2017 (11) TMI 921 - HC - Income Tax

Reopening of assessment - obligation on the part of the assessee does not extend beyond fully and truly disclosing all primary facts - Held that - On a mere reading on the reasons for reopening clearly show that there is no allegation against the petitioner that there has been omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for that year. The so called reason to believe that income chargeable to tax has escaped assessment is on the ground that the Assessing Officer at the time of scrutiny assessment did not examine as to whether the entire agricultural income was completely exempted or not. This can hardly be a reason to believe that income chargeable to tax has escaped assessment as it is a clear case of change of opinion by the respondent. As pointed out in the case of Calcutta Discount Company Limited, the obligation on the part of the assessee does not extend beyond fully and truly disclosing all primary facts. It is for the Assessing Officer to take an inference on facts and law based on such disclosure. If according to the respondent, his predecessor did not come to a proper inference on the facts disclosed, it is no ground to reopen the assessment, as if permitted and it would amount to a clear case of change of opinion. In the light of the above discussion, the first issue framed for consideration is answered in favour of the petitioner and against the revenue. On 29.12.2016, the petitioner through its authorized representative appeared before the respondent and submitted a written request to keep the notice under Section 143(3) of the Act in abeyance till a speaking order is passed on the petitioner s further representation dated 29.09.2016. However, on 30.12.2016 without any opportunity to the petitioner, the impugned assessment order has been passed. Thus the facts clearly demonstrate that the respondent has not followed the directives in the case of GKN Drive Shafts (India) Limited 2002 (11) TMI 7 - SUPREME Court . The rebuttal dated 30.08.2016 cannot taken as an order required to be passed on the objections given by the petitioner for reopening the assessment and the manner in which the impugned assessment order has been passed is wholly illegal and the entire proceedings are flawed. The respondent while issuing the rebuttal dated 30.08.2016 did not attach any finality to the proceedings but gave an opportunity to the petitioner to make further submission. On account of this, the petitioner had no opportunity to challenge the rebuttal dated 30.08.2016. This is one more ground to state that the proceedings are in violation of principles of natural justice. Accordingly this issue is answered in favour of the petitioner and against the revenue. The petitioner has referred to an application filed under the Right to Information Act by one Mr.Radhakrishnan who had made an application on 25.01.2017 requesting information as to in how many cases notice under Section 148 of the Act has been issued for reopening the assessment beyond four years of the relevant assessment years for the reason that sale proceeds of coffee seeds after drying and pulping in effect amounts to sale of cured coffee seeds, in how may cases the Department construed that an assessee who has sold raw coffee after pulping and drying and has disclosed in the return that the coffee was subjected to pulping and drying disclosing the expenditure incurred thereon and claimed exemption under Section 10(1) of the Act has not disclosed fully and truly all material facts for his/her assessment warranting reassessment and also warrants penalty and in how many cases the Department has reopened the assessment relying on the decision of the ITAT in the case of TC Abraham. Reply for the first question as given by the Information Officer, dated 01.02.2017, is Nil . For the second question, it was stated that no case has been reopened under Section 148 of the Act for the reason mentioned supra and there is no case in the concerned ward where application of Rule 7B(1) of the Rules has been levied by the Assessing Officer. The above facts would clearly establish that the reopening proceedings are clearly discriminatory. Accordingly this issue is answered in favour of the petitioner and against the revenue.

Issues Involved:
1. Change of opinion by the Assessing Officer.
2. Compliance with the directives laid down by the Supreme Court in GKN Drive Shafts (India) Limited.
3. Discrimination in reopening proceedings.

Issue-wise Detailed Analysis:

1. Change of Opinion:
The petitioners challenged the notices issued under Section 148 of the Income Tax Act, 1961, for the assessment year 2009-2010, arguing that they had fully and truly disclosed all material facts during the original assessment. The petitioners contended that the reassessment was based on a mere change of opinion, which is not permissible under Section 147 of the Act. The court noted that the original assessment had accepted the petitioners' claim for exemption under Section 10(1) of the Act. The reasons for reopening, as provided by the respondent, indicated that the Assessing Officer had failed to examine whether the entire agricultural income was exempt or if it fell under Rule 7B. This was deemed a change of opinion, as the primary facts had been fully disclosed, and it was the Assessing Officer's responsibility to draw inferences from those facts. The court held that a mere change of opinion does not justify reassessment, citing the Supreme Court's decisions in Commissioner of Income Tax vs. Dinesh Chandra H. Shah and Commissioner of Income Tax, Delhi vs. Kelvinator of India Limited.

2. Compliance with GKN Drive Shafts (India) Limited:
The petitioners argued that the respondent had not complied with the directives laid down by the Supreme Court in GKN Drive Shafts (India) Limited, which required the Assessing Officer to provide reasons for reopening and to pass a speaking order on the objections raised by the assessee. The court found that while the respondent had provided reasons and a rebuttal to the objections, the rebuttal did not constitute a speaking order as it did not attach finality to the proceedings. The respondent had given the petitioner further opportunity to make submissions, which were not considered before passing the impugned assessment order. The court concluded that the respondent had not followed the directives in GKN Drive Shafts (India) Limited, rendering the proceedings flawed and in violation of principles of natural justice.

3. Discrimination:
The petitioners claimed that they had been singled out for reassessment while several other coffee growers with similar claims for exemption had not been subjected to reopening for the same assessment year. The court noted that this specific averment had not been controverted by the respondent in the counter affidavit. Additionally, information obtained under the Right to Information Act indicated that no other cases had been reopened for the same reasons cited in the petitioners' cases. The court held that the reopening proceedings were discriminatory, as the petitioners had been unfairly targeted.

Conclusion:
The court held that the impugned proceedings, including the notice for reopening and the consequential assessment orders, were illegal, unsustainable, and a clear case of change of opinion. The writ petitions were allowed, and the impugned proceedings were quashed. The court's conclusions applied equally to the other writ petitions with identical facts.

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