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2024 (5) TMI 321 - HC - Income TaxReopening of assessment - reason to believe - onus to prove - Reassess v/s review the income - waiver of loans granted by the BIFR - remission of liability was not even remitted in the tax audit report i.e., Form 3CD - HELD THAT - The courts have taken a consistent view that once the assessee has disclosed all the material and primary facts, truly and fully before the AO, it is for the AO to draw the requisite inferences from those primary facts. The onus on the assessee cannot be extended beyond the true and full disclosure of such facts. Also, the power of the AO to reassess an income chargeable to tax which has escaped assessment is strikingly different from the authority to review the decision taken during the original proceedings. While the former is permissible in light of the pith and substance enshrined in Section 147 of the Act, allowing the latter would be a violence with the mandate of the said Section Applying the principles laid down in Usha International Ltd. ( 2012 (9) TMI 767 - DELHI HIGH COURT in the instant case, it is clearly seen that not only the aspects relating to the issue at hand had been fully disclosed by the petitioner before the AO but by recording the submissions and comments in the assessment order, it can be reasonably inferred that the AO has formed an opinion on the said issues. Thus, allowing the reassessment proceedings to continue in the present case would be contrary to the mandate expounded in Usha International Ltd. (supra). We are also mindful of the note of caution as articulated in the case of Techspan India P. Ltd. v. Income-tax Officer 2006 (2) TMI 88 - DELHI HIGH COURT whereby, this Court, while relying upon Gruh Finance Ltd. v. 2000 (2) TMI 86 - GUJARAT HIGH COURT has held that every attempt to bring to tax income that has escaped assessment cannot be aborted by judicial intervention on an assumed change of opinion. Thus non-disclosure of full material cannot be attributed to the petitioner in the instant case. Rather, the AO had omitted to make any addition qua the issue at hand, despite noting the submissions and forming an opinion on the same. Reopening notice set aside - Decided in favour of assessee.
Issues Involved:
1. Validity of the impugned notice issued under Section 148 of the Income Tax Act, 1961. 2. Jurisdictional challenge to the reassessment proceedings initiated by the respondents. 3. Examination of the scope and extent of authority under Section 147 of the Income Tax Act, 1961. 4. Determination of "true and full disclosure" by the assessee. 5. Distinction between reassessment and review of assessment. Summary: 1. Validity of the Impugned Notice: The petitioner challenged the notice dated 31 March 2018 issued under Section 148 of the Income Tax Act, 1961, on the ground that it was issued beyond the statutorily prescribed period of four years from the end of the relevant Assessment Year (AY). The petitioner contended that the reassessment proceedings were without jurisdiction as the waiver of the loan amount was already disclosed during the original assessment proceedings. 2. Jurisdictional Challenge to Reassessment: The petitioner argued that the reassessment proceedings were initiated without jurisdiction since the issue of the waiver of the loan amount was already disclosed and examined in the original assessment. The petitioner relied on the decision in CIT v. Usha International Ltd. [2012 SCC OnLine Del 4995] to support the argument that reassessment cannot be based on a change of opinion. 3. Scope and Extent of Authority Under Section 147: The court examined the scope and extent of the authority of reassessment under Section 147 of the Income Tax Act, emphasizing that the Assessing Officer (AO) must have "reasons to believe" that any income chargeable to tax has escaped assessment. The court noted that the first proviso to Section 147 stipulates that no action shall be taken after four years unless there is a failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment. 4. Determination of "True and Full Disclosure": The court referred to the decision in M/S Mangalam Publications, Kottayam v. CIT, Kottayam [2024 SCC OnLine SC 62], which elucidated the meaning of "true and full disclosure" as the voluntary filing of a return of income that the assessee earnestly believes to be true. The court concluded that the petitioner had disclosed all material facts regarding the waiver of the loan amount during the original assessment proceedings, which was evident from the assessment order dated 8 January 2014. 5. Distinction Between Reassessment and Review: The court emphasized the conceptual difference between the power to reassess and the power to review. It reiterated that reassessment should not be based on a mere change of opinion, as held in CIT v. Kelvinator of India Ltd. [2010 SCC OnLine SC 195]. The court found that the AO had formed an opinion on the issue of the waiver of the loan amount during the original assessment and that the reassessment proceedings were based on a change of opinion, which is not permissible under Section 147 of the Act. Conclusion: The court quashed the impugned notice dated 31 March 2018 and the letter dated 22 November 2018, holding that the reassessment proceedings were invalid as they were based on a change of opinion and not on the fulfilment of the conditions stipulated under Section 147 of the Income Tax Act. The writ petition was allowed, and the reassessment proceedings were set aside.
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