2015 (8) TMI 721 - HC - Income Tax

Reopening of assessment - petitioner assessee was not entitled to the deduction under Section 80IB(10) - Held that - While finalizing original assessment under Section 143(3) of the Act, the AO along with notice under Section 142(1) of the Act sent questionnaire to the petitioner, more particularly, with respect to deduction claimed under Section 80IB of the Act by the assessee and to which petitioner assessee supplied necessary details as required by the AO and only thereafter when the AO allowed the deduction under Section 80IB of the Act claimed by the assessee, the impugned reassessment proceedings/ reopening of the assessment for AY 2009-10 is nothing but on mere change of opinion of the AO, which is not permissible. Under the circumstances, impugned notice under Section 148 of the Act, to reopen the complete and finalize the assessment for AY 2009-10 in the impugned reassessment proceedings for the reasons recorded is absolutely illegal and invalid. - Decided in favour of assessee.

Issues Involved:
1. Legality of reopening the assessment under Section 147 of the Income Tax Act, 1961.
2. Validity of the reassessment notice under Section 148 of the Income Tax Act, 1961.
3. Whether the reassessment was based on a mere change of opinion by the Assessing Officer (AO).

Detailed Analysis:

1. Legality of Reopening the Assessment under Section 147 of the Income Tax Act, 1961:

The petitioner filed a return for AY 2009-10, claiming a deduction under Section 80IB(10) of the Act, which the AO initially allowed after scrutiny. However, the AO later issued notices to reopen the assessment, citing that the income of Rs. 77,41,250/- had escaped assessment. The petitioner argued that the reopening was based on a mere change of opinion, as the deduction had already been scrutinized and allowed during the original assessment. The court noted that the AO had issued a detailed questionnaire regarding the deduction under Section 80IB(10) and had considered the petitioner's responses before allowing the deduction. The court held that reopening the assessment on the same issue without new tangible evidence constitutes a change of opinion, which is not permissible under the law.

2. Validity of the Reassessment Notice under Section 148 of the Income Tax Act, 1961:

The AO issued notices under Section 148 to reassess the total income for AY 2009-10, based on the belief that the income had escaped assessment. The petitioner contended that the AO had already examined the deduction claim in detail during the original assessment, and thus, the reassessment notice was invalid. The court observed that the AO had indeed scrutinized the deduction claim and had allowed it after being satisfied with the petitioner's submissions. The court ruled that the reassessment notice was invalid as it was based on a mere change of opinion and lacked new tangible evidence.

3. Whether the Reassessment was Based on a Mere Change of Opinion by the Assessing Officer (AO):

The petitioner argued that the reassessment was based on a mere change of opinion, as the AO had already considered and allowed the deduction claim during the original assessment. The court referred to the Supreme Court's decision in CIT vs. Kelvinator of India Ltd. and the Gujarat High Court's decision in Gujarat Power Corporation Ltd., which held that reassessment based on a mere change of opinion is not justified. The court concluded that the AO had applied his mind during the original assessment and had allowed the deduction claim after detailed scrutiny. Therefore, the reassessment proceedings were based on a mere change of opinion, which is not permissible under Section 147 of the Act.

Conclusion:

The court quashed the impugned notices under Section 148 and the reassessment proceedings for AY 2009-10, ruling that they were based on a mere change of opinion by the AO and lacked new tangible evidence. The court emphasized that reassessment on such grounds is not permissible under the law, thereby making the notices and subsequent proceedings illegal and invalid. The petition was allowed, and the rule was made absolute to the extent of quashing the reassessment notices and proceedings.

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