2023 (2) TMI 718 - HC - Income Tax

Reopening of assessment u/s 147 - Reasons to believe - petitioner had deposited an amount in the financial year 2016-17 which had been brought to light by the Investigation Wing of the department - HELD THAT - It is no longer res-integra that once during the course of assessment proceedings, a query was raised and replied, it will be presumed that the issue was the subject matter for consideration during the said assessment proceedings notwithstanding the fact that there is no specific mention of that particular issue in specific words in the order of assessment. An order of assessment u/s 143(3) having been passed must be deemed to have been passed after considering all material facts in regard to the queries raised which stood duly answered in terms of the judgment of Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT as held that there was a difference between power to review and power to reassess u/s 147 and AO had no power to review and that, if the concept of change of opinion was removed, then, in the garb of reopening of the assessment, a review would take place. In the present case admittedly, between the date of the orders of assessment sought to be reopened and the date of forming of opinion by the Income-tax Officer nothing new has happened. There is no change of law. No new material has come on record. No information has been received. It is merely a fresh application of mind by the same AO to the same set of facts - basis for reopening remains the same which was otherwise the subject matter of scrutiny by the AO during the scrutiny assessment proceedings leading to passing of the order u/s 143(3) thus present case is nothing but a change of opinion which does not satisfy the jurisdictional requirement under section 147 - Decided in favour of assessee.

Summary

Issues:
Reopening of assessment under section 147 of the Income Tax Act, 1961 based on alleged escapement of income for the assessment year 2017-18.

Analysis:
1. The petitioner challenged the notice dated 30th March 2021, seeking to reopen the assessment for the assessment year 2017-18 due to alleged income escapement under section 147 of the Act. The reasons for reopening included discrepancies related to funds deposited by the petitioner in a credit society, identified during an investigation by the Income Tax department.

2. The petitioner contended that the reassessment proceedings amounted to a change of opinion, citing the Delhi High Court judgment in Commissioner of Income-tax Vs. Kelvinator of India Ltd. The petitioner argued that the issue of fund deposits had already been addressed during the scrutiny assessment proceedings, and the subsequent reassessment would be impermissible as a review of the original assessment order.

3. The court noted that the reassessment was initiated within four years from the relevant assessment year, obviating the need to prove failure to disclose material facts. However, it emphasized that the assessing officer must have a "reason to believe" that income had escaped assessment, even within the four-year period.

4. Referring to the Delhi High Court's Full Bench decision in Commissioner of Income-tax Vs. Kelvinator of India Ltd., the court highlighted that an order of assessment under section 143(3) is presumed to have considered all material facts, even if not explicitly mentioned. The Supreme Court's decision further clarified that reassessment should not be a review but based on tangible material indicating income escapement.

5. The court found that no new developments or information had emerged between the original assessment and the reassessment decision, indicating a mere reevaluation of existing facts. Consequently, the court concluded that the reassessment was a change of opinion, failing to meet the jurisdictional requirements under section 147 of the Act.

6. As a result, the court quashed the notice under section 148, the order rejecting objections, and the draft assessment order. The petition was allowed without costs, emphasizing the impermissibility of reassessment based on a mere change of opinion.

This detailed analysis of the judgment highlights the legal intricacies involved in the case, focusing on the grounds for reopening the assessment, the principles governing reassessment under the Income Tax Act, and the court's determination regarding the impermissibility of reassessment based on a change of opinion.