2022 (1) TMI 793 - HC - Income Tax

Reopening of assessment u/s 147 - eligibility of reason to believe - change of opinion to commence proceedings for re-assessment - claim of expenses made without establishing the nature of expenses with respect to work done and documentary evidences. ad there is no brought forward losses whereas assessee claimed set off of brought forward losses - HELD THAT - As regards point (a) and point (b), petitioner had received notice dated 15th October 2015 under Section 142(1). Item 9 in the Annexure to the notice calls upon petitioner to furnish break-up of head-wise expenses where amount paid was above ₹ 5 lakhs in the format mentioned therein and item 11 calls upon petitioner to furnish details of brought forward losses and assessed losses, if any, along with proof, i.e., assessment orders / order giving effect to CIT(A) s order / ITAT or High Court order. Petitioner replied to this notice by a communication dated 19th November 2015 addressed through petitioner s Chartered Accountants. We have perused the said document and petitioner has provided all the details as sought for. In fact these figures also find a mention in the statement of profit and loss filed by petitioner. It is true that these points have not been discussed in the assessment order. But as held by the Division Bench of this Court in Aroni Commercials Limited. 2014 (2) TMI 659 - BOMBAY HIGH COURT once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment.. It is not necessary that an assessment order should contain reference and / or discussion to disclose its satisfaction in respect of the query raised. Unexplained dividend receipts - As in the profit and loss account, break-up of other income has been provided. It indicates a total income of ₹ 15,11,01,889/- of which ₹ 13,25,26,684/- relates to dividend from foreign companies. The assessment order certainly includes income from other sources of ₹ 15,11,01,889/-. Therefore, even this issue has been a subject of consideration of the Assessing Officer while completing the assessment. Objection against reopening - Petitioner made attempt on multiple occasions to upload its objections to the notice for re-opening of assessment proceedings but on account of the portal of income tax not working properly (technical issues and glitches), it could not upload / record its objections. Thereafter petitioner finally managed to file its objections dated 14th September 2021 and an order rejecting the objections was passed on 17th September 2021, which is impugned in the Petition. This Petition has been declared on 22nd September 2021 and lodged on 23rd September 2021. Therefore, we cannot say that in the case at hand, petitioner had participated in the assessment proceedings. We have to, therefore, reject the submissions of Shri. Walve that petitioner having participated in the assessment proceedings, would disentitle the petitioner to the extra-ordinary reliefs under Article 226 of the Constitution of India. The notice under Section 148 has been issued purely by way of change of opinion relying on the same set of primary facts which had been submitted by petitioner during the original assessment proceedings. In our view, the usage of expression in the reasons there has been escapement of income by reason of failure on the part of the assessee to disclose fully and truly all material facts is clearly made as an attempt to take the case out of the restrictions imposed by proviso to Section 147 of the Act.

Issues Involved:
1. Validity of the notices for reopening assessment under Section 148 of the Income Tax Act.
2. Whether there was a failure on the part of the petitioner to fully and truly disclose all material facts necessary for the assessment.
3. Whether the reopening of the assessment was based on a mere change of opinion by the Assessing Officer.

Detailed Analysis:

1. Validity of the Notices for Reopening Assessment:
The petitioner sought reliefs to quash the notices and the draft assessment order issued by the respondent for reopening the assessment proceedings for the assessment year 2013-14. The petitioner had filed its return of income for A.Y. 2013-14 on 30th September 2013, and an assessment order was passed on 30th November 2015 under Section 143(3) of the Income Tax Act. The petitioner later received a notice dated 20th March 2020 under Section 148 of the Act, indicating that the income chargeable to tax for A.Y. 2013-14 had escaped assessment. Since the notice was received after four years from the end of the relevant assessment year, the proviso to Section 147 applied, requiring the respondents to show a failure on the part of the petitioner to fully and truly disclose all material facts.

2. Failure to Fully and Truly Disclose Material Facts:
The respondents cited three points in the reasons for reopening the assessment:
(a) Claim of expenses made without establishing the nature of expenses with respect to work done and documentary evidence.
(b) Discrepancy in the Tax Audit Report regarding brought forward losses.
(c) Claim of dividend receipts without submitting the Annual Accounts and Balance Sheet of the foreign companies.

For points (a) and (b), the petitioner had already provided detailed responses and documentation during the original assessment proceedings. The court noted that once a query is raised and replied to during the assessment proceedings, it follows that the query was considered by the Assessing Officer. It is not necessary for the assessment order to discuss every query raised. As for point (c), the break-up of other income, including dividend from foreign companies, was provided in the profit and loss account, and the assessment order included income from other sources.

3. Reopening Based on Change of Opinion:
The court emphasized that it is settled law that the Assessing Officer cannot reopen an assessment based on a mere change of opinion. The court referenced the case of Aroni Commercials Limited, where it was held that once a query is raised and answered, it is considered that the Assessing Officer has deliberated on the issue. The court found that the reasons for reopening the assessment in this case were based on the same set of primary facts submitted during the original assessment proceedings, indicating a change of opinion rather than new tangible material.

Participation in Assessment Proceedings:
The respondent argued that the petitioner had participated in the assessment proceedings and should not be granted relief. However, the court found that the petitioner faced technical issues and lockdown constraints due to the Covid-19 pandemic, which hindered their ability to respond promptly. The petitioner made multiple attempts to file objections and provide information but faced technical glitches. The court concluded that the petitioner had not participated in the assessment proceedings in a manner that would disentitle them to relief under Article 226 of the Constitution of India.

Conclusion:
The court allowed the petition, quashing the notices and the draft assessment order for reopening the assessment for A.Y. 2013-14. The court held that the reopening was based on a change of opinion and not on any failure by the petitioner to disclose material facts. The petition was disposed of with no order as to costs.

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