2018 (3) TMI 537 - HC - Income Tax

Validity of reopening of assessment - eligible reasons to believe - proof of change of opinion - Held that - The basis of the reopening notice is that the amount of ₹ 97.74 lakhs had remained to be disallowed in the regular proceedings leading to assessment order dated 25th February, 2005 as the expenses were not routed through profit and loss account. This basis is incorrect as the assessment order dated 25th February, 2005 under Section 143(3) of the Act, in fact, at paragraph no.7 examines the entire claim of ₹ 339.96 crores, which includes ₹ 97.74 crores. In fact, the impugned order records the fact that the order dated 25th February, 2005 under Section 143(3) of the Act records that ₹ 339.96 crores is not been routed through the profit and loss account and yet disallowed only a part of the claim to the extent of ₹ 242 crores. Thus, it is self-evident from the order of the assessment dated 25th February, 2005 that the Assessing Officer had applied his mind over the issue which forms the basis of the reopening notice dated 26th March, 2007. It is settled position in law that the the reopening notice based on mere change of opinion is not sustainable as held by the Apex Court in Commissioner of Income Tax Vs. Kelvinator India 2010 (1) TMI 11 - SUPREME COURT OF INDIA . No substantial question of law

Summary

Issues:
Challenge to order under Section 260A of the Income Tax Act, 1961 for Assessment Year 2002-03 regarding the validity of reopening proceedings under Section 148 of the IT Act based on change of opinion.

Analysis:
1. Reopening of Assessment: The respondent filed its return for Assessment Year 2002-03 declaring an income of ?351.23 crores, which was later assessed at ?899.06 crores. The Assessing Officer sought to reopen the assessment under Section 148 of the Act based on certain deductions not routed through the profit and loss account. The respondent argued that the reopening was a mere change of opinion as the issues were already considered in the original assessment.

2. Appeal to CIT(A): The respondent appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who allowed the appeal by holding that the reasons for reopening were already considered in the original assessment order. The CIT(A) concluded that the reopening notice was based on a mere change of opinion and annulled the subsequent assessment order.

3. Tribunal Decision: The Revenue appealed to the Tribunal, which upheld the CIT(A)'s findings, stating that the reopening was based on a mere change of opinion and lacked jurisdiction. The Tribunal agreed that the issues forming the basis of the reopening were already addressed in the original assessment.

4. High Court Judgment: The High Court found that the basis of the reopening notice was incorrect as the issues were already examined in the original assessment order. Referring to the Supreme Court decision in Commissioner of Income Tax Vs. Kelvinator India, the High Court reiterated that a reopening notice based on a mere change of opinion is not sustainable. The Court dismissed the appeal, stating that the Tribunal correctly applied the legal principles established in the Kelvinator India case, and the proposed question of law did not raise any substantial issue.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing that the reopening of the assessment based on a mere change of opinion was not valid. The judgment reaffirmed the principle that a reassessment cannot be initiated solely on the grounds of a change of opinion from the original assessment.