2020 (3) TMI 1117 - HC - Income Tax

Reopening of assessment u/s 147 - reasons for re-opening the assessment - deduction u/s 80JJAA as claimed by the petitioner - change of opinion or not? - HELD THAT - Whether the notice that has been issued to the petitioner was on account of change of opinion or on account of failure on the part of the petitioner to fully and truly disclose all material required for the assessment is to be determined by the Assessing Officer while passing order under Section 147 of the Income Tax Act, 1961. In the facts of the case, though the petitioner had furnished certain details at the time of re-assessment, the question still remains to be answered is whether there was full and true disclosure by the petitioner as is contemplated under proviso to Section 147 of the Income Tax Act, 1961. In this case, mere filing to the annexure by the petitioner in response to notice during scrutiny assessment by itself may or may not have been sufficient to come to the conclusion that there was full and true disclosure by the petitioner if the information furnished was neither complete nor true. It is therefore best left open for the petitioner to demonstrate before the 1st respondent that the details furnished by the petitioner vide letter dated 03.03.2016 in annexure 2 meets the requirements of full and true disclosure for the Assessing Officer to drop the proceedings in terms of 1st proviso to Section 147 of the Income Tax Act, 1961. In case there is a change of opinion, the 1st respondent cannot proceed in the light of the decision of the Hon ble Supreme Court in CIT Vs. Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT In case indeed there is a mere change in opinion, the 1st respondent will be obliged to drop the proceeding. However, to ascertain whether is a mere change of opinion or not first it has to be established that the there was true and full disclosure by the petitioner. This can be demonstrated by the petitioner only before the 2nd respondent and not in a proceeding under Art.226 of the Constitution of India as scope of judicial review is limited and it is not possible to conduct roving enquiry on facts. Under these circumstances, do not find any merits in quashing the impugned notice dated 13.03.2017 and the communication dated 24.11.2017 overruling the objection of the petitioner. Relegate the petitioner to participate in the proceedings before the 1st respondent by filing appropriate representations/objections within a period of thirty days from the date of receipt of a copy of this order. The 1st respondent is obliged to pass orders on merits in accordance with law. It is made clear that in case the circumstance do not justify invocation of proviso to Section 147, the 1st respondent shall drop the proceedings. At the same time, while passing orders under Section 147 of the Income Tax Act, the 1st respondent can pass assessment order as per Explanation 3 to Section 147 of the Income Tax Act, 1961.

Summary

Issues Involved:
1. Validity of reopening the assessment under Section 148 of the Income Tax Act, 1961.
2. Jurisdictional error in reopening the assessment.
3. Change of opinion as a ground for reopening the assessment.
4. Compliance with the conditions for reopening the assessment beyond four years.

Detailed Analysis:

1. Validity of Reopening the Assessment:
The petitioner challenged the notice dated 30.03.2017 for reopening the assessment for the Assessment Year 2012-2013 after four years from the date of the original assessment. The petitioner requested reasons for reopening, which were provided by the first respondent on 13.10.2017. The reasons cited included the improper claim of deduction under Section 80JJAA of the Income Tax Act, 1961, as the employees in question were not "workmen" under the Industrial Dispute Act, 1947, and their wages exceeded the threshold.

2. Jurisdictional Error:
The petitioner argued that reopening the assessment was based on a mere change of opinion, contrary to the Supreme Court's decision in Kelvinator of India Vs. Commissioner of Income Tax. The petitioner had previously disclosed all relevant details during the original assessment, and the reopening was claimed to be without jurisdiction.

3. Change of Opinion:
The petitioner contended that the reopening was solely due to a change in opinion by the Assessing Officer, which is not a valid reason for reopening under the Income Tax Act. The petitioner cited several Supreme Court decisions, including Calcutta Discount Co. Ltd. V. Income Tax Officer and CIT V. Kelvinator of India Ltd., to support this argument.

4. Compliance with Conditions for Reopening Beyond Four Years:
The court examined whether the conditions for reopening the assessment beyond four years were met. According to Section 147 of the Income Tax Act, no action can be taken after four years unless there is a failure by the assessee to make a return or disclose fully and truly all material facts. The court noted that the provisions of Section 148 are standalone and not restricted by Section 147.

Court's Observations and Conclusion:
- The court acknowledged that the petitioner had furnished certain details during the original assessment but emphasized that full and true disclosure is required to avoid reopening.
- The court referred to the Supreme Court's decision in Kelvinator of India Ltd., emphasizing that mere change of opinion cannot justify reopening.
- The court concluded that whether the notice was issued due to a change of opinion or failure to disclose material facts should be determined by the Assessing Officer during the reassessment process.
- The court did not find merit in quashing the impugned notice and communication, allowing the petitioner to demonstrate full and true disclosure before the first respondent.

Final Directions:
- The petitioner is directed to participate in the reassessment proceedings and file appropriate representations/objections within thirty days.
- The first respondent is instructed to pass orders on merits in accordance with the law, considering the provisions of Section 147 and the Supreme Court's guidelines on change of opinion.
- The reassessment order should be passed within sixty days from the receipt of the court's order.

Disposition:
The writ petition is disposed of with the above observations, and no costs are awarded. Connected Miscellaneous Petitions are also closed.