2022 (1) TMI 739 - HC - Income Tax

Reopening of assessment u/s 147 - Eligibility of reasons to believe - Change of opinion - provision for sales return as the expenditure was not incurred during the previous year (as also the amortization of other operating expenses) - HELD THAT - Reasons recorded only indicate a change of opinion by the Jurisdictional Assessing Officer (JAO) based on the same set of facts and documents. Moreover the JAO has proceeded on the incorrect premise that the amount of provision for sales return as the expenditure incurred was not incurred during the relevant year but the following year. Infact this has been accepted in the order dated 16th November 2019 rejecting petitioner s objections which order is also impugned in this petition. The JAO though he admits that he has erred states that that issue of difference is not of prime relevance or contention is not of relevance at this stage. 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. As held in 3i Infotech Limited 2010 (6) TMI 372 - BOMBAY HIGH COURT 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 reopen the assessment based on the very same material with a view to take another view. In the reasons recorded also the JAO in effect says as could be seen from paragraph 5 therein that it was a change of opinion - we are unable to cull out what were the material facts necessary for assessment that were not disclosed by petitioner truly and fully at the time of assessment. - Decided in favour of assessee.

Summary

Issues:
Impugning notice under Section 148 of the Income Tax Act, 1961 and order rejecting objections.

Analysis:
1. The petitioner contested a notice issued under Section 148 of the Income Tax Act, 1961, and an order rejecting objections. The petitioner filed the income return for Assessment Year 2012-2013, which was accepted after scrutiny under Section 143(3) of the Act.

2. The petitioner was involved in a business merger scenario where assets were vested in the petitioner as per a court-approved scheme. The petitioner filed returns and complied with audit requirements as per Section 44AB of the Act.

3. The Assessing Officer raised queries during the original assessment, and the petitioner provided all necessary details, including the scheme of amalgamation and demerger approved by the High Court. The assessment was completed accepting the income offered in the return.

4. Subsequently, the petitioner received a notice under Section 148, challenging the provision for sales return and operating expenses. The reasons for reopening indicated a change of opinion by the Assessing Officer based on the same facts and documents.

5. The court noted that all points raised during reopening were addressed in the original assessment, and the Assessing Officer had all relevant information. The court cited precedent that the Assessing Officer cannot reopen assessment based on a change of opinion when all necessary facts were disclosed.

6. The court emphasized that the reasons for reopening did not demonstrate any failure on the petitioner's part to fully and truly disclose material facts during the original assessment. Without evidence of non-disclosure, the reopening of assessment was deemed unjustified.

7. Ultimately, the court allowed the petition, quashing the notice under Section 148 and the order rejecting the objections. The decision was made based on the lack of justification for reopening the assessment and the absence of undisclosed material facts during the original assessment.

This detailed analysis covers the issues involved in the legal judgment comprehensively, highlighting the key arguments and decisions made by the court.