2018 (12) TMI 602 - HC - Income Tax

Reopening of the assessment - change of opinion - value of closing stock i.e, work in progress was not adopted - Held that - The find that the Assessing Officer has taken all the figures from the Profit and Loss Account filed by assessee along with the return of income, wherein, they have claimed a total expenditure of ₹ 11,30,92,666/- and admitted value of work in progress to the extent of ₹ 10,61,14,603/-. AO, while completing the assessment under Section 143(3) vide order dated 07.03.2001, opined that the indirect expenses incurred to the extent of ₹ 69,52,063/-, should not be incurred in the work in progress. This, according to the subsequent officer was incorrect. Therefore, re-opening was ordered. The assessee objected to the re-opening by contending that it is a clear case of change of opinion. However, this was rejected and the assessment was completed vide order dated 11.11.2005. AO has come to the conclusion that the correct value of closing stock i.e, work in progress was not adopted. There is absolutely no allegation of any failure on the part of the assessee to fully and truly disclose all material facts for assessment. In the absence of any such allegation, the re-opening of the assessment was a clear case of change of opinion. The order passed by the Tribunal calls for no interference. - Decided in favour of assessee

Summary

Issues:
1. Reopening of assessment for the year 1998-99 - Change of opinion.
2. Disclosure of all material facts by the assessee.

Analysis:
The High Court of Madras heard an appeal against the order of the Income Tax Appellate Tribunal regarding the assessment year 1998-99. The substantial questions of law raised were whether the reassessment was solely due to a change of opinion and if the assessee had fully disclosed all material facts. The main issue was whether the Tribunal was correct in deeming the reopening of the assessment as a change of opinion.

Upon reviewing the assessment order, it was noted that the Assessing Officer had utilized figures from the Profit and Loss Account filed by the assessee, where certain expenses and work in progress values were claimed. The Assessing Officer had disagreed with the treatment of certain indirect expenses in the work in progress, leading to the decision to reopen the assessment.

The assessee argued that the reassessment was a clear case of change of opinion, but this objection was overruled, and the assessment was completed. The High Court observed that the Assessing Officer's conclusion regarding the correct value of closing stock was the basis for the reopening, without any allegation of failure to disclose material facts by the assessee. Consequently, the High Court upheld the Tribunal's decision, stating that the reassessment was indeed a change of opinion.

In conclusion, the High Court dismissed the appeal, answering the substantial questions of law in favor of the assessee and imposing no costs. This judgment clarifies the distinction between a valid reassessment based on new information and an impermissible change of opinion, emphasizing the importance of disclosing all material facts during assessments.