2020 (1) TMI 923 - HC - Income Tax

Reopening of assessment u/s 147 - change of opinion - Section 43A applicability - HELD THAT - In the reasons there is reference to the Section 43A of the Act and the claim of the Petitioner is based on the same. In our prima facie reading of the reasons the fact of the operations have come to standstill and the properties were disposed of and the claim of depreciation being incorrect, is a matter of narration. Thereafter narrating so, the foundation of the reasons, prima facie, indicate that foundation is the allegation that the Petitioner has not paid the liability. This prima facie opinion of ours is borne out by the order passed by the AO disposing of the objections. The Petitioner had not referred to the so called other two grounds for reopening. AO has not stated that the two grounds for reopening have gone unanswered. It is the contention of the learned counsel for the Respondent that it is not necessary. But at the prima facie stage, we note the way parties have understood and acted on the Reason, which would be otherwise in normal course of conduct. Change of opinion - As regards application of Section 43A and the second explanation thereto, a query was raised by the Assessing Officer vide notice under Section 142(1) wherein the Assessing Officer stated that on perusal of depreciation charge was seen during the year and the information was called for. This information was supplied by the Petitioner by communication dated 22 November 2017 wherein note on the business activities was given. The factum of ICICI bank giving loan for purchase of rigs was mentioned. The query regarding depreciation charge was answered by Petitioner by giving the necessary details. The notice under Section 142(1) dated 30 November 2017 called upon the Petitioner to show cause as to why the claim of depreciation should not be disallowed. There was a debate at the bar whether the response of the Petitioner giving the explanation dated 25 November 2017 could be considered as a response to the show cause notice. According to the learned counsel for the Respondent the notice calling upon the Petitioner to show cause was dated 30 November 2017 and the letter dated 25 November 2017 could not be considered as a response. This letter was inwarded on 4 December 2017 and the notice dated 30 November 2017 called upon the Petitioner to submit reply by 5 December 2017. This response of the Petitioner was with the Assessing Officer prior to the dates stipulated. Therefore, prima facie, a specific query was raised by the Assessing Officer, and material was produced in response to the specific query by the Petitioner. When AO consciously considered the claim for deduction which evident from the questions raised during the regular assessment proceedings, it would be evidence of the fact that the Assessing Officer had occasion to apply his mind and had taken a view. In such circumstances re-opening would be a mere change of opinion, which is not permitted. - Decided in favour of assessee.

Summary

Issues:
Challenging the notice seeking to reopen assessment for Assessment Year 2015-16 under Section 148 of the Income Tax Act and the order disposing of objections raised by the Petitioner.

Detailed Analysis:

1. Reopening of Assessment:
The Petitioner, a Private Limited Company in the business of hiring rigs, challenged the notice dated 26 March 2019 seeking to reopen the assessment for the Assessment Year 2015-16 under Section 148 of the Income Tax Act. The Respondent issued the notice under Section 148 based on reasons related to foreign exchange loss and depreciation claimed by the Petitioner. The Petitioner contended that the assessment was reopened without jurisdiction as the Assessing Officer had applied his mind and passed the assessment order after considering all explanations and material furnished by the Petitioner during the original assessment proceedings.

2. Reasons for Reopening:
The reasons provided in support of the notice highlighted discrepancies related to foreign exchange loss and depreciation claimed by the Petitioner. The Respondent alleged that the Petitioner had not paid the liability and had ceased business activities. The Petitioner argued that all relevant information was disclosed during the assessment process, and specific queries regarding depreciation were adequately responded to. The Petitioner relied on previous court decisions to support the argument that the reopening of the assessment was unjustified as the Assessing Officer had already considered and decided on the issues raised.

3. Change of Opinion:
The Respondent contended that there was no change of opinion as the Assessing Officer had not formed an opinion on certain aspects like the Petitioner ceasing to be the owner of assets and lack of business activity. However, the Petitioner maintained that the Assessing Officer had indeed considered and decided on these issues during the original assessment. The court analyzed the responses provided by the Petitioner to specific queries raised by the Assessing Officer and concluded that the explanations given were in response to the queries, indicating that the Assessing Officer had applied his mind to the matter.

4. Legal Precedents and Prima Facie Opinion:
The court examined legal precedents and observed that the concept of change of opinion prohibits reopening assessments when issues have been examined during the original scrutiny assessment. The court's prima facie opinion was that the reasons for reopening the assessment were based on allegations that the Petitioner had not paid the liability, which seemed to be a matter of narration. The court noted that the Assessing Officer did not mention unanswered grounds for reopening, and the Petitioner had responded to specific queries raised during the assessment process.

In conclusion, the court found merit in the Petitioner's arguments regarding the unjustified reopening of the assessment and granted an interim order to maintain the status quo, allowing the Petitioner to apply for early hearing.