2023 (10) TMI 332 - HC - Income Tax

Reopening of assessment - Deduction u/s 10AA unit denied as unit was formed by splitting up of or reconstruction of its business, which was already in existence - HELD THAT - The notice conveying its reasons to believe itself cites profit and loss statement and notes to the financial statements in relation to SEZ point which was already before the AO during the initial assessment proceedings. The notice also records that Petitioner had furnished Form No. 56F, copy of return of income along with the computation of income in which deduction under Section 10 AA of the Act was claimed in AY 2015-16 to the AO. The fact that Petitioner is conducting its operations from STP unit and SEZ unit is also evident in the notes to accounts forming part of the financial statements furnished by Petitioner during assessment proceedings 2015-16. Petitioner was specifically asked to produce Form No. 56F with respect to STP and SEZ units during proceedings for AY 2011-12 and the deduction under 10A of the Act was allowed after the scrutiny of the said forms. Petitioner furnished the same and other relevant documents as required by the AO from time to time, including financial statements for AY 2012-13 and AY 2013-14, wherein again details of SEZ were mentioned. Further financial statements of AY 2014-15 also mention details of the SEZ unit and Form No. 56F and relevant extract of ITR form for AY 2012-13 to AY 2014-15 as furnished also disclose details of the claim of deduction under section 10AA of the Act. Hence there is no neglect or failure on the part of petitioner to render full and true disclosure at the time of assessment. There can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on an assessee. Does the duty however extend beyond the full and truthful disclosure of all primary facts? In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn. It is not for somebody else least of all an assessee to tell the AO what inferences should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that an assessee must disclose what inferences whether of facts or law he would draw from the primary facts. Petitioner has furnished all the details and relevant documents itself as also those required to be furnished by the AO from time to time during the assessment proceedings. AO has perused the documents and thereafter passed the original order. No failure on the part of Petitioner to make a full and true disclosure during the assessment proceedings to justify re-opening of the proceedings on this account. We thus answer the first issue accordingly. Re-opening the proceedings based on change of opinion - As there is no failure on the part of Petitioner in making true and full disclosure to the AO during the original assessment leading to the deductions being allowed by the assessing order. The Notice conveying reasons to believe as well as the Order rejecting Petitioner s objections clearly indicate that the original order was passed by the AO upon his satisfaction in respect of the material furnished by Petitioner. The notice simply says that the AO should not have allowed the deductions and should have arrived at an alternate finding. Thus, even de hors any additional explanation by Petitioner, the wording and language of the notice and the order impugned herein itself reveals the distinct views taken by the AO. We find that the reopening of assessment is merely based on a change of opinion on the same set of facts and material before the AO which was available to him at the time of original assessment. We thus, answer issue No. 2 accordingly. Thus we allow the Petition and hold that the Revenue has failed to show non-disclosure of facts by Petitioner and the reason to believe there was escapement of income is purely based on a change of opinion.

Summary

Issues Involved:
1. Full and true disclosure of material facts during the original assessment.
2. Reopening of assessment based on a 'change of opinion'.

Summary:

Issue 1: Full and True Disclosure of Material Facts
The court examined whether the petitioner failed to disclose fully and truly all material facts during the original assessment, which led to the finalization of the assessment order and income escaping assessment. The court noted that the notice under Section 148 of the Income-tax Act, 1961, was issued more than four years after the expiry of the relevant assessment year, making the proviso to Section 147 applicable. The court found that the reasons to believe, as stated in the notice, indicated no non-disclosure of material facts. The court highlighted that the petitioner had provided all necessary documents, including financial statements, Form No. 56F, and other relevant details during the original assessment. The court concluded that there was no failure on the part of the petitioner to make a full and true disclosure, thus answering the first issue in favor of the petitioner.

Issue 2: Reopening of Assessment Based on a 'Change of Opinion'
The court considered whether the reopening of the assessment was based on a 'change of opinion'. It was evident that the original order was passed based on all necessary information available at the time of the regular assessment. The court noted that the Assessing Officer (AO) had allowed deductions under Section 10AA of the Act after thorough examination in previous assessment years. The language of the notice and the order rejecting the petitioner's objections indicated that the reopening was based on a different view on the same set of facts. The court cited previous judgments, including Ananta Landmark Pvt. Ltd. v. Deputy Commissioner of Income Tax, which held that reopening based on a change of opinion is impermissible. The court concluded that the reopening of the assessment was merely based on a change of opinion, thus answering the second issue in favor of the petitioner.

Conclusion
The court allowed the petition, holding that the Revenue failed to show non-disclosure of facts by the petitioner and that the reason to believe there was escapement of income was purely based on a change of opinion. The impugned notice dated 27th March 2021, the order dated 22nd March 2022, and the consequential notices were quashed and set aside. The petition was allowed with no order as to costs.