2022 (1) TMI 375 - HC - Income Tax

Validity of Reopening of assessment u/s 147 - Eligibility of reasons to believe - change of opinion - Onus to prove - failure on the part of petitioner to fully and truly disclose all material facts required for assessment - whether primary material facts not disclosed ? - HELD THAT - The assessee had made submissions on these items earlier but still states that income chargeable to tax has escaped because in his opinion certain amounts are required to be added back in profit and loss account and certain amounts should not have been disallowed. 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 very same material with a view to take another view. We are satisfied that 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 AO - In the reasons for reopening, 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 reopened on account of change of opinion of the Assessing Officer- See 3I INFOTECH LTD. VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX 2010 (6) TMI 372 - BOMBAY HIGH COURT - Decided in favour of assessee.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act 1961 for A.Y.-2013-2014 and quashing of order disposing of objections against reassessment proceedings.

Detailed Analysis:

1. Notice under Section 148 and Quashing of Order:
The petitioner contested a notice dated 2nd August 2019 issued under Section 148 of the Income Tax Act 1961 for A.Y.-2013-2014 and sought to quash an order dated 5th December 2019 disposing of objections against the initiation of reassessment proceedings. The petitioner had filed the return of income for A.Y. 2013-2014, and the assessment was completed on 30th December 2016. The notice under Section 148 was issued after the expiry of 4 years from the relevant assessment year, triggering the application of the proviso to Section 147. The duty of the assessee to disclose all primary relevant facts was emphasized, and it was clarified that the duty does not extend beyond full and truthful disclosure of all primary facts. The explanation to Section 147 was discussed, highlighting that the assessee is not required to disclose inferences, as drawing inferences is the duty of the assessing authority.

2. Reasons to Believe and Change of Opinion:
The court analyzed the reasons provided for proposing to reopen the assessment and concluded that it amounted to a change of opinion rather than a valid reason to believe that income had escaped assessment. Citing precedents, including Commissioner of Income Tax Vs. Kelvinator of India Ltd., it was emphasized that the Assessing Officer cannot reopen assessments based on a mere change of opinion. The court noted that the entire basis for proposing to reopen relied on documents and submissions available before the original assessment order was passed. It was highlighted that if one view is conclusively taken by the Assessing Officer based on the material on record, it is not permissible to reopen the assessment to take another view.

3. Disclosure of Material Facts and Assessment Reopening:
The court found that the petitioner had fully and truly disclosed all material facts necessary for the assessment, which were carefully scrutinized by the Assessing Officer during the original assessment proceedings. The court observed that there was no indication in the reasons for reopening as to what was not disclosed by the petitioner. It was concluded that the assessment was being sought to be reopened not due to a failure to disclose material facts but because of a change of opinion by the Assessing Officer. Citing relevant case law, the court held that when a full and true disclosure of material facts has been made during the assessment proceedings, the condition precedent for reopening the assessment beyond a period of four years is not fulfilled.

4. Final Decision:
In light of the analysis, the court allowed the petition, quashed the notice dated 2nd August 2019, and set aside the order on objections dated 5th December 2019. The petition was disposed of with no order as to costs.