2012 (1) TMI 381 - HC - Income Tax

Summary

Issues Involved:
1. Legality of reopening assessments u/s 10 of the Interest Tax Act.
2. Whether the reopening was barred by limitation.
3. Whether the reopening constituted a change of opinion.
4. Determination of chargeable interest from hire purchase transactions.

Summary:

1. Legality of Reopening Assessments u/s 10 of the Interest Tax Act:
The revenue appealed against the reopening of assessments for the years 1992-93 to 1996-97 under Section 21H of the Interest Tax Act, 1974, read with Section 260A of the Income Tax Act, 1961. The Assessing Authority reopened the assessments based on the premise that the interest attributable to hire purchase transactions had escaped assessment due to non-disclosure by the assessee. The assessee contended that it had made full and true disclosure in the returns filed, and the reopening was not in consonance with Section 10 of the Act. The High Court held that the reopening was justified under Section 10(a) of the Act as there was a failure to disclose fully and truly all material facts necessary for the assessment.

2. Whether the Reopening was Barred by Limitation:
The Appellate Commissioner and the Tribunal held that the reopening was barred by limitation, assuming it was under Section 10(b) of the Act, which allows reopening within four years. The High Court, however, clarified that the reopening was under Section 10(a) and not Section 10(b), making the limitation period inapplicable. Therefore, the reopening was not barred by limitation.

3. Whether the Reopening Constituted a Change of Opinion:
The Appellate Authorities opined that the reopening constituted a change of opinion, which is not permissible. The High Court disagreed, stating that the concept of change of opinion is relevant only under Section 10(b) and not Section 10(a). The reopening was based on the failure to disclose fully and truly all material facts, and hence, the concept of change of opinion was not applicable.

4. Determination of Chargeable Interest from Hire Purchase Transactions:
The assessee argued that the income from hire purchase transactions was not chargeable interest under the Act. The High Court did not delve into the merits of this argument, focusing instead on the procedural aspects of reopening the assessments. The court noted that the assessee had offered the amount attributable to hire purchase transactions to tax in later years, which undermined its argument.

Conclusion:
The High Court allowed the revenue's appeals, holding that the reopening of assessments was justified under Section 10(a) of the Interest Tax Act, not barred by limitation, and did not constitute a change of opinion. The court did not address the substantive issue of whether the income from hire purchase transactions was chargeable interest.