2022 (1) TMI 945 - HC - Income Tax

Reopening of assessment u/s 147 - notice u/s 148 was issued beyond the period of four years from the end of the relevant assessment year - deductibility of interest expense - whether there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of Assessment Year 2012-13? - HELD THAT - The case of the assessee was selected for scrutiny for Assessment Year 2012-13 and it is after complete examination of the original computation of income, revised computation of income and audit, the Assessing Officer has allowed the claim of the assessee towards deductibility of interest expense - Thus, it is clear that the complete details were made available by the petitioner company in the course of assessment proceedings under Section 143(3) of the Act for Assessment Year 2012-13. In this backdrop, it can safely be concluded that the re-assessment proceedings for this year have been initiated despite the fact that the details in connection with the reasons for re-opening were already furnished for Assessment Year 2012-13 no disallowance were made in the assessment order regarding interest inventorization and the same was accepted by the Assessing Officer towards deductibility of interest expense Thus, the reasons for re-opening the assessment of the relevant year were based on the details furnished in the assessment proceedings of Assessment Year 2012-13. Merely, if some other decision has been taken by the Department for other years i.e., Assessment Year 2013-14 and Assessment Year 2014-15, the respondent authorities do not retain the power to review the order of Assessment Year 2012-13 in the garb of re-opening under Section 147 of the Act. Thus, on change of opinion and reviewing its own order is bad in law and without jurisdiction. In our view, re-opening of the assessment without any basis and merely change of opinion is not permissible while exercising powers under Section 147 r/w Section 148 In the present case, the reasons which have been recorded by the assessing officer for reopening of the assessment do not disclose that the assessee had failed to disclose fully and truly all material facts necessary for the purpose of assessment. The duty is cast upon the assessee to make true and full disclosure of the facts at the time of original assessment. The duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. It is for the Assessing officer to draw the correct inference from the primary facts. If the assessing officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment. - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of the Notice issued under Section 148 of the Income Tax Act, 1961.
2. Validity of the order rejecting the objections to the impugned notice.
3. Whether there was a failure to fully and truly disclose material facts necessary for the assessment.
4. Whether the re-opening of assessment was based on a mere change of opinion.

Detailed Analysis:

1. Legality of the Notice Issued under Section 148 of the Income Tax Act, 1961:
The petitioner questioned the legality of the Notice dated 27 March 2019 issued by the Assessing Officer under Section 148, seeking to reopen the assessment for the Assessment Year 2012-13. The petitioner argued that there was no fresh tangible material for initiating re-assessment proceedings and that the assessment was sought to be re-opened on the basis of a mere change of opinion. The court observed that the notice was issued beyond the period of four years from the end of the relevant assessment year, invoking the first proviso to Section 147 of the Act.

2. Validity of the Order Rejecting the Objections to the Impugned Notice:
The petitioner also challenged the order dated 13 November 2019 passed by the Assistant Commissioner of Income Tax, which rejected the objections raised by the petitioner regarding the validity of the impugned notice. The court noted that the reasons for reopening the assessment, as communicated by the Assessing Officer, were based on the details already furnished during the original assessment proceedings for the Assessment Year 2012-13. Therefore, the re-assessment proceedings were initiated despite the fact that the necessary details were already provided.

3. Whether there was a Failure to Fully and Truly Disclose Material Facts Necessary for the Assessment:
The court examined whether there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of Assessment Year 2012-13. It was noted that the petitioner had filed the return of income, revised return, and provided all requisite information and documents during the original assessment proceedings. The court concluded that the re-assessment proceedings were initiated based on the same details furnished during the original assessment, indicating no failure on the part of the assessee to disclose material facts.

4. Whether the Re-opening of Assessment was Based on a Mere Change of Opinion:
The court emphasized that re-opening of the assessment on the basis of a mere change of opinion is not permissible under Section 147 r/w Section 148 of the Act. The court referred to the legal position established in the case of CIT vs. Kelvinator of India Limited and other relevant judgments, which state that a mere change of opinion cannot form the basis of reopening a completed assessment. The court found that the reasons recorded by the Assessing Officer for reopening the assessment did not disclose any failure by the assessee to fully and truly disclose all material facts necessary for the assessment.

Conclusion:
The court set aside the impugned notice dated 27 March 2019 issued under Section 148 of the Act and the impugned order dated 13 November 2019 passed by the Assistant Commissioner of Income Tax. The petition was allowed, and the re-opening of the assessment for the Assessment Year 2012-13 was deemed invalid as it was based on a mere change of opinion and lacked the necessary conditions for re-assessment. There was no order as to costs.