2020 (2) TMI 330 - HC - Income Tax

Reopening of assessment u/s 147 - addition u/s 40A - HELD THAT - Specific query had been put by the original AO to the assessee regarding sales and purchases and in response thereto, all details had been furnished by the assessee and therefore the issue of cash payments in contravention of Section 40A(3) read with Rule 6DD of the Rules was before the AO and therefore invocation of Section 148(1) was hit by the doctrine of change of opinion. Only contention raised before us is that in the original assessment order no opinion at all was formed and therefore, it was erroneous for the Commissioner and the Tribunal to held to be a case of change of opinion. This argument is to be rejected. It is not in dispute that the issue of cash payments and evidence thereof, was before the AO and wrongly he ignored it. The remedy before the revenue was to have challenge that order but the revenue did not do so and proceeded in the manner aforementioned. Once an issue and evidence there of, is clearly before an authority and the authority ignores it, it cannot later on decide to re-open on that ground and the specious argument that if there is no opinion there can be no change of opinion, would not apply.

Summary

Issues:
1. Validity of notice under Section 148 of the Income Tax Act 1961 based on cash payments made by the assessee.
2. Invocation of Section 148(1) of the Act and the doctrine of change of opinion.

Analysis:
1. The High Court addressed the issue of the validity of the notice under Section 148 of the Income Tax Act 1961. The appeal was filed by the revenue against the orders of the Commissioner of Income Tax (Appeal)-3, Gurgaon and the Income Tax Appellate Tribunal Division Bench 'A', Chandigarh. The court noted that a search was conducted under Section 132(1) of the Act, leading to proceedings and an order under Section 143(3) of the Act. Subsequently, a notice under Section 148(1) was issued, alleging cash payments made by the assessee in violation of Section 40A(3) read with Rule 6DD of the Income Tax Rules 1962. The Commissioner and Tribunal held that the issue of cash payments was already before the Assessing Officer, and invoking Section 148(1) was considered a change of opinion. The court rejected the argument that no opinion was formed in the original assessment order, emphasizing that the issue and evidence were before the authority, which chose to ignore it. The court held that once an issue and evidence are presented to an authority, ignoring it precludes later reopening on that ground.

2. The court further analyzed the invocation of Section 148(1) of the Act and the doctrine of change of opinion. It was argued that without an opinion, there can be no change of opinion. However, the court dismissed this argument, stating that when an issue and evidence are clearly before an authority and are disregarded, the authority cannot later decide to reopen the matter on that ground. The court emphasized that the revenue's remedy was to challenge the original order if the issue of cash payments was overlooked by the Assessing Officer. Since the revenue did not pursue this course and proceeded with invoking Section 148(1), the court upheld the decision of the Commissioner and Tribunal, dismissing the appeal filed by the revenue.