2022 (12) TMI 802 - HC - Income Tax

Reopening of Assessment u/s 147 - change of opinion - Reopening permissible if the assessee had not disclosed all the relevant particulars fully and truly before the assessing officer - reopening on a standalone basis - disallowing the claim towards debiting to the profit loss account due to reversal on account of cancellation and price revision - HELD THAT - The fact that the reopening of assessment was ordered on mere change of opinion has been upheld by two lower appellate authorities. It is evident that respondent had disclosed fully and truly all material facts to the assessing officer during the assessment proceeding on the basis of which assessment order was passed u/s 143(3) of the Act. By change of opinion holding that reduction towards reversal on account of cancellation and price revision and deducting the same from the profit and loss account was irregular thereby having reason to believe that taxable income had escaped assessment, the concluded assessment could not have been reopened. At the stage of third round of appeal we do not find any substantial question of law for interference by the High Court under Section 260A - We are, therefore, of the view that there is no merit in this appeal. - Decide against revenue.

Summary

Issues:
1. Appeal against Tribunal's order under Section 260A of the Income Tax Act, 1961 for the assessment year 2010-11.
2. Reopening of assessment under Section 147 of the Act based on reversal of revenue on account of cancellation and price revision.
3. Tribunal's decision on the correctness of the assessing officer's actions regarding revenue reversal.

Issue 1: Appeal against Tribunal's Order under Section 260A:
The appellant, the Income Tax Department, appealed against the order of the Income Tax Appellate Tribunal for the assessment year 2010-11. The appellant raised substantial questions of law regarding the correctness of upholding the Commissioner of Income Tax (Appeals) orders. The Tribunal dismissed the appeal of the revenue by upholding the order of the CIT(A) dated 30.03.2019. The Tribunal held that the assessing officer's reasons for reopening the assessment were based on a mere change of opinion, and the reopening was beyond the specified period of four years from the end of the relevant assessment year. The Tribunal relied on the Bombay High Court's decision in Hindustan Lever Limited v. R.B.Wadekar (2014) to support its conclusion that the assessing officer's reasons for reopening must be read on a standalone basis without further improvements. The High Court concurred with the Tribunal's views and dismissed the appeal, finding no substantial question of law for interference under Section 260A of the Act.

Issue 2: Reopening of Assessment under Section 147:
The respondent, a private limited company engaged in real estate development, had its assessment for the year 2010-11 reopened under Section 147 of the Act. The assessing officer disallowed a claim towards debiting to the profit & loss account due to reversal on account of cancellation and price revision. The Commissioner of Income Tax (Appeals) allowed the respondent's appeal, holding that the assessing officer's reopening of assessment was bad in law. The CIT(A) directed the deletion of the addition made on account of reversal of revenue due to price revision/cancellation. The CIT(A) noted that the appellant had reversed revenue on account of price revision and cancellation to reflect the true income and expenditure for the assessment year. The CIT(A) found the assessing officer's observations on cancellations during the economic recession to be unfounded, as cancellations did not necessarily benefit the appellant. The CIT(A) allowed the appellant's contentions on cancellations and directed the reversal of revenue to reflect the true financial position.

Issue 3: Tribunal's Decision on Revenue Reversal:
The Tribunal upheld the CIT(A)'s decision, emphasizing that the assessing officer's reasons for reopening the assessment were based on a change of opinion and initiated beyond the specified period of four years. The Tribunal agreed with the CIT(A) that the assessing officer's reasons relied solely on the books regarding reversal on account of cancellation and price revision. The Tribunal cited the Bombay High Court's decision to support the quashing of the reopening as a mere change of opinion. The Tribunal found no other arguments presented and concluded that the reopening was rightly quashed by the CIT(A) as it was based on a change of opinion. The High Court concurred with the Tribunal's findings and upheld the decision, stating that the respondent had fully and truly disclosed all material facts during the assessment proceeding, and the reopening was not justified.

This detailed analysis covers the issues raised in the legal judgment, providing a comprehensive overview of the arguments, decisions, and reasoning involved in each issue.