2016 (10) TMI 775 - HC - Income Tax

Reopening of assessment - claiming exemption u/s 11 - assessment came to be reopened by giving notice u/s 148 by the very same officer, who executed the scrutiny assessment and granted exemption - change of opinion - Held that - in the present proceedings, the exemption issue generated by the authority has already been thoroughly examined and therefore, it would not be proper on the part of the respondent-authority to reopen the said issue and further there is not remote indication that petitioner has not truly and fully disclosed all material facts. It is a case of change of opinion - Notice quashed - Decided in favor of assessee.

Issues Involved:
1. Legality and validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Rejection of objections by the petitioner regarding the reopening of assessment.
3. Applicability of Section 11(1)(a) and Section 11(4) of the Income Tax Act to the petitioner’s case.
4. Alleged change of opinion by the Assessing Officer.
5. Examination of previous assessments and their impact on the current reopening.

Detailed Analysis:

1. Legality and Validity of the Notice under Section 148:
The petitioner challenged the notice dated 30.03.2010 issued under Section 148 of the Income Tax Act, 1961, which was aimed at reopening the assessment for the Assessment Year (A.Y.) 2005-06. The petitioner argued that the reopening was based on an incorrect interpretation of the provisions of Section 11(1)(a) and Section 11(4) of the Act. The court noted that the reasons for reopening stated that the petitioner’s institution, registered under Section 12AA, was not entitled to exemption under Section 11(1)(a) as the property was not held under a trust and no trust deed was executed.

2. Rejection of Objections by the Petitioner:
The petitioner had filed objections to the reopening notice, which were rejected by the respondent authority on 29.11.2010. The petitioner contended that the reasons provided for reopening lacked a rational connection or a live link to the formation of the belief of escapement of income. The court observed that the scrutiny assessment for the initial year had already examined the exemption claims under Section 11, and no new material change justified the reopening.

3. Applicability of Section 11(1)(a) and Section 11(4):
The petitioner argued that their activities, which included printing, publishing, and distributing textbooks, were in line with their charitable objectives and had been granted exemptions in previous years under Section 11. The court referred to the petitioner’s objects, such as aiding and promoting education and making textbooks available at reasonable prices. It was noted that the exemption had been granted in earlier years after thorough scrutiny under Section 143(3), and there was no material change in subsequent years to warrant a different view.

4. Alleged Change of Opinion by the Assessing Officer:
The court emphasized that the reopening of assessment based on a mere change of opinion is impermissible. It cited the Supreme Court’s decision in Commissioner of Income Tax vs. Kelvinator of India Ltd., which stated that the concept of "change of opinion" must be treated as an inbuilt test to check the abuse of power. The court found that the reopening in the present case was based on the same facts and issues already scrutinized in earlier assessments, thus constituting a change of opinion.

5. Examination of Previous Assessments and Their Impact:
The court noted that for the A.Y. 2004-05, the reopening proceedings were dropped after the petitioner’s explanation, and there was no material change in the petitioner’s activities since then. The court referred to the Supreme Court’s decision in Radhasoami Satsang Saomi Bagh v. Commissioner of Income Tax, which held that in the absence of any material change, a contrary opinion should not be taken in subsequent years. The court also cited Commissioner of Income Tax vs. Excel Industries Ltd., where it was held that the Revenue cannot take a different view in subsequent years if it had accepted the Tribunal’s order in favor of the assessee in earlier years.

Conclusion:
The court concluded that the reopening of the assessment for A.Y. 2005-06 was not justified as it was based on a change of opinion and lacked any tangible new material. The impugned notice dated 30.03.2010 and the order dated 29.11.2010 were quashed and set aside. The rule was made absolute to this extent.

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