to the reopening of the assessment.
3. Legitimacy of the assessment order dated 19 December 2013 passed by the Assessing Officer under Section 143(3) read with Section 147 of the Act for A.Y. 2008-09.

Detailed Analysis:

1. Legality of the Notice Dated 28 March 2013 Under Section 148:
The petitioner challenged the notice dated 28 March 2013 issued under Section 148 of the Income Tax Act, 1961, which sought to reopen the assessment for A.Y. 2008-09. The petitioner argued that the reopening was based on a mere change of opinion, which does not constitute a valid reason to believe that income chargeable to tax had escaped assessment. The Court observed that during the original assessment proceedings, the petitioner had disclosed all necessary details, including the nature of its activities and the reasons for treating the profit on the sale of investments as capital gains. The Court found that the reasons for reopening the assessment were already considered during the original assessment, and the notice was based on a change of opinion, which is not permissible under the law.

2. Validity of the Order Dated 20 November 2013:
The petitioner also challenged the order dated 20 November 2013, which rejected their objection to the reopening of the assessment. The Court noted that the order was based on the incorrect assertion that the petitioner had not furnished sample contract notes, Demat accounts, and other relevant documents during the original assessment proceedings. The Court found that the petitioner had indeed provided these documents, and the grounds for rejecting the objection were factually incorrect. Additionally, the Court held that the Assessing Officer's reliance on an internal audit report, which was not mentioned in the reasons for reopening, was not permissible. The audit report was considered an opinion rather than tangible material, and thus, it did not justify the reopening of the assessment.

3. Legitimacy of the Assessment Order Dated 19 December 2013:
The Court addressed the preliminary objection raised by the respondent, which suggested that the petitioner should have challenged the assessment order dated 19 December 2013 through an appeal under the Act. However, the Court found that the assessment order was passed in undue haste, seemingly to render the petitioner's challenge redundant. The Court held that the Assessing Officer's actions were not bona fide and aimed at thwarting the petitioner's challenge to the reopening of the assessment. Consequently, the Court set aside the assessment order dated 19 December 2013.

Conclusion:
The Court concluded that the reopening of the assessment for A.Y. 2008-09 was based on a mere change of opinion, which does not constitute a valid reason to believe that income chargeable to tax had escaped assessment. The notice dated 28 March 2013, the order dated 20 November 2013 rejecting the petitioner's objection, and the assessment order dated 19 December 2013 were all set aside. The petition was allowed, with no order as to costs.

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