2021 (4) TMI 1030 - HC - Income Tax

Reopening of assessment u/s 148 - exemption u/s 54B - beyond 4 years from the end of the relevant assessment year - HELD THAT - A bare perusal of the reasons recorded, reveal that the findings recorded by the AO with regard to non-production of the necessary documents in support of the claim are without any basis and it reflects total non-application of mind to the record. Records indicate that the details with regard to deduction u/s 54B was called for and the assessee had complied the same by furnishing the registered sale deed and agreement of purchase along with bank particulars. We are of the view that initiation of the proceedings based on the same set of facts, which were earlier relied upon by the AO while framing the assessment order, would nothing but a review of earlier proceedings, which cannot be permitted in law. The attempt on the part of the AO to reopen the assessment is nothing but he has changed his opinion. In the previous assessment proceedings, the AO had consciously applied his mind to the relevant facts and material available and framed the assessment and now, on the same set of facts, again, on the different view by the AO to reopen the proceedings would amount to change of opinion. At the stage of previous assessment proceedings, the assessee had disclosed all the primary facts for the assessment and based upon the materials the AO did not disallow the deduction to the extent of ₹ 1,85,00,000/-. Revenue has failed to show that which necessary facts were not disclosed by the assessee at the stage of previous assessment proceedings. In these circumstances, we are of the view that no new material surfaced during the reassessment proceedings on which the AO could have formed a requisite belief with regard to escape of assessment, especially when the assessee has disclosed all materials fully and truly at the stage of original assessment proceedings. Reference may be made to the case of CIT Vs. Usha International Ltd. 2012 (9) TMI 767 - DELHI HIGH COURT wherein held that the reassessment will be invalid, in case the assessment order itself records that the issue was raised and is decided in favour of the assessee. The reassessment proceedings in the said cases, will be hit by principles of change of opinion . It would be appropriate to rely and refer the observation of the Apex Court in case of CIT Vs. Kelvinator India Ltd, 2010 (1) TMI 11 - SUPREME COURT wherein, it was observed that one must treat the concept of change of opinion as an inbuilt test to check abuse of power by the AO. It was further observed that the AO has power to reopen the assessment proceedings, provided there is tangible material to come to the conclusion that there is escapement of income from assessment. We are of the opinion that the impugned action on the part of the respondent to issue notice under Section 148 of the Act and consequential proceedings are without jurisdiction and therefore, is required to be quashed and set aside and accordingly, it is quashed and set aside.- Decided in favour of assessee.

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Legality of the reassessment proceedings and assessment order.
3. Allegation of change of opinion by the Assessing Officer (AO).
4. Compliance with procedural requirements as per judicial precedents.

Issue-wise Detailed Analysis:

1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961:
The writ applicant challenged the impugned notice dated 31.03.2019 issued under Section 148 of the Income Tax Act, 1961. The applicant argued that the reopening of the assessment was based on the same set of facts that were already scrutinized and decided in the previous assessment proceedings. The applicant contended that the notice was bad in law and without jurisdiction, as it was merely a change of opinion by the AO.

2. Legality of the reassessment proceedings and assessment order:
The reassessment proceedings were initiated beyond the period of four years from the end of the relevant assessment year. It is a settled law that to confer jurisdiction under clause (a) of Section 147 of the Act, beyond the period of four years, two conditions are required to be fulfilled: (i) the AO must have reason to believe that the income chargeable to tax has escaped assessment; and (ii) such escapement was due to the failure to disclose fully and truly all material facts necessary for the assessment. The court found that the AO had previously scrutinized and accepted the details furnished by the assessee, including the registered sale deed and bank transactions. Therefore, the reassessment proceedings were deemed invalid.

3. Allegation of change of opinion by the Assessing Officer (AO):
The court observed that the initiation of the reassessment proceedings was based on the same set of facts that were relied upon during the original assessment proceedings. The AO had consciously applied his mind to the relevant facts and material available at that time and framed the assessment accordingly. The attempt to reopen the assessment was viewed as a mere change of opinion, which is not permissible in law. The court relied on the principle laid down in CIT Vs. Kelvinator India Ltd., where it was held that the concept of 'change of opinion' acts as an inbuilt test to check the abuse of power by the AO.

4. Compliance with procedural requirements as per judicial precedents:
The applicant argued that the revenue did not follow the directions given in the case of Asian Paints Ltd. Vs. Deputy Commissioner of Income Tax, 2008 (296) ITR 90 (BOM), where it was directed that if the AO does not accept the objections filed by the assessee, he shall not proceed further in the matter within a period of four weeks from the date of receipt of service of the said order on objections. The court noted that the revenue had failed to provide sufficient time for the applicant to approach the competent court, thus violating the procedural requirements.

Conclusion:
The court concluded that the reopening of the assessment was without jurisdiction and amounted to a change of opinion. The impugned notice dated 31.03.2019 and the assessment order dated 29.08.2019 were quashed and set aside. The writ application was allowed, and the court emphasized the necessity of tangible material for the AO to form a belief of income escapement, as per the principles laid down by the Supreme Court and other judicial precedents.

← Previous Next →