2015 (4) TMI 15 - HC - Income Tax

Reopening of assessment - validity of notice challenged - Held that - The assessment order in the present case has obviously taken into account the aspect of depreciation. Perusal of the assessment order reveals that all relevant documents and details as called for were filed. It is further recorded in paragraph 3 of the assessment order that the details of assessing company alongwith return of income and those which were called for assessment proceedings were scrutinised. There does not appear to the tangible material/reason for the assessing officer to reopen the assessment proceedings in the facts of the present case. The reasons offered by the Assessing Officer while rejecting the objection that the issues involved in reassessment proceedings were never examined by the Assessing Officer are not tenable. No particulars whatsoever has been relied upon by the Assessing Officer while rejecting the objections. The facts reveal and we are satisfied that in the present case, the order of reopening of the assessment will not be justified. The decision to reopen assessment is not based on proper reasons but obviously is a result of change of opinion. This is impermissible. In the case of ECGC, there was specific finding that there existed tangible material and reason to reopen the assessment and that was evident from the record in that case. It is not the case of the Revenue that in this case any new material was forwarded to the Assessing Officer. In any event we are not called upon to decide on the merits of the case and the proposed reopening is not justifiable in the facts and circumstances of the present case.- Decided in favour of assessee.

Issues Involved:
1. Legality of notice issued under section 148 of the Income Tax Act, 1961.
2. Validity of reopening assessment based on alleged non-disclosure of material facts.
3. Applicability of the "change of opinion" doctrine in reassessment proceedings.

Detailed Analysis:

1. Legality of Notice Issued Under Section 148 of the Income Tax Act, 1961:
The petitioner sought a writ of mandamus directing the respondent to withdraw and cancel the notice dated 18.11.2013 issued under section 148 of the Income Tax Act, 1961, and the order dated 4.2.2014 rejecting the objections of the petitioner. The petitioner argued that the Assessing Officer had no occasion to pass the impugned order and that all material facts had been fully disclosed during the original assessment proceedings, including details of long-term capital gains, trial run expenses, and bad debts. The petitioner contended that the notice under section 148 was a result of a change of opinion on the same set of facts, which is impermissible in law.

2. Validity of Reopening Assessment Based on Alleged Non-Disclosure of Material Facts:
The respondent argued that the notice did not arise from a change of opinion and that within a period of four years, it was permissible to reassess earlier orders if there was reason to believe that income had escaped assessment. The respondent relied on the decision in the case of Export Credit Guarantee Corporation of India Ltd. vs. Additional Commissioner of Income Tax, where it was held that within four years, the Assessing Officer could reopen the assessment if there was reason to believe that income had escaped assessment. The court examined the reasons adopted by the Assessing Officer for issuing the impugned notice, noting that the Assessing Officer contended that the petitioner had incorrectly set off unabsorbed depreciation and claimed deductions not in order, leading to underassessment of income.

3. Applicability of the "Change of Opinion" Doctrine in Reassessment Proceedings:
The court referred to the Supreme Court's decision in CIT vs. Kelvinator of India Ltd., which held that the words "reason to believe" must be interpreted in a manner that does not give arbitrary powers to the Assessing Officer to reopen assessments based on a mere change of opinion. The court found that the reasons recorded by the Assessing Officer did not demonstrate a failure on the part of the petitioner to disclose fully and truly all material facts necessary for assessment. The court noted that the Assessing Officer's reasons were contradictory and inconsistent, indicating that the necessary satisfaction in terms of the statutory provision had not been recorded. The court held that the reopening of the assessment was not justified as it was based on a change of opinion, which is impermissible.

Conclusion:
The court set aside the impugned notice dated 18.11.2013 issued under section 148 of the Income Tax Act, 1961, and the order dated 4.2.2015 rejecting the petitioner's objections. The court concluded that the decision to reopen the assessment was not based on proper reasons but was a result of a change of opinion, which is impermissible. The petition succeeded, and there was no order as to costs.

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