2014 (3) TMI 220 - HC - Income Tax

Reopening of assessment Validity of Notice u/s 148 of the Act Held that - There has been a full and true disclosure of all relevant material necessary by the petitioner for the purpose of assessment - as the assessment sought to be reopened i.e assessment year 2008-09 by a notice dated 25 March 2013 is less than 4 years from the end of the assessment year - there was no occasion for the Assessing Officer to apply his mind to the tangible material to form any opinion with regard to it during the original assessment proceeding Relying upon Export Credit Guarantee Corporation India Ltd. vs. Additional CIT 2013 (1) TMI 517 - BOMBAY HIGH COURT - reopening of an assessment is permissible when the original assessment order passed under Section 143(3) of the Act is silent in respect of the issue/point on which reassessment notice is issued - Non receipt of convertible foreign exchange within a period of 6 months from the end of the assessment year was not the subject matter of consideration nor the fact that the petitioner had declared its book profits after reducing the amount of deductions under Section 10AA of the Act during the original proceedings. It is permissible for the Assessing Officer to have a reasonable belief that income chargeable to tax has escaped assessment and the same does not stem from a change of opinion - only a prima facie view of the AO is necessary to issue notices and not a cast iron case of escapement of income thus, no fault can be found with the notice dated 25 March 2013 issued under Section 148 of the Act thus, there is no reason to interfere in the notice Decided against Assessee.

Summary

Issues:
1) Validity of notice issued under Section 148 of the Income Tax Act, 1961 for reopening assessment year 2008-09.

Analysis:
1) The petitioner, a 100% Export Oriented Unit in a Special Economic Zone, challenged a notice issued under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the year 2008-09. The notice was based on discrepancies in the export turnover and receipt of convertible foreign exchange, leading to an alleged escapement of income chargeable to tax.

2) The petitioner contended that the reopening was without jurisdiction, citing full disclosure during the original assessment and reliance on RBI Circular No.91 of 2003 regarding export proceeds. The Assessing Officer rejected these objections, stating they would be considered during reassessment proceedings based on evidence produced.

3) The petitioner argued that the reopening was a change of opinion, as the original assessment considered the issues raised. The petitioner claimed entitlement to deduction under Section 10AA of the Act, emphasizing compliance with RBI Circular and challenging the interpretation of export turnover under Section 10AA.

4) The revenue, opposing the petitioner's arguments, justified the reopening within the statutory period of four years, asserting the Assessing Officer's reasonable belief of income escapement. The revenue maintained that the issues prompting reassessment were not examined in the original assessment.

5) The Court analyzed the jurisdictional aspect of the reopening, emphasizing that a mere change of opinion is not sufficient. It noted that the grounds for reopening were not part of the original assessment, indicating a lack of consideration. The Court cited precedent to support the permissibility of reassessment when specific issues were not addressed initially.

6) Ultimately, the Court upheld the validity of the notice dated 25 March 2013 under Section 148 of the Act, dismissing the petitioner's challenge. It clarified that the Assessing Officer's prima facie belief of income escapement suffices for issuing notices, leaving the detailed examination of merits for the reassessment proceedings.

7) The judgment highlights the importance of distinguishing between a change of opinion and valid reasons for reassessment, emphasizing that the Assessing Officer must have tangible grounds to believe income has escaped assessment. The decision underscores the procedural requirements and jurisdictional aspects governing the reopening of assessments under the Income Tax Act.