2021 (9) TMI 323 - HC - Income Tax

Reopening of assessment u/s 147 - tangible material for reopening - Reopening beyond periods of four years - unabsorbed depreciation of the Amalgamating Company was excess adjusted - HELD THAT - Reopening of the assessment, in the case of the Writ Petitioner is falling beyond the period of four years. Thus the conditions stipulated under proviso Clause (c) of explanation 2 to Section 147 of the Act is to be complied. Mere reason to believe is insufficient for the purpose of assessment beyond the period of four years. Change of opinion - Assessing Authority, while passing the original Assessment Order considering the very same materials as well as the informations provided and the Court Orders formed an opinion that it is a case of amalgamation. Thereafter, they are again forming an opinion that the transaction does not come under purview of Section 2(1B) of the Income Tax Act and it is an ordinary takeover of business by acquiring shares. Where two opinions are possible in respect of a particular transaction and the Assessing Authority formed a particular opinion and passed an Assessment Order and the other opinion later on formed for the purpose of reopening of assessment beyond four years from and out of the same materials without any alteration or change, then such opinion formed at later point of time, undoubtedly to be construed as 'change of opinion'. Failure on the part of the Assessee to disclose fully and truly all material facts - TDS credit pertaining to GTPL was allowed in the hands of Roca India. Therefore, the prerequisite condition as to 'existence of reason to believe that income has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment' has not been satisfied. As in the Original Assessment Order itself, the Assessment Authority made a finding regarding unabsorbed depreciation of amalgamating company. The details are furnished and the Assessing Authority has taken into consideration of all these facts. The rejection order which is impugned is passed only based on the factual inferences drawn from and out of the very same materials produced by the petitioner at the time of original assessment and has elaborately considered in the aforementioned paragraphs. The inferences drawn at later point of time in the present case, is nothing but a change of opinion and therefore, the subsequent finding on the point that there was a failure on the part of Assessee cannot be relied upon. Case of the petitioner is not falling within the proviso Clause (c) of explanation 2 to Section 147 of the Income Tax Act and the respondents could not able to establish that there was a failure on the part of the Assessee to disclose fully and truly all material facts and further, this Court could able to arrive a conclusion that the factual inference drawn is also change of opinion, the petitioner is entitled to succeed in the present case. - Decided in favour of assessee.

Issues Involved:
1. Validity of reopening proceedings under Section 148 of the Income Tax Act.
2. Compliance with requirements under Section 147 of the Income Tax Act.
3. Alleged change of opinion by the Assessing Officer.
4. Disclosure of material facts by the assessee.

Issue-wise Detailed Analysis:

1. Validity of reopening proceedings under Section 148 of the Income Tax Act:
The petitioner, a Private Limited Company, challenged the reopening proceedings initiated under Section 148 of the Income Tax Act. The company had previously filed its return of income for the assessment year 2009-10, which was scrutinized, and an Assessment Order was passed on 16.01.2014. However, beyond four years but within six years, the Assessing Officer issued a notice under Section 148 on 28.03.2016, stating that there was a reason to believe that the income for the Assessment Year 2009-10 had escaped assessment. The petitioner filed objections, which were rejected, prompting the writ petition.

2. Compliance with requirements under Section 147 of the Income Tax Act:
The petitioner argued that the requirements under Section 147 were not met, as there was no tangible material for reopening, nor was there any failure to disclose fully and truly all material facts. The petitioner contended that the reopening was based on a change of opinion, which is not permissible. The court considered the arguments and concluded that mere reason to believe is insufficient for reopening beyond four years unless the Assessing Officer is satisfied that the assessee failed to disclose fully and truly all material facts.

3. Alleged change of opinion by the Assessing Officer:
The petitioner’s counsel highlighted that the issue of amalgamation and unabsorbed depreciation was already considered by the Assessing Officer during the original assessment. The court noted that the Assessing Officer had drawn inferences from the same materials during the original assessment and formed an opinion that the transaction was an amalgamation. The subsequent opinion that it was an ordinary takeover of business by acquiring shares constituted a change of opinion, which is not valid for reopening the assessment beyond four years.

4. Disclosure of material facts by the assessee:
The court found that the petitioner had disclosed all relevant materials and documents during the original assessment, including details of the amalgamation and unabsorbed depreciation. The Assessing Officer had considered these materials and formed an opinion. The court concluded that there was no failure on the part of the assessee to disclose fully and truly all material facts, and the reopening was based on a change of opinion.

Conclusion:
The court held that the reopening of the assessment was invalid as it was based on a change of opinion and there was no failure on the part of the assessee to disclose fully and truly all material facts. Consequently, the impugned proceedings and notice under Section 148 were quashed, and the writ petition was allowed.

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