2014 (12) TMI 1335 - HC - Income Tax

Reopening of assessment - proceedings reopened after a period of 4 years - grant of benefit u/s 80(O) - Held that - Accepting the said stand, the assessment was made and benefit under Section 80(O) was granted. With the change of the assessing authority, that too, after taking note of the assessment orders passed subsequent to the said order for the subsequent years, the assessment is sought to be reopened after a period of years. Four years is the period of limitation prescribed for the re-opening of the assessment in the sense, an assessment cannot be reopened unless the case falls within one of the exceptions mentioned in the first proviso. If an assessment is to be reopened, the assessing authority has reasons to believe that any income chargeable to tax has escaped assessment, it is settled law that change of opinion cannot constitute a ground such as reason to believe for reopening the assessment and that is precisely what the appellate authorities have held. If an assessment is to be reopened after four years, then the conditions stipulated in the proviso is to be fulfilled. In the instant case, the support is sought from the last ground i.e., failure to disclose fully and truly all material facts necessary for his assessment. However, there is no whisper in this regard. It is in those circumstances, both the authorities on proper appreciation of the entire material on record have concurrently held that case would not fall under Section 147 - Decided in favour of the assessee.

Summary

Issues:
1. Reopening of assessment under Section 147 of the Income Tax Act based on change of opinion.
2. Eligibility of the assessee for deduction under Section 80(O) for technical services.
3. Compliance with the conditions for reopening assessment after four years.

Analysis:

1. The main issue in this case is the reopening of the assessment by the assessing authority under Section 147 of the Income Tax Act. The appellate authorities found the order of the assessing authority unsustainable as it amounted to a change of opinion rather than a valid reason to believe that income had escaped assessment. The proviso to Section 147 requires failure to disclose fully and truly all material facts necessary for assessment, which was not established in this case.

2. The reassessment order highlighted that the assessee had been granted exemption under Section 80(O) for a specific amount, but deductions were disallowed in subsequent years. The assessing authority contended that the income in question did not qualify for the deduction under Section 80(O) as it was for technical services and not related to any invention by the assessee. The absence of any patent, design, or registration further supported the decision to reopen the assessment.

3. Reopening the assessment after four years requires compliance with the conditions specified in the proviso to Section 147. In this case, the authorities found no evidence of failure to disclose material facts necessary for assessment. The appellate authorities emphasized that the mere change of opinion cannot be a valid reason for reopening an assessment after the prescribed period, and without meeting the conditions stipulated in the proviso, the case does not fall under Section 147.

In conclusion, the High Court upheld the findings of the appellate authorities, dismissing the appeal raised by the revenue. The judgment favored the assessee, emphasizing the importance of meeting the statutory conditions for reopening assessments under Section 147 of the Income Tax Act. The decision underscored that a mere change of opinion without evidence of non-disclosure of material facts is insufficient to justify reopening an assessment.