2021 (2) TMI 427 - HC - Income Tax

Reopening of assessment u/s 147 - Reopening after four years - Assessee case selected for scrutiny assessment under Section 143(3)Disallowance u/s 14A - HELD THAT - A specific query was raised by the Assessing Officer with respect to Section 14A and the same was appropriately replied by the writ applicant. The same was accepted at the relevant point of time. Once again the very same issue is sought to be raised for the purpose of reopening which is otherwise not permissible in law on mere change of opinion. It cannot be said that there was any failure on the part of the assessee to fully and truly disclose all the material facts. This writ application, in our opinion, could be said to be squarely covered by the decision of the Supreme Court rendered in the case of CIT vs. Kelvinator India 2010 (1) TMI 11 - SUPREME COURT . We are convinced that the impugned notice under Section 148 of the Act issued to the assessee for the purpose of reopening of the assessment beyond the period of four years and that too in a case of scrutiny assessment under Section 143(3) of the Act is not sustainable in law having regard to the facts of this case - Decided in favour of assessee.

Issues Involved:
1. Legality and validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Alleged failure to disclose fully and truly all material facts necessary for assessment.
3. Whether the reopening of the assessment constitutes a mere change of opinion.
4. Validity of reopening the assessment based on audit objections.

Detailed Analysis:

1. Legality and Validity of the Notice Issued under Section 148 of the Income Tax Act, 1961:
The writ applicant challenged the notice issued by the respondent under Section 148 of the Income Tax Act, 1961, proposing to reopen the assessment for the year 2012-13 under Section 147. The original return was filed on 19th September 2012, and the case was scrutinized with an order under Section 143(3) passed on 26th February 2015. The total income was determined at ?4,81,02,130/-. Later, an order under Section 154 was passed, determining the total income at ?4,81,18,350/-. The reasons for reopening included the non-disallowance of ?8,20,952/- under Section 14A read with Rule 8D(2)(iii).

2. Alleged Failure to Disclose Fully and Truly All Material Facts Necessary for Assessment:
The respondent argued that the assessee failed to disclose fully and truly all material facts necessary for the assessment. The writ applicant contended that all details, including the exempt income and related expenses, were disclosed during the original assessment. The court noted that a specific query was raised by the Assessing Officer regarding Section 14A, which was appropriately replied to by the writ applicant. The court observed that there was no failure on the part of the assessee to fully and truly disclose all material facts.

3. Whether the Reopening of the Assessment Constitutes a Mere Change of Opinion:
The writ applicant argued that the reopening was based on a mere change of opinion, which is not permissible in law. The court agreed, noting that the issue of disallowance under Section 14A was scrutinized in detail during the original assessment. The court cited the Supreme Court's decision in CIT vs. Kelvinator India, emphasizing that a mere change of opinion does not constitute a sufficient ground to reopen assessment proceedings.

4. Validity of Reopening the Assessment Based on Audit Objections:
The writ applicant contended that the reopening was based on revenue audit objections, which is not a valid ground for reopening assessment proceedings. The respondent argued that the audit objection constituted information leading to the conclusion that income chargeable to tax had escaped assessment. The court, however, noted that the reopening was not justified merely based on audit objections, especially when the issue had already been scrutinized during the original assessment.

Conclusion:
The court concluded that the impugned notice under Section 148 of the Act was not sustainable in law. The reopening of the assessment was based on a mere change of opinion and there was no failure on the part of the assessee to disclose fully and truly all material facts. The court quashed the notice, allowing the writ application.

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