2017 (7) TMI 871 - HC - Income Tax

Reopening of assessment - reasons to believe - Held that - In the present case as no order of assessment had been passed by the Assessing Officer, simply on the basis of intimation contemplated under Section 143(1), it cannot be said that any opinion was expressed by the Assessing Officer, which could have been changed for the purposes of giving notice for re-assessment. Thus, when there was no expression of opinion earlier at any stage by the AO, there cannot be a change of opinion in giving notice under Section 148 of the Act as has been held by the Tribunal. In addition to the above, the very fact that the objections of the respondent-assessee against the notice for re-assessment and the reasons to believe were disposed of by the Assessing Officer by detailed order and the said order was allowed to attain finality, the matter with regard to the validity of the notice and the proceedings had come to rest. The Tribunal therefore had no jurisdiction in law to allow the appeal on a technical ground that the proceedings were invalid for the reason that they were initiated on the basis of change of opinion rather than on any valid ground. Tribunal has manifestly erred in law in holding that there was a change of opinion and therefore it was not open for the authorities to have proceeded under Section 147/148 of the Act for re-assessment. - Decided in favour of the Revenue

Summary

Issues:
1. Validity of re-assessment proceedings under Section 147 of the Income Tax Act based on change of opinion.
2. Interpretation of Section 143(1) of the Act in the context of assessment proceedings.

Analysis:
1. The High Court addressed the issue of the validity of re-assessment proceedings under Section 147 of the Income Tax Act, focusing on whether they were based on a change of opinion. The Tribunal had allowed the appeal of the assessee-respondent, stating that the re-assessment proceedings were illegal as they were initiated on the basis of a change of opinion. The Court examined the sequence of events, including the acceptance of returns under Section 143(1) and the subsequent notice for re-assessment under Section 148. The Court emphasized that since there was no order of regular assessment under Section 143(3), no opinion was expressed by the Assessing Officer. The Court also highlighted that once the objections against the re-assessment notice were disposed of and attained finality, the Department could not challenge the proceedings based on a change of opinion.

2. The Court delved into the interpretation of Section 143(1) of the Act concerning the assessment proceedings. Citing the Supreme Court's decision in Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd., the Court clarified that the intimation under Section 143(1) is not an assessment order but an acknowledgment, where no opinion is expressed by the Assessing Officer. The Court emphasized that as no assessment order was passed, there was no scope for a change of opinion. The Court concluded that the Tribunal erred in holding that there was a change of opinion, and the re-assessment proceedings were valid.

Therefore, the High Court ruled in favor of the Revenue, setting aside the Tribunal's order and allowing the appeal against the respondent-assessee. The judgment emphasized the importance of understanding the legal provisions and the sequence of events in assessment proceedings to determine the validity of re-assessment based on a change of opinion.