2022 (3) TMI 973 - HC - Income Tax

Reopening of assessment u/s 147 - Notice issued after the expiry of 4 years from the end of relevant year - e ligibility of reasons to belive - change of opinion - Allowability of subsidy received and the provision for expenses - HELD THAT - Both the issues raised in the reasons for reopening were subject matter of consideration before the Assessing Officer. When primary facts necessary for assessment are fully and truly disclosed, the Assessing Officer is not entitled on change of opinion to commence the proceedings for reassessment. 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 the proposed reopening is purely based on change of opinion which is not permissible in law. The notice, therefore, has to go. It is settled law that 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. The change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. - Decided in favour of assessee.

Summary

Issues:
Impugning a notice under Section 148 of the Income Tax Act 1961 for A.Y. 2015-2016 based on change of opinion by the Assessing Officer after the expiry of 4 years from the end of the relevant year. Bar on reopening after 4 years unless there has been a failure on the part of the assessee to disclose material facts. Reopening based on subsidy received and provision for expenses, both of which were already considered during the original assessment proceedings.

Analysis:
1. The petitioner challenged the notice issued under Section 148 of the Income Tax Act 1961 for A.Y. 2015-2016, claiming it was based on a change of opinion by the Assessing Officer. The petitioner argued that both issues raised in the reasons for reopening had already been discussed and analyzed during the original assessment proceedings on 29th December 2017.

2. Since the notice was issued after the 4-year limit and the assessment was completed under Section 143(3) of the Act, the proviso to Section 147 applies, barring reopening after 4 years unless there was a failure to disclose material facts by the assessee. The burden is on the respondents to prove such a failure.

3. Upon reviewing the reasons for reopening, it was found that there was no indication of a failure on the part of the petitioner to disclose material facts. The reasons raised two issues: subsidy received and provision for expenses, both of which were already addressed during the original assessment proceedings.

4. Documents revealed that during the assessment proceedings, the Assessing Officer inquired about the subsidy received and the provision for expenses. The petitioner provided explanations, and the Assessing Officer accepted the justification for the subsidy being a capital receipt. Regarding the provision for expenses, a disallowance was made, which the petitioner appealed.

5. The court emphasized that when all necessary facts for assessment are disclosed, the Assessing Officer cannot reopen proceedings based on a change of opinion. Reopening an assessment based on the same material to take a different view is not permissible.

6. The court concluded that the proposed reopening was solely based on a change of opinion, which is not allowed by law. Therefore, the notice was deemed invalid and had to be set aside.

7. The court further noted that the subsidy issue was indeed discussed during the assessment proceedings, even if not explicitly mentioned in the assessment order. Once a query is raised and answered during assessment, it is considered a subject of consideration, even if not explicitly reflected in the order.

8. The court allowed the petition, quashing the notice under Section 148 for A.Y. 2015-2016, along with other related orders. It criticized the Faceless Assessing Officer for not addressing the petitioner's submissions on merits and failing to justify the issuance of the notice based on relevant judgments and orders.

This detailed analysis highlights the key arguments, legal principles, and findings of the High Court judgment regarding the reopening of the assessment under the Income Tax Act 1961.