2021 (10) TMI 577 - HC - Income Tax

Validity of reopening of assessment u/s 147 - Validity of reason to believe - revision v/s review - whether there is any allegation against the assessee having failed to fully and truly disclose all material facts necessary for the assessment? - HELD THAT - We have purported the reasons for reopening in the preceding paragraphs and bare reading of those reasons will show that there is no such allegation against the assessee. That apart, the reopening having been made beyond the period of four years, unless and until there is fresh tangible material available in the hands of the Assessing Officer and putforth to the assessee in the proper manner, reopening could not have been resolved. The decision of the Hon'ble Supreme Court in Kelvinator India Pvt Ltd. 2010 (1) TMI 11 - SUPREME COURT would clearly come to the aid and assistance of the assessee. In the absence of any allegation against the assessee of any non-disclosure, we have no hesitation to hold that the assessment is a clear case of change of opinion, which has been held to be bad in law in terms of decision of the Hon'ble Supreme Court in the case of Kelvinator India Pvt Ltd. We found that during the scrutiny assessment, the case was discussed with the assessee on four dates, prior to which, a questionare containing as many as 13 questions were put to the assessee with direction to file relevant documents and on scrutiny of those documents, the Assessing Officer called for further particulars which had also been furnished by the assessee on 04.06.2018 and therefore, it has to be presumed that the order has been passed by the Assessing Officer under Section 143(3) of the Act dated 17.09.2008 by forming an opinion and reopening the same on the same ground for the very same issue is a clear case of review. We are of the clear view that the reopening of the assessment is a clear case of change of opinion and what is the Assessing Officer purported to review the scrutiny assessment, which is impermissible under law. - Decided in favour of assessee.

Summary

Issues Involved:

1. Legality of reopening the assessment under Section 148 of the Income Tax Act, 1961.
2. Validity of the reassessment order dated 13.11.2014.
3. Alleged failure of the assessee to disclose fully and truly all material facts necessary for the assessment.

Issue-wise Detailed Analysis:

1. Legality of reopening the assessment under Section 148 of the Income Tax Act, 1961:

The assessment pertains to the assessment year 2006-07. The assessee filed an E-return on 22.11.2006, and the initial assessment under Section 143(3) was completed on 17.09.2008. The Assessing Officer issued a notice under Section 148 on 21.03.2012, proposing to reopen the assessment. The assessee sought reasons for reopening, which were provided on 10.07.2012. The reasons cited were that the income derived from the sale of shares, treated as capital gains and taxed at 10%, should have been treated as business income and taxed at 30%. The assessee objected, stating that there was no failure on their part to disclose all material facts necessary for the assessment and that the reopening was a case of change of opinion, which is not permissible. The court observed that the reopening notice was issued beyond the four-year period, and there was no new tangible material to justify the reopening. The court held that the reopening was a clear case of change of opinion, which is impermissible under law.

2. Validity of the reassessment order dated 13.11.2014:

The reassessment order dated 13.11.2014 was issued one day before the Supreme Court granted an interim stay on 14.11.2014. The assessee challenged this reassessment order in W.P.No.30980 of 2014. The court observed that the reassessment was coupled with a demand notice, which compelled the assessee to challenge it. The Supreme Court had previously allowed appeals in similar cases, remitting them to the High Court to decide on merits. The court found that the Assessing Officer did not properly address the objections raised by the assessee in the order dated 01.11.2012. The court held that the reassessment order was invalid as it was based on a change of opinion and did not comply with the procedural requirements laid down by the Supreme Court in GKN Driveshafts (India) Limited Vs. ITO.

3. Alleged failure of the assessee to disclose fully and truly all material facts necessary for the assessment:

The court examined the reasons for reopening and found no allegation against the assessee for failing to fully and truly disclose all material facts necessary for the assessment. The court noted that during the initial assessment, the case was discussed with the assessee on multiple dates, and all required details were furnished by the assessee. The court concluded that the reopening of the assessment was a clear case of change of opinion, which is not permissible under law. The court referred to several judgments, including CIT Vs. Kelvinator of India Ltd and Principal Commissioner of Income Tax-6, Chennai -vs- Safe Corrugated Containers (P.) Ltd, to support its conclusion.

Conclusion:

The court set aside the order passed in W.P.No.30610 of 2012 and quashed the reassessment order dated 13.11.2014. The writ appeals were allowed, and the connected Civil Miscellaneous Petitions were closed. The court reiterated that reopening an assessment based on a change of opinion is impermissible under law.