2021 (6) TMI 556 - HC - Income Tax

Reopening of assessment u/s 147 - whether there was true and full disclosure by the petitioner at the time of assessment? - whether the petitioner is entitled to state that the impugned proceedings were on account of change of opinion? - HELD THAT - Before the assessment was completed, the petitioner s auditor has clearly stated that the petitioner was trader of rights in films and that the petitioner has not claimed any appreciation and consequently there is no schedule for the same. In the said communication, the auditor has also called upon the respondent to inform as to which of the transactions and which of the agreements were required. It is thereafter the assessment was completed under section 143 (3) on 19.12.2011. Before the assessment order was passed, a personal hearing was also held on 04.08.2011. Though the assessment order has been passed by the predecessor of the respondent, it does not reveal any proper reasonings. Nevertheless, it cannot be said that the petitioner was guilty of failure to disclose truly and fully all material facts necessary for completing assessment for the assessment year 2009-2010. Therefore, the impugned exercise of the respondent invoking section 148 of the Income Tax Act, 1961 for the purpose of first proviso to section 147 has to be held on account of change of opinion by the respondent. Thus the impugned communication overruling the objection of the petitioner against reopening of the assessment is liable to be quashed. Accordingly, it is quashed. This Writ petition stands allowed.

Summary

Issues:
Challenge to reopening of income tax assessment for Assessment Year 2009-2010 based on failure of true and full disclosure of materials.

Analysis:
1. The petitioner challenged the communication overruling objections against reopening the income tax assessment for the Assessment Year 2009-2010. The notice under Section 148 of the Income Tax Act, 1961 was issued based on reasons related to the purchase of movie rights and alleged failure to disclose materials required for assessment.

2. The petitioner contended that the notice was issued beyond the normal limitation period and questioned the basis for reopening the assessment. The petitioner argued that the reasons provided were not new but a change of opinion, which does not justify reassessment under Sections 147 & 148 of the Income Tax Act, 1961.

3. The petitioner cited various legal precedents to support their argument against the reopening of the assessment. The respondent, however, argued that there was a failure to disclose all required materials for assessment, as evidenced by discrepancies in Form-3CD submitted by the petitioner.

4. The court reviewed the documents filed by both parties and the reasoning provided by the respondent. It noted that the assessment for the relevant year was completed earlier, and the petitioner's auditor had provided details of income from film rights sales before the assessment order was passed.

5. The court found that the assessment order lacked detailed reasoning, but it concluded that the petitioner had not failed to disclose all material facts necessary for assessment. It determined that the reopening of the assessment was based on a change of opinion rather than new facts.

6. Consequently, the court quashed the communication overruling the petitioner's objections against the reopening of the assessment, ruling in favor of the petitioner. The court held that the respondent's actions were based on a change of opinion and not valid grounds for reassessment.