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2015 (1) TMI 1463 - HC - Income TaxReopening of assessment u/s 147 - eligible reason to believe - No independent application of mind by AO - whether tangible material available with the AO to reopen the assessment? - HELD THAT - Assessing Officer would admit that he has referred to the details mentioned in the annexure to the return filed by the assessee for the assessment year 2009-10. Thus, there was no independent material to come to the conclusion that there has been no full and true disclosure made by the assessee - the impugned proceedings are liable to be set aside for the sole reason that there was no tangible material available with the AO except that which was disclosed in the return of income filed by the petitioner for the relevant assessment year. This has been held to be not a sound foundation for exercising power under Section 147 read with Section 148 of the Act. This would be sufficient to set aside the impugned proceedings. Whether the petitioner had made full and true disclosure with regard to the year of commencement of business? - Assessment proceedings are not a one way proceedings, even in the case of the assessee, the Assessing Officer while completing the regular assessment, called for details and documents which were furnished by the assessee - no hesitation to hold that the materials disclosed by the assessee were available with the Assessing Officer and it is from such material, the present impugned reopening proceedings have been initiated. Thus, the respondent had initiated proceedings purely based on existing information which was provided by the assessee in the course of original assessment and based on the return of income filed by the assessee for the relevant year. The petitioner before the Assessing Officer placed the profit and loss account and the balance sheet and the relevant annexures and notes to the financial statements. The notes are important material because it would disclose the details pertaining to various entries in the profit and loss account and balance sheet and explain the stand taken by the assessee. So far as the fixed assets is concerned in the balance sheet, the petitioner has indicated that the capital work is in progress. In the absence of any new material in the hands of the Assessing Officer or discovery of some materials or a new insight after the completion of the original assessment, the question of reopening does not arise. The conclusion arrived by the Assessing Officer in the impugned order that merely the petitioner has produced books of account before the Assessing Officer and that there is no presumption that all the books were seen by the Assessing Officer is factually incorrect, as during the course of assessment proceedings, documents and evidences were called for from the assessee which were produced and after perusal of the same, the assessment was completed - impugned reopening proceedings is a clear case of change of opinion as there has been full and true disclosure by the assessee at the time of scrutiny assessment/original assessment. - Decided in favour of assessee.
Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961. 2. Whether the reopening of the assessment was based on a change of opinion. 3. Whether there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Detailed Analysis: 1. Validity of the Notice Issued Under Section 148 of the Income Tax Act, 1961: The petitioner challenged the notice issued by the 1st respondent under Section 148 of the Income Tax Act, 1961, which stated that the petitioner's income chargeable to tax for the assessment year 2009-10 had escaped assessment within the meaning of Section 147 of the Act. The petitioner argued that the notice was beyond jurisdiction, barred by limitation, and based on a change of opinion, hence liable to be quashed. 2. Whether the Reopening of the Assessment Was Based on a Change of Opinion: The petitioner contended that all relevant materials were available with the Assessing Officer during the original assessment, and the reopening was based on the same information, constituting a change of opinion. The court noted that the Assessing Officer had referred to the details mentioned in the annexure to the return filed by the assessee for the assessment year 2009-10. The court held that there was no independent material to conclude that there had been no full and true disclosure made by the assessee. The court cited the Supreme Court's decision in CIT v. Kelvinator of India Ltd., which emphasized that reassessment must be based on "tangible material" and not merely on a change of opinion. 3. Whether There Was a Failure on the Part of the Assessee to Disclose Fully and Truly All Material Facts Necessary for the Assessment: The court examined whether the petitioner had made full and true disclosure regarding the year of commencement of business. The petitioner argued that this aspect was mentioned in the return of income and duly explained in the notes to the financial statements, which formed part of the return of income and was specifically dealt with by the Transfer Pricing Officer (TPO). The court found that the materials disclosed by the assessee were available with the Assessing Officer and were considered during the original assessment. The court rejected the Revenue's contention that the Assessing Officer would not look into Form No. 3CEB, stating that the order passed by the TPO is binding on the Assessing Officer. Conclusion: The court concluded that the impugned reopening proceedings were a clear case of change of opinion, as there had been full and true disclosure by the assessee at the time of the original assessment. The Assessing Officer had no tangible material to conclude that there was no full and true disclosure, and the reopening was based on the materials available on record. The court quashed the impugned proceedings and allowed the writ petition.
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