2021 (4) TMI 75 - HC - Income Tax

Reopening of assessment u/s 147 - reopening after 4 years from the end of relevant financial year - HELD THAT - After careful examination of the assessment order and materials furnished by the assessee at the stage of previous assessment, would go to show that there was conscious application of mind to the issue of deduction by the then AO and after considering the evidences and materials, he thought not fit to disallow the deduction. A mere change of opinion while persuading the same material by the AO, while initiation of the proceedings, cannot be a reasons to believe that the income has escaped assessment. Thus, once an opinion is formed on the issue of deduction and assessment on the issue was framed under Section 143 the reopening on the same set of facts and material, without there being any tangible material would be nothing but a change of opinion. We take the notice of the fact that the assessee had disclosed true facts with regard to claim of deduction under Section 80IB(10) of the Act while filing return of income and same had been mentioned in the audit report as well as Form 10CCB and considering these materials, the then Assessing Officer did not disallow the deduction. Therefore, the condition precedent for reopening of the assessment beyond 4 years having not satisfied and on this ground also, the impugned notice is required to be quashed and set aside. No hesitation to hold that there was no basis or jurisdiction for Assessing Officer to form a belief that any income of the assessee chargeable to tax for the year under consideration, had escaped assessment under Section 147 of the Act and reasons recorded could not have led to formation of any belief that income had escaped assessment.

Issues Involved:
1. Validity of reopening the assessment under Section 147 of the Income Tax Act, 1961.
2. Alleged non-disclosure of material facts by the assessee.
3. Whether reopening constitutes a mere change of opinion.
4. Compliance with preconditions for reopening after four years.
5. Validity of sanction under Section 151 of the Act.

Issue-wise Detailed Analysis:

1. Validity of Reopening the Assessment under Section 147:
The writ applicant challenged the notice dated 30.09.2019 issued under Section 148 of the Income Tax Act, 1961, seeking to reopen the income tax assessment for A.Y. 2012-13. The reopening was based on the grounds that the claim of deduction under Section 80IB(10) was not allowable as the condition precedent for the eligibility of the claim was not satisfied, leading to income escaping assessment.

2. Alleged Non-disclosure of Material Facts by the Assessee:
The Assessing Officer (AO) contended that the assessee did not disclose fully and truly all material facts necessary for the assessment. The AO noted discrepancies related to the development permission dates and the approval of the housing project. However, the assessee argued that all material facts were disclosed during the original assessment proceedings, and the AO had accepted the claim of deduction based on the evidence provided.

3. Whether Reopening Constitutes a Mere Change of Opinion:
The assessee argued that the reopening was merely a change of opinion, which is not permissible under the law. It was highlighted that the issue of deduction under Section 80IB(10) was thoroughly examined during the original assessment, and no new tangible material was presented to justify the reassessment. The court agreed, stating that reconsideration of the same issue without any new and tangible material is not sustainable in the eye of the law.

4. Compliance with Preconditions for Reopening After Four Years:
The court emphasized that for reopening after four years, two conditions must be fulfilled: (i) the AO must have reason to believe that income chargeable to tax has escaped assessment, and (ii) such escapement must be due to the failure to disclose fully and truly all material facts necessary for the assessment. The court found that the assessee had disclosed true facts regarding the claim of deduction, and the AO's initiation of proceedings was based on a mere change of opinion, not on any failure to disclose material facts.

5. Validity of Sanction under Section 151 of the Act:
The assessee challenged the reopening on the grounds of lack or absence of valid sanction under Section 151 of the Act. However, the court did not delve into this issue in detail, as the primary grounds for quashing the notice were the change of opinion and the disclosure of material facts.

Conclusion:
The court concluded that the impugned notice dated 30.03.2019 issued under Section 148 of the Act was without authority of law, as the initiation of proceedings was based on a mere change of opinion. The court held that the condition precedent for reopening the assessment beyond four years was not satisfied, and there was no basis for the AO to form a belief that income had escaped assessment. Consequently, the notice was quashed and set aside, and the writ application was allowed.

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