2015 (7) TMI 577 - HC - Income Tax

Validity of reopening of assessment - claim of deduction for the same projects under Section 80 IA(4) - Held that - If the reasons recorded in the present case are attentively read, it is mentioned, during course of assessment it is remained to be verified, whether the assessee was the owner of the infrastructure facility or not . In the next also it was stated on verification of profit and loss account . It was further stated during the assessment proceedings it is remained to be verified the expenses incurred . Thus, what can be figured out from the reasons recorded is that the Assessing Officer wanted to re-open the assessment as according to him certain aspects remained to be verified. It cannot be gainsaid that re-opening of assessment for the purpose of verifying or verification will be necessarily an action based on a mere change of opinion. The connotation of word to be verified , verification is to reexamine the existing material. Verification is always with reference to the details already considered once. When one wants to verify his decision, it means that one reviews the decision. Re-assessment powers cannot be exercised to merely review the earlier assessment on the special ground that something was omitted from consideration or particular conclusion was imprecisely or wrongly arrived at. Formation of such belief by the Assessing Officer has to satisfy the requisite parameters which are conditions precedent for examine of provision under Section 147. The necessary conditions being satisfied. From the reasons recorded themselves, therefore, it was seen that the Assessing Officer proceeded to exercise the powers since he wanted to verify certain aspects the assessment already complete, Thus Assessing Officer has clearly exceeded his jurisdiction under Section 147 of the Act in issuing the impugned notice. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Jurisdiction of the Assessing Officer in reopening the assessment under Section 147 of the Income Tax Act, 1961.
3. Whether the reopening of assessment was based on a mere change of opinion.

Detailed Analysis:

1. Validity of the Notice Issued under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice dated 30.12.2010 issued by the Income Tax Officer under Section 148, seeking to reopen the assessment for the Assessment Year 2007-08. The petitioner contended that the notice was based on incorrect facts and a misconception, particularly regarding the Net Profit figures and the eligibility for deduction under Section 80 IA(4). The petitioner argued that the reasons for reopening were based on a wrong premise and that the Assessing Officer had no new tangible material to justify the reopening.

2. Jurisdiction of the Assessing Officer in Reopening the Assessment under Section 147 of the Income Tax Act, 1961:
The court examined the powers derived by the Assessing Officer under Section 147, which allows reopening if there is "reason to believe" that income has escaped assessment. The court noted that the reopening was within four years, thus the first part of Section 147 applied, requiring the Assessing Officer to have tangible material to justify the reopening. The court emphasized that there must be a rational connection between the material discovered and the formation of the belief by the Assessing Officer.

3. Whether the Reopening of Assessment was Based on a Mere Change of Opinion:
The court found that the original assessment was completed after a detailed scrutiny, where the Assessing Officer had considered all necessary facts and materials, including the Audit Report and the claim for deduction under Section 80 IA(4). The court highlighted that the reopening was sought on the same material without any new tangible evidence, which constituted a mere change of opinion. The court referred to the Supreme Court's decision in Commissioner of Income Tax Vs Kelvinator of India, which held that a mere change of opinion does not justify reopening an assessment.

Conclusion:
The court concluded that the Assessing Officer exceeded his jurisdiction under Section 147 by issuing the impugned notice based on a mere change of opinion. The court set aside the notice dated 30.12.2010 and the order dated 05.12.2011 rejecting the petitioner's objections. The petition was allowed, and the rule was made absolute without any order as to costs.