2021 (10) TMI 465 - HC - Income Tax

Reopening of assessment u/s 147 - double deduction u/s 80IB - Whether it is a disclosure or not within the meaning of Section 147 of the Act ? - validity of reasons to believe - whether the interest was allowable as a deduction? - HELD THAT - AO had had all materials facts before him when he made the original assessment. When the primary facts necessary for assessment are fully and truly disclosed, the AO is not entitled on change of opinion to commence proceedings for reassessment. Even if the AO, who passed the assessment order, may have raised too many legal inferences from the facts disclosed, on that account the AO, who has decided to re-open assessment, is not competent to re-open assessment proceedings. Where on consideration of material on record, one view is conclusively taken by the AO, it would not be open to re-open the assessment based on the very same material with a view to take another view. Petitioner has filed the annual returns with the required documents as provided for under Section 139 - There was nothing more to disclose and a person cannot be said to have omitted or failed to disclose something when, of such thing, he had no knowledge. One cannot be expected to disclose a thing or said to have failed to disclose it unless it is a matter which he knows or knows of. In this case, except for a general statement in the reasons for re-opening, the Assessing Officer has not disclosed what was the material fact that petitioner had failed to disclose. Petitioner had truly and fully disclosed all material facts necessary for the purpose of assessment. Not only material facts were disclosed by petitioner truly and fully but they were carefully scrutinized and figures of income as well as deduction were reworked carefully by the Assessing Officer. In the reasons for reopening, AO has infact relied upon the audited report accounts to say that the claim of petitioner of 1/5th of the construction period interest was double deduction or that it has resulted in irregular allowance of construction period interest or that petitioner was not entitled for deduction under Section 80 IB of the Act. In the reasons for re-opening, there is not even a whisper as to what was not disclosed. In our view, this is not a case where the assessment is sought to be reopened on the reasonable belief that income had escaped assessment on account of failure of the assessee to disclose truly and fully all material facts that were necessary for computation of income but this is a case wherein the assessment is sought to be re-opened on account of change of opinion of the Assessing Officer about the manner of computation of the deduction. The notice to re-open the assessment was found entirely on the assessment records. The entire basis for re-opening the assessment is the disclosure which has been made by the assessee in the course of the assessment proceedings. It is settled law that where on consideration of material on record, one view is conclusively taken by the Assessing Officer, it would not be open to the Assessing Officer to re-open the assessment based on the very same material with a view to take another view. Petitioner had during the course of the assessment proceedings made a complete disclosure of material facts. Assessing Officer had called for disclosure on which a specific disclosure on the issue in question was made. In such a case, it cannot be stated that condition precedent to the re-opening of an assessment beyond a period of four years has been fulfilled. Reopening quashed - Decided in favour of assessee.

Issues Involved:

1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Compliance with jurisdictional conditions for initiating reassessment proceedings.
3. Alleged failure to disclose fully and truly all material facts necessary for assessment.
4. Reopening of assessment based on change of opinion.

Issue-Wise Detailed Analysis:

1. Validity of the Notice Issued Under Section 148 of the Income Tax Act, 1961:

The petitioner challenged the validity of the notice dated 27/03/2019 issued under Section 148 of the Income Tax Act, 1961, for reopening the assessment for the assessment year 2012-2013. The petitioner argued that the notice was without jurisdiction and that the jurisdictional conditions required for initiating reassessment proceedings were not satisfied.

2. Compliance with Jurisdictional Conditions for Initiating Reassessment Proceedings:

The petitioner contended that its books were regularly audited, and all necessary details were provided during the original assessment. The original assessment was completed on 17th March 2015 under Section 143(3) of the Act. The reassessment notice was issued more than four years later, on 27th March 2019. The petitioner argued that there was no fresh or tangible material to justify the reassessment and that the reassessment was based on a change of opinion.

3. Alleged Failure to Disclose Fully and Truly All Material Facts Necessary for Assessment:

The respondent argued that the petitioner had failed to disclose fully and truly all material facts necessary for assessment. The reasons for reopening stated that the petitioner had irregularly claimed construction period notional interest, wrongly claimed deduction under Section 80 IB of the Act on total income instead of business income, and claimed deduction on capital gains and income from other sources. The respondent contended that these issues were not fully and truly disclosed during the original assessment.

4. Reopening of Assessment Based on Change of Opinion:

The petitioner argued that the reassessment was based on a change of opinion, which is not permissible. The petitioner had provided all necessary details during the original assessment, and the reassessment was based on the same material facts already on record. The petitioner cited various judgments to support the argument that mere change of opinion does not justify reassessment.

Court's Analysis and Judgment:

The court noted that the assessment was sought to be reopened after more than four years, and hence, the proviso to Section 147 of the Act was applicable. The court emphasized that for reopening an assessment after four years, there must be a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The court observed that the reasons for reopening did not specify what material facts were not disclosed by the petitioner. The court referred to various judgments, including Calcutta Discount Co. Ltd. and Bhanji Lavji, to highlight that the duty of the assessee is to disclose all primary facts, but it is the duty of the Assessing Officer to draw inferences from those facts.

The court concluded that the petitioner had truly and fully disclosed all material facts necessary for the assessment. The reassessment was based on a change of opinion, which is not permissible. The court quashed and set aside the notice dated 27th March 2019 issued under Section 148 of the Act and the order dated 30th September 2019 rejecting the petitioner's objections.

Conclusion:

The petition was allowed, and the notice and order for reopening the assessment were quashed and set aside. The court emphasized that reassessment based on a change of opinion is not permissible and that the Assessing Officer must specify what material facts were not disclosed by the assessee to justify reopening the assessment after four years.

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