2021 (12) TMI 651 - HC - Income Tax

Reopening of assessment u/s 147 - Reopening beyond period of four years - eligibility of reasons to believe - HELD THAT - The criteria for reopening of assessment after a period of four years are no longer res Integra in view of the judgment of ANANTA LANDMARK PVT. LTD. 2021 (10) TMI 71 - BOMBAY HIGH COURT held that where assessment was not sought to be reopened on the reasonable belief that income had escaped assessment on account of failure of assessee to disclose truly and fully all material facts that were necessary for computation of income but was a case wherein assessment was sought to be reopened on account of change of opinion of Assessing Officer, the reopening was not justified. It is also held that where primary facts necessary for assessment are fully and truly disclosed, the Assessing Officer is not entitled to reopen the assessment on a change of opinion. It is held that while considering the material on a record, one view is conclusively taken by Assessing Officer, it would not be open for the Assessing Officer to reopen the assessment based on the very same material and take another view. Perusal of the reasons recorded by Respondent No.1 indicates that Respondent No.1 has relied upon facts and figures available from the audited account and undisputed TAR filed along with the return of income in the original assessment. Since the impugned notice was issued four years from the end of the relevant Assessment year, there has to be tangible material to conclude that income had escaped assessment. From the reasons recorded by Respondent No.1 in the reassessment notice, it appears that there was no tangible material available on record to conclude that income had escaped assessment. Assessing Officer has acted in excess of the limit of his jurisdiction to reopen the assessment in the exercise of powers under Section 147 read with Section 148 of the Act. Accordingly, Petitioner would be entitled to succeed in this proceeding - Decided in favour of assessee.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act and rejection of objections to reopening of assessment.

Analysis:
The petitioner, a private limited company engaged in property development, challenged a notice under Section 148 of the Income Tax Act dated 30th March, 2019, for reopening the assessment for the Assessment Year 2012-13. The petitioner followed the Percentage Completion Method for its projects, where profit margins were added as a percentage of total costs incurred during the year. The petitioner's return of income for the said year was filed on 30th September, 2012, and the assessment order was passed under Section 143(3) of the Act on 4th February, 2015. Respondent No.1 issued the notice for reopening the assessment on 30th March, 2019, beyond four years from the end of the relevant Assessment Year.

The petitioner objected to the proposed action, stating that all material facts were fully disclosed in the original assessment and that the reopening lacked tangible material. Despite the objections, Respondent No.1 passed an order on 3rd October, 2019, rejecting the petitioner's objections and calling for further details under Section 142(1) of the Act. The court granted an ad-interim stay to the impugned notice dated 30th March, 2019, and the petitioner filed a petition challenging the notice and order issued by Respondent No.1.

During the hearing, it was established that the impugned notice was issued after four years from the end of the relevant Assessment Year. Section 147 of the Act allows for reopening an assessment if there are reasons to believe that income has escaped assessment due to failure to disclose all material facts. The court referred to a previous judgment where it was held that reopening based on a change of opinion of the Assessing Officer without any new material was not justified. The court found that there was no tangible material available to conclude that income had escaped assessment in this case.

Consequently, the court held that the Assessing Officer had exceeded the jurisdiction to reopen the assessment under Section 147 and 148 of the Act. The court quashed and set aside the impugned notice, order, and subsequent notice issued by Respondent No.1 for the Assessment Year 2012-13, ruling in favor of the petitioner.