2023 (6) TMI 1292 - HC - Income Tax

Reopening of assessment u/s 147 - notice after a period of four years - Reasons to believe - Whether case reopened on account of change of opinion ? - HELD THAT - As the principle of change of opinion cannot be a basis for reopening completed assessments where AO has applied his mind and taken a conscious decision on a particular matter in issue. Moreover, the decision of the AO u/s 143(3) dated 22nd December 2017 is against the Petitioner who has filed an appeal therefrom that is pending adjudication before the CIT (A). A perusal of the reasons recorded by Respondent No. 1 indicates that the Respondent No. 1 has relied upon facts and figures available from the audited account. It appears that there was no tangible material available on record to conclude that income had escaped assessment. The ratio in the case of Ananta Landmark 2021 (10) TMI 71 - BOMBAY HIGH COURT is clearly applicable to the facts of this case. Thus AO has acted in excess of the limit of his jurisdiction to reopen the assessment in the exercise of powers under section 147 r.w.s. 148 of the Act. Decided in favour of assessee.

Summary

Issues involved:
The judgment involves challenging a notice under section 148 of the Income-tax Act, 1961 for the Assessment Year 2015-16 and the order rejecting objections to the proposed action of reopening.

Details of the Judgment:

Issue 1: Reopening of Assessment
The Petitioner, a Government Corporation engaged in electricity generation, filed its return of income for AY 2015-16 declaring a total loss. The Assessing Officer passed an order of assessment u/s 143(3) after scrutiny. Respondent No.1 issued a notice for re-assessment, citing that income had escaped assessment due to certain interest income and expenditure deductions not considered for book profit. The Petitioner challenged the notice and order, arguing that the jurisdictional requirement for reopening was not satisfied.

Issue 2: Objections to Reopening
The Petitioner submitted objections to the proposed action, reiterating all material facts and explanations disclosed during the original assessment. The objections were based on grounds such as the reopening being beyond four years, lack of tangible material supporting the 'reason to believe', and failure to disclose fully and truly material facts. The objections were rejected, leading to the filing of the present Petition challenging the notice and order.

Issue 3: Legal Basis for Reopening
Respondent No.1 defended the action of reopening, stating that it was permissible even if based on the same record as the completed assessment. They relied on legal precedents to support their position. However, the Court held that unless income has escaped assessment due to failure to disclose all material facts, the AO lacks jurisdiction for reassessment.

Conclusion:
The Court found that the AO exceeded the limit of jurisdiction in reopening the assessment without sufficient tangible material to indicate income had escaped assessment. The judgment quashed the notice and order issued for AY 2015-16, directing the CIT (A) to decide the appeal promptly. The Court's decision was based on legal principles established in previous cases, emphasizing the importance of full and true disclosure of material facts for assessment purposes.