2021 (7) TMI 1032 - HC - Income Tax

Reopening of assessment u/s 147 - reopening on two issues one in respect of retention money and the other in respect of difference in profits admitted in the P L account - HELD THAT - Reasons furnished for reopening of the assessment dated 18.12.2018 would clearly reveal that incorrect claim and reduced income were identified. As stated that the issue of retention money was not considered by the AO in the original assessment order. Thus, the reopening of assessment cannot be construed as change of opinion.. This Court is of the considered opinion that once the Department could able to establish that reopening of assessment is made based on the new materials or with reference to the information which were not truly and correctly provided by the assessee at the time of original assessment, then power under Section 147 of the IT Act can be invoked. Amended provision of Section 147 of the IT Act provides wider power to the Assessing Officer to reopen the assessment. Only when the adjudicated issues are sought to be reopened, then alone the Court can form an opinion that the case would fall under change of opinion and not otherwise. Sufficiency of the reasons cannot be gone into by the High Court in writ proceedings. Once the High Court is able to form an opinion that the issues raised in the reopening proceedings are not adjudicated in the original assessment order, then it is sufficient to confer power on the Assessing Officer to reopen the assessment and the Department must be allowed to proceed with further action as contemplated under the statute. These being the principles to be followed in the present case, the non-adjudication of retention money is unable to be disputed by the petitioner/assessee in the present case. Petitioner could not be able to establish that the retention money stated above was adjudicated by the Assessing Officer during the original assessment. This being the factum established, there is no reason to consider the case of the writ petitioner - Decided against assessee.

Summary

Issues Involved:
1. Legality of the notice issued under Section 148 of the Income Tax Act for reopening the assessment.
2. Jurisdiction and merits of reopening the assessment after four years.
3. Consistency and correctness of the accounting policy for retention money.
4. Alleged failure of the petitioner to disclose fully and truly all material facts necessary for assessment.
5. Validity of the reasons provided by the Assessing Officer for reopening the assessment.

Detailed Analysis:

1. Legality of the Notice Issued Under Section 148 of the Income Tax Act:
The petitioner challenged the notice issued under Section 148 of the Income Tax Act dated 29.03.2018, which sought to reopen the assessment for the year 2011-12. The petitioner argued that the reopening was done without any tangible materials and there was no finding that the petitioner failed to disclose fully and truly all material facts necessary for the assessment. The court noted that the reasons for reopening were identical to the clarifications raised by the ACIT earlier, and the petitioner had already provided detailed explanations during the original scrutiny assessment.

2. Jurisdiction and Merits of Reopening the Assessment After Four Years:
The court examined whether the reopening of the assessment after four years was justified. It was observed that the respondent did not provide a finding that there was a failure on the part of the petitioner to disclose all material facts. The court highlighted that the respondent's proceedings dated 18.12.2018 were not a speaking order as required by law, and the reasons provided for reopening did not establish any new tangible materials.

3. Consistency and Correctness of the Accounting Policy for Retention Money:
The petitioner contended that the change in the Accounting Policy regarding retention money was duly communicated and considered during the original assessment. The court acknowledged that the petitioner had submitted all relevant details and the Chartered Accountants had confirmed the change in policy. The court noted that the petitioner had offered retention money to tax in subsequent periods, thereby negating the need to tax the same income for the assessment year 2011-12.

4. Alleged Failure of the Petitioner to Disclose Fully and Truly All Material Facts Necessary for Assessment:
The respondent argued that the petitioner did not follow a consistent policy in accounting for retention money and failed to reconcile the difference in profits. However, the court found that the petitioner had provided all necessary details during the original assessment and there was no failure to disclose material facts. The court emphasized that the original assessment order did not form any opinion on the issue of retention money, thus the reopening could not be justified as a mere change of opinion.

5. Validity of the Reasons Provided by the Assessing Officer for Reopening the Assessment:
The court scrutinized the reasons recorded by the Assessing Officer, which included the inconsistency in accounting for retention money and the difference in profits admitted. It was noted that the Assessing Officer had tangible material in the form of financial documents and replies from the petitioner. However, the court concluded that the reasons provided did not establish any new material facts that were not considered during the original assessment. The court held that the reopening of the assessment was not valid as it was based on the same information already available during the original assessment.

Conclusion:
The court dismissed the writ petition, concluding that the reopening of the assessment was not justified. The court held that the petitioner had disclosed all material facts necessary for the assessment and the reasons provided for reopening did not constitute new tangible materials. The court emphasized that the sufficiency of the reasons for reopening cannot be scrutinized in writ proceedings and must be determined by the competent authority through proper enquiry and adjudication. Consequently, the connected miscellaneous petitions were also closed.