2017 (8) TMI 727 - HC - Income Tax

Reopening of assessment - change of opinion by the Assessing Officer - reasons to believe - audit objection for the reopening of Assessment was resorted to - claim for set-of of loss incurred on selling of housing loan portfolio - Held that - After the scrutiny, notice under Section 143(2) of the Act was issued. The explanation was given by the Assessee. In the explanation, the Assessee explained about the claim for setof of loss incurred on selling of housing loan portfolio. The Assessing Officer accepted the explanation given by the Assessee and allowed set-of of loss arising on sell of housing loan portfolio. Merely because the another Assessing Officer has a different opinion cannot be a ground to reopen assessment and so also on the reason of audit object remedial action by initiating reopening proceeding cannot be resorted to as held by the Apex Court in case of Indian and Eastern Newspaper Society vs. CIT, reported in (1979 (8) TMI 1 - SUPREME Court ). The Commissioner (Appeals) and the Tribunal on considering the explanation given by the Assessee and the facts on record had arrived at a concurrent conclusion that reopening of assessment is merely on account of change of opinion of the Assessing Officer and there was no omission or failure on the part of the Assessee to disclose truly and fully all the material facts. - Decided in favour of assessee.

Summary

Issues:
1. Justification of annulling the Assessment under Section 148 of the Income Tax Act, 1961.
2. Reopening of Assessment based on change of opinion by the Assessing Officer.
3. Applicability of CBDT Circular No.9 of 2006 in the reopening of Assessment.
4. Legality of reopening Assessment without omission or failure to disclose material facts.

Analysis:

Issue 1: Justification of annulling the Assessment under Section 148 of the Income Tax Act, 1961
The appellant contended that the Tribunal erred in annulling the Assessment for the year 2005-06 under Section 148 without proper justification. The appellant argued that the Assessment was reopened based on reasons to believe that the Assessee did not disclose all facts, citing an audit objection and referring to CBDT Circular No.9 of 2006. However, the Court emphasized that mere change of opinion is not a valid ground for reopening an assessment.

Issue 2: Reopening of Assessment based on change of opinion by the Assessing Officer
The Court noted that the Assessment under Section 143(3) was completed after scrutiny, and the Assessee provided explanations, including details about loss incurred on selling a housing loan portfolio. The Assessing Officer accepted the explanation and allowed the setoff of the loss. The Court highlighted that a different opinion by another Assessing Officer does not justify reopening the assessment solely based on a change of opinion.

Issue 3: Applicability of CBDT Circular No.9 of 2006 in the reopening of Assessment
The appellant argued that the reopening of Assessment was justified based on the CBDT Circular No.9 of 2006 and an audit objection. However, the Court held that the reopening of Assessment cannot be solely based on a change of opinion, as established in the case law of Indian and Eastern Newspaper Society vs. CIT.

Issue 4: Legality of reopening Assessment without omission or failure to disclose material facts
The Commissioner (Appeals) and the Tribunal concurred that the reopening of the assessment was due to a change of opinion by the Assessing Officer and not due to any omission or failure by the Assessee to disclose material facts. Citing the precedent of Indian and Eastern Newspaper Society case, the Court dismissed the appeal, stating that no substantial question of law arose, and upheld the concurrent conclusion that the reopening was unjustified.

In conclusion, the Court dismissed the appeal, emphasizing that the reopening of the Assessment solely on the basis of a change of opinion without any failure to disclose material facts is not legally justified under the Income Tax Act, 1961.