2021 (3) TMI 954 - HC - Income Tax

Reopening of assessment u/s 147 - reopening done beyond the period of four years - whether there is any allegation against the respondent-assessee having failed to fully and truly disclose all the details before the Assessing Officer when the assessment was initially completed under Section 143(3) of the Act on 31.12.2010? - HELD THAT - Admittedly there is no allegation against the assessee and the Tribunal was right in holding that there was no negligence on the part of the assessee in furnishing necessary materials in completing the assessment. If such is the admitted factual position the reason for reopening stating that expenditure in relation to income not includable in total income under Section 14A of the Act should be calculated as per Clause (ii) of Rule 8D(2) would clearly amount to change of opinion. The stand taken by the Revenue before us by placing reliance on the decision in the case of P.V.S. Beedies P. Ltd. 1997 (10) TMI 5 - SUPREME COURT is not substantiating their case on account of the factual position in the case of P.V.S. Beedies P. Ltd. In the said case the audit department noted that the trust under the name of P.V.S. Memorial Charitable Trust had been initially granted recognition which had expired on 22.09.1972 and therefore for the relevant years under consideration in the said case namely AY 1974-75 and 1975-76 the trust was not a recognized charitable trust. Therefore the audit department having pointed out the same the assessment was reopened. The factual position in P.V.S. Beedies P. Ltd is quite distinct and different from the case before us. Therefore the said decision would not render assistance to the case of the Revenue.

Summary

Issues:
1. Validity of reopening of assessment under Section 147 of the Income Tax Act, 1961.
2. Whether reopening of assessment by the Assessing Officer constitutes a change of opinion.

Analysis:
1. The appeal before the Madras High Court was filed by the Revenue challenging the order of the Income Tax Appellate Tribunal (ITAT) for the assessment year 2008-09. The Revenue raised substantial questions of law regarding the validity of the reopening of assessment under Section 147 of the Income Tax Act. The key issue was whether the reassessment done by the Assessing Officer was valid. The reason for reopening was related to the calculation of expenditure in relation to income not includable in total income under Section 14A of the Act.

2. The assessee contended that the reopening was beyond the permissible four-year period and amounted to a change of opinion by the Assessing Officer. The Tribunal allowed the appeal, stating that the reassessment was indeed a clear case of change of opinion. The Revenue relied on a Supreme Court judgment to support their argument that reopening based on an audit department's report is valid. However, the High Court noted that there was no failure on the part of the assessee to disclose all details during the initial assessment under Section 143(3) of the Act.

3. The High Court distinguished the facts of the case from the precedent cited by the Revenue, emphasizing that the situation in the cited case was different. Ultimately, the High Court found no grounds to interfere with the Tribunal's order, dismissing the appeal and answering the substantial questions of law against the Revenue. The High Court's decision was based on the lack of evidence supporting the validity of the reassessment and the absence of any failure in disclosure by the assessee during the initial assessment.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the High Court's reasoning behind its decision.