2023 (2) TMI 713 - HC - Income Tax

Reopening of assessment u/s 147 - Reasons to belive - change of opinion - Reopening within a period of four years from the end of the relevant assessment year - disallowance as regards the claim of the depreciation - whether there was any tangible material with the AO justifying reopening of the assessment or can it be said to be a case of review and change of opinion by the said Officer? - HELD THAT - As clear from the record that the AO did enquire into the claim of depreciation and had called for certain details with regard to the assets written of which were supplied with the Assessing Officer and only then the AO passed the order of assessment under section 143(3) of the Act and did not make any disallowance in regard to the claim of depreciation. All the material facts therefore were certainly before the AO and notwithstanding the fact that the order of assessment does not specifically discuss the issue yet must be deemed to have been considered and allowed. As seen from the reasons recorded that there was no new material which had come to the notice of the Assessing Officer and the entire reference in the reasons recorded is only to the material on record. In the absence of any new tangible material available with the AO and in view of the fact that there is a general presumption that an order of assessment u/s 143(3) has been passed after proper application of mind and considering the fact that in the present case the AO had sought clarification with regard to the assets which had been written off details whereof were submitted during the course of the proceedings it certainly goes to show that the issue with regard to depreciation had been gone into by the said AO without making any disallowance as regards the claim of the depreciation. We have no hesitation in holding that the reassessment proceedings were nothing but a case of change of opinion which does not comply with the jurisdictional foundation under section 147 - Decided in favour of assessee.

Issues Involved:
1. Validity of the notice issued under section 148 of the Income Tax Act, 1961 for reopening the assessment.
2. Whether the reopening of the assessment was based on "tangible material" or merely a "change of opinion."
3. Compliance with the jurisdictional foundation under section 147 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of the notice issued under section 148 of the Income Tax Act, 1961 for reopening the assessment:

The petitioner challenged the notice dated 24th February 2015, issued under section 148 of the Income Tax Act, 1961, by respondent No.1. The notice aimed to reopen the assessment for the assessment year 2010-11 based on the respondent's "reason to believe" that income chargeable to tax had escaped assessment within the meaning of section 147 of the Act. The reasons recorded for reopening highlighted that the assessee company had debited "Loss on write-off of Fixed Assets" in the P&L account, which was added back to the total income during the computation. The physical verification of these assets revealed their absence, leading the Assessing Officer to believe that there was a failure on the part of the assessee to disclose all necessary details for making a correct assessment, thus justifying the issuance of the notice under section 148.

2. Whether the reopening of the assessment was based on "tangible material" or merely a "change of opinion":

The petitioner argued that the reopening of the assessment was illegal as there was no tangible material with the Assessing Officer to warrant the reassessment proceedings, which were merely a "change of opinion." The petitioner relied on the Apex Court judgment in Commissioner of Income-tax Vs. Kelvinator of India Ltd. 320 ITR 561 (SC), which emphasized that reassessment cannot be based on a mere change of opinion and must be supported by tangible material. The court observed that the reasons recorded for reopening did not indicate any new material but were based on the material already on record. The court referred to various judgments, including Kalyanji Mavji & Co. Vs. Commissioner of Income Tax and Jindal Photo Films Ltd. Vs. Deputy Commissioner of Income Tax, to underline that reassessment must be based on new and tangible material and not merely on a re-evaluation of existing facts.

3. Compliance with the jurisdictional foundation under section 147 of the Income Tax Act:

The court scrutinized whether the Assessing Officer had the jurisdictional foundation under section 147 to reopen the assessment. It was noted that the return of income for the assessment year 2010-11 had been filed, declaring a loss and adding back the amount of Rs.1.81 Crore to the business income without claiming it as a deduction. The petitioner had disclosed all material facts during the original assessment proceedings, and the Assessing Officer had called for and received details regarding the assets written off. The court highlighted that an order of assessment under section 143(3) implies application of mind by the Assessing Officer, and the absence of specific discussion on an issue does not imply non-consideration. The court concluded that the reassessment proceedings were a case of "change of opinion" and did not meet the jurisdictional requirements under section 147.

Conclusion:

The court held that the reassessment proceedings were based on a change of opinion and lacked new tangible material, thus failing to comply with the jurisdictional foundation under section 147 of the Act. Consequently, the impugned notice dated 24th February 2015 and the order dated 23rd January 2016 disposing of the objections were set aside. The petition was allowed with no costs.

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