2009 (8) TMI 57 - HC - Income Tax

Re-opening of an assessment change of opinion - The Audit Report merely gives an opinion with regard to the non-availability of the deduction both under Section 80-IA and under Section 80-HHC and that the deduction under Section 80-IA was not deducted from the profits of the business while computing deduction under Section 80-HHC. Clearly, therefore, there was no new or fresh material before the Assessing Officer except the opinion of the Revenue Audit Party - . it is settled law that mere change of opinion cannot form the basis for issuing of a notice under Section 147/148 of the Act proceedings initiated u/s 148 quashed

Summary

Issues involved:
Challenge to notice under Section 148 of the Income Tax Act for re-opening assessment for the assessment year 2002-2003 based on alleged incorrect allowance of deductions under Sections 80-IA and 80-HHC.

Analysis:

1. Background and Petitioner's Claim:
The petitioner, a Private Limited Company engaged in manufacturing and export of footwear, filed its return of income for the assessment year 2002-2003, claiming deductions under Sections 80-G, 80-HHC, and 80-IB of the Income Tax Act. The petitioner justified its entitlement for these deductions by filing relevant documents along with the return.

2. Assessment and Re-opening Notice:
After the assessment, the Assessing Officer issued a notice under Section 148 of the Act dated 29.1.2007 to re-open the assessment for the said year. The reasons provided for re-opening highlighted an alleged incorrect allowance of deductions under Sections 80-IA and 80-HHC, leading to a short levy of tax, as per the assessment officer's view.

3. Petitioner's Objections and Legal Stand:
The petitioner challenged the re-opening notice, arguing that it was based on a mere change of opinion rather than new material. The petitioner contended that the reasons provided did not disclose any fresh facts and were solely based on the Revenue Audit Party's opinion. Citing legal precedent, the petitioner emphasized that a notice under Section 148 cannot be issued solely on a change of opinion.

4. Revenue's Defense and Court's Decision:
The Revenue defended the re-assessment based on factual grounds but acknowledged that a mere change of opinion is insufficient for action under Section 147/148 of the Act. The Court, after considering the arguments, found in favor of the petitioner. It held that the re-opening notice lacked new material and was solely based on a change of opinion, which is impermissible under the law.

5. Judgment and Conclusion:
Consequently, the Court allowed the writ petition, quashing the impugned notice dated 29.1.2007 issued by the Assessing Officer. A writ of prohibition was issued to restrain any further action based on the re-opening notice for the assessment year 2002-2003. The Court disposed of the writ petition accordingly, upholding the principle that a mere change of opinion cannot serve as the basis for initiating re-assessment proceedings under the Income Tax Act.