2021 (12) TMI 1092 - HC - Income Tax

Reopening of assessment u/s 147 - Reason to believe - loan given by Petitioner to its foreign subsidiary at 11% p.a. rate of interest and claim of depreciation of goodwill from an amalgamating company - HELD THAT - As loan given by Petitioner to its foreign subsidiary at 11% p.a. rate of interest and claim of depreciation of goodwill from an amalgamating company. Both these details were made available to the Assessing Officer who had passed the order of assessment sough to be re-opened. As regards loan to a subsidiary, during the assessment proceedings, a letter dated 07/10/2016 was addressed by Petitioners Chartered Accountant to the Assessing Officer where the details of the loan given to its overseas subsidiary and rate of interest charged have been provided. Petitioner, in its statement giving details of disallowances made, also has stated that for AY 2012-13 and AY 2013-14, there was disallowance on account of depreciation of goodwill. Notwithstanding that the Assessing Officer has allowed depreciation of goodwill for AY 2014-15. As held by Apex Court in the case of Indian Eastern Newspaper Society, New Delhi Vs. Commissioner of Income Tax, New Delhi 1979 (8) TMI 1 - SUPREME COURT even if it is an error that the Assessing Officer discovered, still an error discovered on a re-consideration of the same material does not given him power to re-open. When the primary facts necessary for assessment are fully and truly disclosed, the Assessing Officer 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 reopen assessment, is not competent to reopen assessment proceedings. Where on consideration of material on record, one view is conclusively taken by the Assessing Officer, it would not be open to reopen the assessment based on the vary same material with a view to take another view. In the circumstances, we are satisfied it is nothing but change of opinion. - Decided in favour of assessee.

Summary

Issues:
Impugning notice under Section 148 of the Income Tax Act and order rejecting objections.

Analysis:
The High Court observed discrepancies in the reasons provided for initiating proceedings under Section 148 of the Act. The Court directed that all reasons and forms for recording approval must include dates, and the authority granting the sanction should digitally mention the date and time below the signature. This directive is to be followed meticulously by all officers in the Income Tax Department.

The Court determined that the reasons presented for initiating the proceedings amounted to a change of opinion, which is impermissible under Section 147 of the Act. It was noted that no new material or information had come to light between the original assessment order and the decision to re-open the assessment. The Court emphasized that the power under Section 147 cannot be used to review an assessment order based on the same set of facts.

The Respondent argued that the Assessing Officer found relevant material after due diligence, justifying the reason to believe that income had escaped assessment. However, the Court found that the reasons for re-opening assessment were based on the same facts and material already available to the original Assessing Officer, rendering it a mere fresh application of mind without new substantive information.

Regarding specific issues raised by the present Assessing Officer, the Court highlighted instances where details regarding a loan to a foreign subsidiary and depreciation claimed on goodwill were already provided to the original Assessing Officer during the assessment proceedings. The Court cited legal precedent to emphasize that even if an error is discovered upon re-consideration of the same material, it does not grant the Assessing Officer the power to re-open assessment proceedings based on a change of opinion.

Ultimately, the Court concluded that the re-opening of the assessment was indeed a change of opinion and not based on any new material or information. The petition was disposed of in favor of the petitioner, quashing the notice seeking to re-open the assessment for the relevant year and the order rejecting objections.

This detailed analysis of the judgment from the Bombay High Court provides insights into the issues surrounding the notice under Section 148 of the Income Tax Act and the subsequent rejection of objections, highlighting the importance of adherence to legal procedures and the prohibition against re-opening assessments based on a mere change of opinion.