2022 (4) TMI 625 - HC - Income Tax

Reopening of assessment u/s 147 - eligibility of reason to believe - petitioner had claimed deduction on account of notional foreign exchange loss on non payment of imports - HELD THAT - As evident from the reasons for reopening that the Assessing Officer had all material facts before him when he made the original assessment. In the reasons for reopening there is not even a whisper as to what was not disclosed. There is a specific averment in the petition that, the petitioner had truly and fully disclosed all material facts at the time of original assessment. The respondents have not traversed the said fact in their affidavit-in-reply. This is not a case where the assessment is sought to be reopened on the reasonable belief that income had escaped assessment on account of failure of assessee to disclose truly and fully all material facts that were necessary for computation of income but this is a case wherein the assessment sought to be reopened on account of change of opinion of the Assessing Officer. The same is not permissible in view of proviso to section 147 of the Act. - Decided in favour of assessee.

Summary

Issues Involved:
Notice under section 148 for reopening assessment for A.Y. 2015-16 based on same material, proviso to section 147, failure to disclose material facts, change of opinion, genuineness of sundry creditors' amount, deduction on foreign exchange loss, assessment order silence on key issues.

Detailed Analysis:

1. The petitioner challenged a notice dated 31.03.2021 under section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for A.Y. 2015-16 and the subsequent order rejecting objections. The petitioner, a partnership firm in the diamond trading business, filed its return declaring a loss and carrying forward losses. The return was selected for scrutiny assessment, and the income was determined at a loss by the Assessing Officer.

2. The petitioner argued that the reassessment was based on the same material facts as the original assessment, which amounted to a change of opinion, not permissible under the law. The proviso to section 147 states that reassessment can only be initiated if income has escaped assessment due to the assessee's failure to disclose material facts.

3. The respondent contended that certain issues, such as the genuineness of sundry creditors' amount and deduction on foreign exchange loss, were not addressed in the original assessment. They argued that these issues warranted reassessment as they could lead to additional tax liabilities.

4. The High Court analyzed the reasons for reopening the assessment and found that the Assessing Officer had all material facts before him during the original assessment. The court cited a previous judgment emphasizing that reassessment cannot be based on a mere change of opinion after the lapse of a specific period.

5. Ultimately, the High Court held that the reassessment was not justified as it was based on a change of opinion rather than the failure of the assessee to disclose material facts. The court quashed the notice seeking to reopen the assessment and the subsequent order rejecting objections.

6. The judgment highlights the importance of adhering to legal provisions regarding reassessment and underscores that reassessment cannot be initiated solely based on a change of opinion by the Assessing Officer after a specified period has lapsed from the original assessment.