2015 (2) TMI 766 - HC - Income Tax

Reopening of assessment - Tribunal cancelling the re-assessment as it was a case of change of opinion when the Assessing Officer had not expressed any opinion during the regular assessment proceeding - Held that - The impugned order of the Tribunal has rendered a finding of fact on the basis of material before it, in particular the fact that during original assessment proceedings a query was made with regard to the same issue which was responded to by the respondent - Assessee and on satisfaction of the same, the Assessing Officer had passed an assessment order. Therefore, reopening of assessment on an issue in respect of which a query was raised and responded to by the assessee would amount to a change of opinion. No mention of any tangible material in the reasons recorded for issuing reopening notice under Section 148 of the Act. - Decided in favour of assessee.

Issues Involved:
1. Validity of the re-assessment order under Section 147.
2. Whether the case involved a change of opinion by the Assessing Officer.
3. Legality of issuing a notice under Section 148 after issuing a notice under Section 154.

Detailed Analysis:

Issue 1: Validity of the Re-assessment Order under Section 147
The Tribunal canceled the re-assessment order passed under Section 147, holding it as bad in law. The Revenue argued that the Assessing Officer acted upon an audit objection, which constituted tangible material for reopening the assessment. However, the Tribunal found that during the original assessment proceedings, the Assessing Officer had already inquired about the bad debts and was satisfied with the explanation provided by the respondent - Assessee. Thus, reopening the assessment on the same issue amounted to a change of opinion, which is not permissible under the law. The High Court upheld the Tribunal's decision, emphasizing that the reasons recorded for reopening did not mention any tangible material, and the reopening notice could not be sustained on grounds not mentioned in the reasons recorded.

Issue 2: Change of Opinion by the Assessing Officer
The Tribunal held that the reopening of the assessment was based on a mere change of opinion, as the Assessing Officer had already considered and accepted the bad debts during the original assessment proceedings. The High Court supported this view, stating that the concept of 'change of opinion' is a well-settled position in law, as established by the Supreme Court in "CIT Vs. Kelvinator of India Ltd." The Court also noted that the decisions cited by the Revenue, including "Kalyanji Mavji & Co. Vs. Commissioner of Income Tax," were not applicable in the present case, as they did not involve a situation where the Assessing Officer had already formed an opinion on the same material during the original assessment.

Issue 3: Legality of Issuing a Notice under Section 148 after Issuing a Notice under Section 154
The Tribunal held that issuing a notice under Section 148 while a notice under Section 154 was still pending was bad in law. The High Court noted that it had admitted an identical issue in other cases but found the question academic in this instance, as the merits of the reopening were already decided in favor of the respondent - Assessee. Consequently, the Court dismissed this question as well.

Conclusion:
The High Court dismissed the appeal filed by the Revenue, upholding the Tribunal's decision to cancel the re-assessment order under Section 147 on the grounds of change of opinion and lack of tangible material. The Court also found the issuance of a notice under Section 148, while a notice under Section 154 was pending, to be legally untenable. The appeal was dismissed with no order as to costs.

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