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2024 (2) TMI 1520 - HC - Income TaxValidity of Reopening of assessment u/s 147 - proceedings are initiated within a period of 4 years - reasons to believe - in the objections to the reasons recorded the petitioner had specifically raised a plea that there is no double deduction of the same amount - HELD THAT - There is no rebuttal to this objection by AO in his order dealing with the objections and therefore it would be safe to conclude that the officer has accepted that there is no double deduction. In any case on the directions of the Court Profit and Loss account was produced in which these items do not appear to have been debited and therefore no case is made for double deduction. Therefore even on this count the basis of reopening falls to ground. The four items namely Inventories Sundry Debtors Loans Advances and Cost of Set Top Boxes sold which are subject matter of reassessment proceedings were reduced from the Share Premium Account and claimed as deduction in the computation of income. Treatment given by the petitioner against the Share Premium Account is a balance sheet item and not routed through the profit and loss account. Therefore the petitioner made a claim in the computation of income while offering its income under the Income-tax Act. AO himself accepts in the reasons recorded that these items have not been charged to profit and loss account. We fail to understand that if these items are not charged to the profit and loss account then how can it be said that there is a double deduction. On a query being raised by this Court the respondent has not justified the issue of the petitioner claiming double deduction of the same amount for which the reopening was sought. Therefore even on this count the impugned proceedings are required to be quashed and set aside. The petitioner is justified in relying upon the decision of Aroni Commercials Limited 2014 (2) TMI 659 - BOMBAY HIGH COURT wherein held that even in case of reopening within 4 years from end of the assessment year if the issue was examined in the course of the assessment proceedings then no reopening of assessment can be done since the same would amount to change of opinion. In our view the ratio of this decision supports the case of the petitioner. Thus impugned notice u/s 148 set aside. Decided in favour of assessee.
ISSUES PRESENTED and CONSIDERED
The core legal question in this case is whether the reopening of the assessment under Section 148 of the Income Tax Act, 1961, for the assessment year 2007-08, is valid. Specifically, the issues considered include:
ISSUE-WISE DETAILED ANALYSIS 1. Reopening as a Change of Opinion The legal framework prohibits reopening of assessments based on a mere change of opinion. The Court examined whether the issues leading to the reopening were already considered during the original assessment proceedings. The petitioner had submitted detailed explanations regarding write-offs against the Share Premium Account, which were accepted by the assessing officer during the original assessment. The Court noted that the absence of explicit discussion in the assessment order on these issues does not imply a lack of consideration, as not all queries need to be reflected in the order. The Court concluded that reopening the case on the same material amounts to a review of the original order, which is not permissible. This conclusion is supported by the decision in Commissioner of Income-tax Vs. Usha International Ltd., where it was held that reopening based on the same facts constitutes a change of opinion. 2. Recording of Reasons Before Issuance of Notice The petitioner argued that the reasons for reopening were not recorded before the issuance of the notice, rendering the proceedings void. The Court observed that the respondent failed to provide the date when the reasons were recorded, despite specific objections raised by the petitioner. This lack of rebuttal led the Court to infer that the reasons were not recorded prior to the notice, supporting the petitioner's claim that the proceedings are ab initio void. 3. Alleged Double Deduction The Court evaluated the claim of double deduction, which formed the basis for the reopening. The petitioner had argued that there was no double deduction, as the amounts were not debited to the profit and loss account but adjusted against the Share Premium Account. The Court found no evidence of double deduction in the petitioner's financial statements and noted the respondent's failure to rebut the petitioner's objection regarding this issue. Consequently, the Court determined that the reopening based on alleged double deduction was unjustified. 4. Justification for Reopening Within Four Years The legal framework allows reopening within four years if there is a valid reason. However, the Court reiterated that reopening is not justified if the issue was examined during the original assessment proceedings. The Court referenced Aroni Commercials Limited, where it was held that reopening within four years is impermissible if it constitutes a change of opinion. The Court found that the petitioner's submissions during the original assessment addressed the issues in question, and the assessing officer's acceptance of these submissions precludes reopening on the same grounds. SIGNIFICANT HOLDINGS The Court held that the reopening of the assessment under Section 148 was invalid for several reasons:
Based on these findings, the Court quashed the notice under Section 148, ruling it invalid and setting aside the reassessment proceedings. The petition was disposed of with the rule made absolute in favor of the petitioner.
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