2014 (2) TMI 798 - HC - Income Tax

Reopening of Assessment Examination of claim of deduction u/s 80IB(10) of the Act Held that - The notice has been issued within a period of four years from the end of relevant assessment year there is a distinction between the expressions change of opinion and mere change of opinion as decided in Multiscreen Media Private Limited v. Union of India and another 2010 (2) TMI 269 - BOMBAY HIGH COURT a mere change of opinion is not enough - A change of opinion is permissible provided it is grounded on additional or tangible material. In Gujarat Power Corporation Ltd. v. Assistant Commissioner of Income-tax 2012 (9) TMI 69 - Gujarat High Court it was held that the Assessing Officer must have some tangible material to form a belief that income chargeable to tax had escaped assessment - reopening of assessment within a period of four years could be made as long as it is not based on mere change of opinion - claim under section 80IB( 10) of the Act was the sole claim of the petitioner in the return filed - The entire claim was examined at length - To the extent the Assessing Officer thought the same was not allowable, after hearing the petitioner and inviting her response, he disallowed the substantial portion of the claim thus, now it is not possible for the Revenue to canvas that yet another element of the claim was not gone into by the Assessing Officer. Regarding recording of Reasons - Held that - The completion of housing project in the year 2010 was well within the time limit envisaged under the statute - There is insufficient material to hold so - Even the sale deed refer to several dates and events - Without reference to the original documents and further evidence, it would be hazardous to accept the petitioner s contention that for the first time, the development permission was granted by the local authority only in the year 2007 - The validity of the reasons must be judged on the basis of requirement of reason to believe and not necessarily that the addition must invariably made ultimately thus, this contention of the assessee cannot be accepted. The notice is quashed - Though second contention of the assessee is not accepted, petition allowed on the basis of first contention - Decided in favour of Assessee.

Summary

Issues Involved:

1. Validity of reopening the assessment under Section 147 of the Income Tax Act based on the same material.
2. Whether the reopening constitutes a mere change of opinion.
3. The validity of the reasons recorded by the Assessing Officer for reopening the assessment.

Issue-wise Detailed Analysis:

1. Validity of reopening the assessment under Section 147 of the Income Tax Act based on the same material:

The petitioner challenged the notice dated 30.08.2011 issued by the Assessing Officer to reopen the assessment for the assessment year 2009-2010. The original assessment was completed after scrutiny. The reasons for reopening included the claim of deduction under Section 80IB(10) of the Act, which was previously disallowed in part by the Assessing Officer. The petitioner contended that the claim was already examined during the original assessment, and reopening the assessment based on the same material would constitute a mere change of opinion, which is not permissible. The court noted that the Assessing Officer relied on the material already on record and did not bring any additional material to justify the reopening. The court held that reopening the assessment based on the same material is not permissible as it constitutes a mere change of opinion.

2. Whether the reopening constitutes a mere change of opinion:

The petitioner argued that the Assessing Officer had already examined the claim for deduction under Section 80IB(10) during the original assessment and any action to disallow the claim would be based on a mere change of opinion. The court observed that during the original assessment, the Assessing Officer had raised specific queries regarding the petitioner's claim for deduction under Section 80IB(10) and had disallowed a substantial portion of the claim. The court emphasized that the claim was scrutinized in detail, and the Assessing Officer had made a reasoned decision. Therefore, reopening the assessment on the same grounds would indeed constitute a mere change of opinion, which is not permissible under the law.

3. The validity of the reasons recorded by the Assessing Officer for reopening the assessment:

The court examined the reasons recorded by the Assessing Officer for reopening the assessment. The reasons stated that the claim of deduction under Section 80IB(10) was not sustainable as the housing project was not completed within the stipulated time. The court noted that the reasons were based on the material already on record and did not involve any additional or extraneous material. The court referenced previous judgments, including Ess Ess Kay Engineering Co. P. Ltd. v. Commissioner of Income Tax and Phool Chand Bajrang Lal v. Income-tax Officer, to highlight that reopening based on fresh and reliable information is permissible, but not on the same material leading to a mere change of opinion. The court concluded that the reasons recorded by the Assessing Officer lacked validity as they were based on the same material that was already scrutinized during the original assessment.

Conclusion:

The court quashed the impugned notice for reopening the assessment, holding that it was based on a mere change of opinion and lacked additional material to justify the reopening. The petition was allowed, and the rule was made absolute to the extent of quashing the notice. The court emphasized that reopening of assessment cannot be resorted to on a mere change of opinion, and the validity of the reasons must be judged based on the requirement of reason to believe and not necessarily on the ultimate addition made.