2022 (2) TMI 347 - HC - Income Tax

Reopening of assessment u/s 147 - Admissibility of deduction u/s. 80 HHC - HELD THAT - Reasons do not indicate that there was failure on the part of Petitioner to truly and fully disclose any material fact. AO is relying on the same material facts already filed and considered by the Assessing Officer who passed the original assessment order - the entire basis for reopening as could be seen from the reasons is change of opinion and as has been held time and again by various Courts, Respondent can not propose to reopen assessment on the basis of change of opinion - Assessing Officer has passed assessment order considering materials on record and taken a conclusive view. To reopen the assessment based on same material with a view to take another view, is not permissible. Moreover, in this case, there is simply a general statement in the reasons that assessee has failed to disclose fully and truly all material facts necessary for its assessment. In our view, this statement is clearly made only as an attempt to take the case out of the restrictions imposed by proviso to section 147 of the Act. According to the reasons recorded, there was an error on the part of AO because the qualifying amount for deduction under section 80HHC ought to have been determined after allowing set-off of brought forward losses against the adjusted profit of the business. An error discovered on a reconsideration of the same material does not give power to the AO to reopen the assessment - Decided in favour of assessee.

Issues:
1. Setting aside notice under section 148 of the Income Tax Act, 1961 and approval granted under section 151 of the Act.
2. Failure to disclose fully and truly material facts for assessment.
3. Reopening assessment based on change of opinion.
4. Error in determining deduction under section 80HHC.
5. Application of legal precedents regarding reopening assessments.

Analysis:
1. The petitioner sought to set aside the notice dated 29th March, 2010, issued under section 148 of the Income Tax Act, 1961, and the approval granted by Respondent No. 3 under section 151 of the Act. The order rejecting the petitioner's objections to the reopening was passed on 22nd June, 2010. The notice to reopen was issued more than four years after the end of the relevant assessment year, and assessment under section 143(3) of the Act had been completed. The proviso to section 147 of the Act requires the respondent to demonstrate a failure on the part of the petitioner to disclose truly and fully material facts necessary for assessment. The reasons recorded for reopening highlighted discrepancies in the initial assessment, specifically regarding the deduction under section 80 HHC.

2. The reasons for reopening the assessment did not indicate a failure on the part of the petitioner to disclose material facts. The Assessing Officer relied on the same facts considered during the original assessment, suggesting a change of opinion rather than a genuine failure to disclose. It was emphasized that reopening an assessment based on the same material to take a different view is impermissible. The reasons provided were deemed a mere attempt to circumvent the restrictions imposed by the proviso to section 147 of the Act.

3. The court referenced legal precedents to emphasize that an error discovered upon reconsideration of the same material does not grant the Assessing Officer the authority to reopen an assessment. Citing the case of CEAT Ltd. vs. Assistant Commissioner of Income Tax, the court highlighted that a change of opinion on material already considered does not justify reopening an assessment. The court reiterated that an error identified upon reassessment of existing material does not empower the Assessing Officer to reopen the assessment.

4. The court addressed the error in determining the deduction under section 80HHC, noting that the Assessing Officer's discovery of an error does not warrant reopening the assessment. The court emphasized that an error identified upon reconsideration of the same material does not provide grounds for reopening an assessment, as demonstrated by legal precedents and established principles.

5. The petition was allowed, and a writ was issued to quash and cancel the notice, approval, and reassessment proceedings. The court disposed of the petition in favor of the petitioner, highlighting the impermissible nature of reopening assessments based on a change of opinion rather than a genuine failure to disclose material facts. Legal precedents were cited to support the court's decision to set aside the notice and approval granted for reopening the assessment.

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