2022 (2) TMI 1228 - HC - Income Tax

Reopening of assessment u/s 147 - eligibility of reasons to believe - HELD THAT - Reassessment order merely reproduces the notice under Section 147 of the IT Act as a reasoning of the AO which was entirely based on a reappreciation of the accounts. In other words, there was no new material on the basis of which the AO could have formed a subjective satisfaction as to income that supposedly escaped assessment. This Court is unable to sustain the impugned assessment order since in the considered view of the Court it is not based on any new material and constitutes a mere change of opinion of the AO. In view of the Petitioner's succeeding in the second point, the Court does not consider it necessary to examine the effect of non-compliance by the Department of the mandatory requirement of the law explained by the Supreme Court in GKN Driveshafts (India) Ltd. 2002 (11) TMI 7 - SUPREME COURT . The impugned assessment order and the consequential demand notice are hereby quashed. The writ petition is allowed.

Summary

Issues:
Challenge to assessment order under Section 143(3) of the Income Tax Act for Assessment Year 2012-13 under Section 147 - Non-compliance of mandatory directions - Reopening of assessment based on change of opinion.

Analysis:
The petitioner challenged an assessment order dated 9th November, 2017, passed by the Deputy Commissioner of Income Tax, questioning the reopening of the assessment for the Assessment Year 2012-13 under Section 143(3) of the Income Tax Act, 1961, read with Section 147. The assessment was reopened under Section 147, and a notice under Section 148 was issued to the petitioner, which led to objections being submitted by the petitioner. The assessing officer proceeded with the assessment without addressing the objections raised by the petitioner, resulting in a recomputed assessed income. The court stayed the assessment order and the demand notice pending the petition.

The petitioner's counsel argued that the assessment proceedings were flawed due to non-compliance with mandatory directions from a Supreme Court judgment and that the reopening was based on a mere change of opinion, making it unsustainable in law. The counsel cited relevant judgments to support these contentions. On the other hand, the Department's counsel argued that the petitioner's participation in the proceedings under Section 147 precluded complaints about non-compliance and that the reassessment was solely a reappreciation of accounts without new material to justify the reopening.

The court, referring to the Supreme Court's interpretation in Kelvinator of India Ltd., emphasized that the power to reopen assessments post-April 1, 1989, must be based on a reason to believe and not a mere change of opinion to prevent arbitrary exercise of power by the assessing officer. The court found that the reassessment order lacked new material and was solely a change of opinion by the assessing officer, leading to the quashing of the assessment order and demand notice.

Given the success on the second point, the court did not delve into the non-compliance issue regarding mandatory directions from the Supreme Court. Consequently, the impugned assessment order and demand notice were quashed, and the writ petition was allowed without costs. An urgent certified copy of the order was directed to be issued as per rules.