2008 (7) TMI 237 - HC - Income Tax

Reassessment - notice issued u/s 148 - reason to believe - change of opinion - no new material has come on record, no new information has been received, it is merely a fresh application of mind by the same Assessing Officer to the same set of facts - reopening of assessment u/s 147 merely because there is a change of opinion cannot be allowed. In our opinion, therefore, in the present case, it was not permissible for the respondent to issue notice u/s 148.

Summary

Issues:
Challenge to notice under Section 148 of the Income-tax Act 1961 and rejection of objection to the notice.

Analysis:
The petitioner, a registered company engaged in manufacturing and sale of paints, challenged a notice issued under Section 148 of the Income-tax Act 1961 and the subsequent order rejecting their objection to the notice pertaining to the assessment year 2003-04. The petitioner had filed returns declaring income and had received a notice-cum-questionnaire during assessment proceedings investigating specific expenditure items. The assessment order allowed deductions for these items, but a notice under Section 148 was later issued, alleging under-assessment based on Explanation 2(c)(i) of Section 147. The petitioner objected, arguing that full disclosure had been made, and the Assessing Officer had directed explanations and ultimately allowed the deductions. The objection was dismissed by the Deputy Commissioner of Income-tax, who believed income had escaped assessment due to inadvertent omission of relevant information from the assessment process.

The High Court deliberated on whether the power under Section 147 could be invoked in a situation where the Assessing Officer had failed to consider available material during the original assessment. Citing the judgment in Commissioner of Income-tax v. Kelvinator of India Ltd., the court emphasized that reopening an assessment solely due to a change of opinion was impermissible. The court agreed with the view that an Assessing Officer cannot take advantage of their own oversight and reopen assessments under Section 147. Notably, the legislative framework does not empower Assessing Officers to review their own orders, preventing the use of Section 147 for such purposes. In this case, where no new material or information had surfaced, and the reassessment was based on the Assessing Officer's fresh consideration of existing facts, the court held that the notice under Section 148 was invalid. Consequently, the petition was allowed, with costs not imposed on the petitioner.