2022 (1) TMI 1234 - HC - Income Tax

Validity of Reopening of assessment u/s 147 - DR submits that the AO while recording the reasons for re-opening the assessment has relied upon two judgments one of Delhi High Court and other of Ahmedabad ITAT and therefore, the Assessing Officer's satisfaction that there has been escapement from assessment cannot be faulted - HELD THAT - We have to note at the outset that the ITAT order is not binding on this court. Secondly, the judgment/order of the Delhi High Court relied upon for the reasons for re-opening has been reported 2012 (11) TMI 323 - DELHI HIGH COURT . Therefore, it is a judgment of 2013 or earlier. The assessment order in this case has been passed on 15th December, 2018 and the query on this issue has been raised on 8th October, 2018 and replied by petitioner vide its letter dated 12th November, 2018. Therefore, the Assessing Officer had benefit of the judgment of the Delhi High Court relied upon by the Assessing Officer wanting to re-open the assessment but still did not find anything wrong in the case made out by petitioner and proceeded to pass the assessment order. In the circumstances, it is quite clear that it is nothing but change of opinion on the part of the Assessing Officer wanting to re-open the assessment. The re-opening of assessment based on change of opinion goes to the root of the matter and as held repeatedly by various courts, is not permissible.

Summary

Issues:
1. Correcting a date in the original order.
2. Validity of notice under Section 148 of the Income Tax Act, 1961 for Assessment Year 2016-2017 based on change of opinion.
3. Reliance on judgments by the Assessing Officer for re-opening the assessment.
4. Assessment order passed despite the Assessing Officer having the benefit of relevant judgments.
5. Legality of re-opening assessment based on change of opinion.
6. Petition seeking to quash the reopening notice, impugned order, and notice under Section 143(2).

Analysis:
1. The judgment began by correcting a date in the original order to ensure accuracy. The rest of the order remained unaltered.

2. The petitioner contended that the notice under Section 148 of the Income Tax Act for the relevant assessment year was issued solely based on a change of opinion, which is impermissible in law. The petitioner argued that the issue regarding finished stocks of a significant amount was raised during assessment proceedings, but not discussed in the assessment order. The petitioner relied on a legal precedent to support the argument that once a query is raised and responded to, the Assessing Officer is deemed to have considered it. The respondent did not dispute this argument, acknowledging the reliance on certain judgments by the Assessing Officer.

3. The court noted that the ITAT order was not binding on them and highlighted that the judgment from the Delhi High Court, which was relied upon for re-opening the assessment, was from 2013 or earlier. Despite having the benefit of this judgment, the Assessing Officer proceeded to pass the assessment order without finding any fault in the petitioner's case. The court emphasized that re-opening an assessment based on a change of opinion is not permissible, as it goes against established legal principles.

4. The court concluded that the Assessing Officer's decision to re-open the assessment was indeed a change of opinion, which is not allowed. The petition was allowed as per the prayer clause, which sought to quash the reopening notice, the impugned order, and another notice related to the assessment.

5. Ultimately, the petition was disposed of in favor of the petitioner, highlighting the importance of adhering to legal principles and not re-opening assessments based on a mere change of opinion.