2021 (4) TMI 1211 - HC - Income Tax

Reopening of assessment u/s 147 - assessee has claimed erroneous reduction in the value of inventory being flats under construction as per joint venture development, which will be complete on receipt of share of flats apart from cash by the assessee company as agreed in the Joint Venture document which has not taken place during the year - HELD THAT - In the reasons given for reopening the assessment, it is stated that the issue of reduction in respect of inventory was not considered during the course of scrutiny proceeding. As further stated that the Tripartite agreement dated 12.3.2012 and the financial submitted by the petitioner are itself tangible materials for reopening of the assessment and there was no change of opinion by the AO. The impugned order further states that the assessment were scrutinised to find out the difference between the opening stock of the current year with the closing stock of the previous year and the details and evidence were called for were restricted to that issue only and that the issue relating to reduction in the value of inventory was not considered during the course of scrutiny and therefore the notice has been issued to reopen the assessment. As find substantial merits in the submission of the learned counsel for the respondent. The assessment is driven based on the returns filed by an assessee and therefore it is for the assessee to make correct computation of income for the purpose of payment of income tax. If there is any irregular claim for deduction/exemption, the respondent assessing officer is well within his rights to reopen the assessment as long as which reopening of the assessment is not on account of any change of opinion as has been held by the Honourable Supreme Court has followed by all the High Courts. It cannot be stated that the impugned notice has been issued merely on account of change of opinion. Further, the petitioner has also not clearly explained how a reduction in the value of inventory was made at the time of filing of the returns. In these proceedings, the petitioner is hiding behind the cloak of the few ratios of the Court which may not be applicable to the facts of the case. Therefore, In my view, the respondent Income tax Department was justified in reopening the assessment under section 148 of the Income Tax Act, 1961. It is still open to the petitioner to substantiate its defence before the respondent by filing suitable reply and explain how the computation of the income was made for the purpose of payment of tax and thus, the taxable income was correctly determined. Therefore, am inclined to dismiss this writ petition. I however give liberty to the petitioner to participate in the proceedings pending before the respondent. The petitioner may therefore file additional reply, if any, within a period of 30 days from date of receipt of copy of this order before the respondent explaining its stand. The respondent is directed to examine the issue a fresh and pass an assessment orders on merits in accordance with law within a period of 90 days from the date of receipt of copy of this order.

Summary

Issues:
Reopening of assessment for Assessment Year 2012-2013 based on reduction in inventory value claimed by the assessee.

Analysis:
1. The respondent Income Tax Officer sought to reopen the assessment for the Assessment Year 2012-2013 due to an alleged erroneous reduction in the value of inventory claimed by the assessee. The original assessment order was passed on 23.03.2015, and the notice for reopening was issued on 20.11.2019 within the normal limitation period under Section 147 of the Income Tax Act.

2. The petitioner objected to the reopening of the assessment, leading to the Income Tax Officer passing an Assessment Order on 13.12.2016 under Section 143(3) read with Sections 147 and 148 of the Income Tax Act.

3. The petitioner challenged the assessment in a writ petition, which was partly allowed, directing the respondent to pass a speaking order in line with a Supreme Court decision. The Division Bench upheld the order, leading to the impugned speaking order being passed.

4. The petitioner contended that there was no valid reason for reopening the assessment, as it was based on a change of opinion without any new information coming to light.

5. The petitioner referenced various court decisions to support their argument against the reopening of the assessment.

6. The respondent defended the reopening, citing a tripartite agreement from 2012 that was not disclosed to the Assessing Officer during the original assessment.

7. The court considered arguments from both sides, reviewed the impugned notices and orders, and noted that the assessment order passed earlier lacked a speaking order.

8. The court found that the reasons for reopening the assessment were valid, as the petitioner had not substantiated the reduction in inventory value during the original assessment.

9. The court emphasized that it is the assessee's responsibility to correctly compute income for tax purposes, and the assessing officer has the right to reopen assessments for irregular claims.

10. Ultimately, the court dismissed the writ petition but allowed the petitioner to participate in further proceedings before the respondent, directing the respondent to pass a fresh assessment order within 90 days.

11. The court instructed the respondent to make decisions on merit without being influenced by the court's observations, and the writ petition was dismissed with no costs.

This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive summary of the arguments presented by both parties and the court's final decision and directives.