2021 (4) TMI 796 - HC - Income Tax

Reopening of assessment u/s 147 - writ petitioner contended that the reopening of assessment is made without jurisdiction and in the absence of any tangible evidence with reference to the provisions of the Act - Whether reopening of assessment is based on change of opinion? - HELD THAT - The reason to believe and the requirements for reopening of assessment are well enumerated under Section 147 of the Income Tax Act. However, in the present case, the petitioner has failed to establish that the reason for reopening is connected with the facts adjudicated originally by the Assessing Officer. Thus, there are new materials available before the Authorities Competent for the purpose of reopening of the assessment and therefore, the writ petition is devoid of merits. High Court cannot make a roving enquiry in respect of the reasons, which are otherwise based on some materials objects were not scrutinised or adjudicated by the Assessing Officer in the original assessment order. The order dated 07.11.2018 issued by the Deputy Commissioner of Income Tax, disposing of the objections raised against the initiation of action under Section 147 of the Act, reveals that the issue involved in the original assessment under Section 143(3) of the Act and the reasons for reopening of assessment under Section 147 of the Act, are different. Deputy Commissioner of Income Tax, in clear terms, formed an opinion that the issue involved during the original assessment was dis-allowance of slump sale and the reasons for reopening of assessment under Section 147 of the Act, was to reassess the income of ₹ 82,49,045/-, which has escaped assessment being entirely different. When factually, the Deputy Commissioner of Income Tax formed an opinion by assigning reasons that the issue involved during the original assessment was different from that of the reasons for reopening of assessment, then there is no reason for the High Court to go into the further details by conducting a roving enquiry and it is for the Competent Authorities to adjudicate the issues on merits and by affording opportunity to the writ petitioner in the manner prescribed under the Statute. It is not as if the reopening of the assessment is the final proceedings. It is only an initiation and the petitioner is bound to avail the opportunity to be provided for the purpose of establishing his case with reference to certain facts and circumstances and by producing documents and evidences. Such an exercise cannot be done by the High Court under Article 226 of the Constitution of India. Thus, once the Competent Authority formed an opinion that the issue involved during the original assessment is unconnected with the reasons for reopening of the assessment under Section 147 of the Act, then the High Court is expected to be slow in interfering with the reopening of the assessment and the authorities must be provided with the opportunity to conduct further adjudications/enquiry by following the procedures contemplated and by affording an opportunity to the assessee and the assessee is also at liberty to establish his case with reference to the evidences available and therefore, this Court is of an opinion that the reasons stated in the impugned order are candid and convincing. There is no violation, as such, in respect of Section 147 of the Income Tax Act and the reasons for reopening of assessment is different with reference to the details furnished in the order dated 07.11.2018 passed by the Deputy Commissioner of Income Tax. Thus, the petitioner is at liberty to participate in the process of enquiry and defend his case in the manner known to law.

Summary

Issues Involved:
1. Jurisdiction and tangible evidence for reopening assessment.
2. Change of opinion versus new material for reopening assessment.
3. Applicability of Section 147 and Section 148 of the Income Tax Act.
4. Reopening assessment after ITAT's order.
5. Compliance with statutory provisions and procedural requirements.
6. High Court's scope of interference under Article 226.

Detailed Analysis:

1. Jurisdiction and Tangible Evidence for Reopening Assessment:
The petitioner argued that the reopening of the assessment was done without jurisdiction and in the absence of any tangible evidence as required under the Income Tax Act. The reopening was based on a change of opinion rather than new material evidence, making the impugned order liable to be set aside. The petitioner emphasized that the issues were already concluded by the ITAT, and thus, reopening was impermissible.

2. Change of Opinion Versus New Material for Reopening Assessment:
The petitioner contended that the reasons for reopening the assessment were identical to the grounds already adjudicated by the ITAT, with no new material evidence provided. The Third Proviso to Section 147 of the Income Tax Act was cited, which restricts the Assessing Officer from reassessing income involving matters already subject to appeal, reference, or revision.

3. Applicability of Section 147 and Section 148 of the Income Tax Act:
The court examined the statutory requirements for reopening assessments under Sections 147 and 148. It was highlighted that the reopening must be based on new tangible evidence and not merely a change of opinion. The court referred to various judgments, including the Supreme Court's decision in "Income Tax Officer vs. Techspan India Private Ltd and Another," which emphasized that reassessment based on the same facts and circumstances as the original assessment is invalid.

4. Reopening Assessment After ITAT's Order:
The court noted that the assessment year in question had already been adjudicated by the ITAT, and the subsequent miscellaneous petition filed by the Income Tax Department was also dismissed. Therefore, reopening the assessment was deemed impermissible as it amounted to sitting on appeal over ITAT's order without any new material evidence.

5. Compliance with Statutory Provisions and Procedural Requirements:
The respondents argued that the reopening was in compliance with the statutory provisions of Section 147, asserting that new materials were available for reopening the assessment. However, the petitioner demonstrated that the reasons for reopening were not distinct from the original assessment issues, thus failing to meet the statutory requirements for reopening.

6. High Court's Scope of Interference Under Article 226:
The court emphasized that the High Court should be slow in interfering with the reopening of assessments under Article 226 of the Constitution. It was noted that the reopening of the assessment is an initiation process, and the petitioner has the opportunity to defend their case during the subsequent proceedings. The court concluded that the reasons provided for reopening were candid and convincing, with no violation of Section 147 of the Income Tax Act.

Conclusion:
The court dismissed the writ petition, stating that there was no infirmity in the impugned order passed by the Deputy Commissioner of Income Tax. The petitioner was advised to participate in the inquiry process and defend their case as per the law. The court's decision underscores the importance of adhering to statutory provisions and procedural requirements when reopening assessments and the limited scope of High Court interference in such matters.