2021 (7) TMI 955 - HC - Income Tax

Reopening of assessment u/s 147 - Reappreciation of books of accounts and records - expiry of time limit for making reopening of assessment under Section 148 - Proceedings initiated beyond the period of four years and during the fag end of sixth year - change of opinion - HELD THAT - Admittedly, the assessment order under Section 143(3) of the Act was passed on 27.07.2009. Reopening of assessment was initiated beyond the period of four years, but within a period of six years. The order furnishing reasons for reopening issued at the first instance by the Assessing Officer was ambiguous and the reasons were not made clear. This Court directed the second respondent therein to consider the objections raised by the petitioner, afford an opportunity of personal hearing and pass orders. Thereafter, the petitioner was provided with an opportunity and the petitioner also had admittedly availed the same. The order pursuant to the directions issued by this Court was passed by the second respondent in proceedings dated 02.03.2015 and perusal of the order would reveal that the assessee failed to disclose certain amount in the tax calculation and subsequently for the taxation. Hence, the said discrepancy was found as a failure on the part of the assessee to disclose fully and truly all material facts Assessee failed to disclose certain amount, which resulted failure on the part of the assessee to disclose fully and truly all materials. The very ground taken by the assessee that it has furnished/disclosed fully and truly all material facts deserves no merit consideration. The second respondent could able to ascertain certain material facts establishing failure on the part of the assessee to disclose the facts fully and truly. Regarding the ground of availability of fresh material for reopening of assessment proceedings, this Court is of the considered opinion that Explanation 2(c) to Section 147 would be relevant - In the present case, Explanation 1 and Explanation 2(c) to Section 147 are to be considered. Mere production of books of account and the details by the assessee are one aspect of the matter and even with reference to such books of accounts and materials, if the Assessing Officer could able to discover some new information or materials, which provided cause for the Assessing Officer to invoke Section 147 of the Act or has reason to believe, then also such reopening proceedings are permissible. Explanation 2(c)(i) states that where an assessment has been made, but income chargeable to tax has been under-assessed, then also reopening of assessment is permissible, in cases where assessment order has been already passed based on the materials available on record. In the event of identifying under-assessment based on the very same materials, then also reopening of assessment is possible. Regarding the under-assessment there need not be new materials. Even based on the available materials, if the competent authority could able to identify any under-assessment, then also power under Section 147 shall be invoked by the competent authority. Thus where it is established that the assessee failed to disclose certain amount in the tax calculation and subsequently for the taxation, there is a reason to believe that there was a failure on the part of the assessee to disclose fully and truly all material facts. This being the factum, the initiation cannot be construed as change of opinion warranting interference from the hands of this Court. - Decided against assessee.

2021 (9) TMI 375 - HC

Issues Involved:
1. Validity of reopening proceedings under Section 147 of the Income Tax Act, 1961.
2. Compliance with the Proviso to Section 147.
3. Whether the reopening was based on a change of opinion.
4. Adequacy of reasons for reopening provided by the Assessing Officer.
5. Failure to disclose fully and truly all material facts by the assessee.
6. Applicability of the principles laid down in GKN Driveshafts (India) Ltd. vs. Income Tax Officer.

Issue-wise Detailed Analysis:

1. Validity of reopening proceedings under Section 147 of the Income Tax Act, 1961:
The petitioner challenged the order dated 02.03.2015, which rejected their objections to the reopening proceedings initiated by the second respondent under Section 147 of the Income Tax Act, 1961. The petitioner argued that the reopening was based on a change of opinion and lacked tangible material, as all necessary details were furnished during the original assessment.

2. Compliance with the Proviso to Section 147:
The petitioner contended that the reopening proceedings were initiated beyond the period of four years but within six years, and hence, the conditions under the Proviso to Section 147 must be met. The petitioner argued that there was no tangible material available to justify the reopening, and the statutory requirements under the Proviso were not fulfilled.

3. Whether the reopening was based on a change of opinion:
The petitioner maintained that the reopening was a result of a change of opinion, as the Assessing Officer had already scrutinized the details provided during the original assessment. The petitioner cited the High Court judgment in Asianet Star Communications (P.) Ltd. vs. Assistant Commissioner of Income-tax, emphasizing that the Revenue must satisfy the conditions under the Proviso before invoking the Explanation to Section 147.

4. Adequacy of reasons for reopening provided by the Assessing Officer:
The learned Senior Standing Counsel for the respondents argued that the reasons for reopening were elaborate and clear, and that mere submission of information and books of accounts by the assessee could not restrain the Assessing Officer from invoking Section 147. The reasons for reopening included the failure of the assessee to disclose certain amounts in the tax calculation, which led to under-assessment.

5. Failure to disclose fully and truly all material facts by the assessee:
The Assessing Officer found that the assessee failed to disclose certain amounts, such as deferred tax assets and waived interest, which should have been considered for the calculation of book profit under Section 115JB. This failure was seen as a reason to believe that income chargeable to tax had escaped assessment due to the assessee's non-disclosure of material facts.

6. Applicability of the principles laid down in GKN Driveshafts (India) Ltd. vs. Income Tax Officer:
The Court had earlier directed the Assessing Officer to consider the objections raised by the petitioner and pass a reasoned order on merits, following the principles laid down in GKN Driveshafts (India) Ltd. The Assessing Officer complied with this direction and provided reasons for reopening, which included the assessee's failure to disclose certain amounts.

Conclusion:
The Court concluded that the reopening proceedings were valid as the Assessing Officer had reasons to believe that the assessee had failed to disclose fully and truly all material facts. The reopening was not based on a mere change of opinion, and the reasons provided were adequate. The petitioner's failure to disclose certain amounts justified the reopening under Section 147. Consequently, the writ petition was dismissed, and the connected miscellaneous petition was closed.

← Previous Next →