2024 (5) TMI 1317 - HC - Income Tax

Validity of reassessment proceedings on the basis of change of opinion - liability of the assessee u/s 115JB - HELD THAT - While passing the original assessment order, the assessing officer has neither formed any opinion regarding tax liability of the respondent assessee under Section 115JB nor noticed the provisions of Section 115JB nor applied his mind for liability to tax of the respondent assessee under Section 115JB. We hold that the original assessment order under Section 143(3) of the Act, 1961 is totally silent on liability of the assessee to tax under Section 115JB of the Act, 1961. He neither noticed the provisions of Section 115JB nor formed any opinion with regard to liability to tax of the assessee on book profit. The assessment order was non-speaking and cryptic. Therefore, reassessment proceedings initiated by the assessing officer under Section 147 of the Act, 1961, is not based on change of opinion. The finding of the ITAT in the impugned order to hold that the reassessment proceedings initiated by the assessing officer was based on change of opinion, is perverse and unsustainable in law. We also find that the ITAT has not decided the appeal of the revenue on merit with regard to the income which allegedly escaped assessment to tax. Decided in favour of revenue.

Issues Involved:
1. Reopening of assessment under Section 147 of the Income Tax Act, 1961 based on change of opinion.
2. Application of Section 115JB of the Income Tax Act, 1961 regarding book profit for tax computation.
3. Jurisdiction of the Assessing Officer for reassessment.

Detailed Analysis:

Issue 1: Reopening of Assessment under Section 147 Based on Change of Opinion
The primary question was whether the reopening of the assessment by the Assessing Officer was merely based on a change of opinion. The original assessment order under Section 143(3) did not consider the provisions of Section 115JB regarding book profit for tax computation. The ITAT concluded that the reassessment was based on a change of opinion, as there was no new tangible material. The High Court, however, found that the original assessment was non-speaking and cryptic, with no opinion formed regarding the tax liability under Section 115JB. Therefore, the High Court held that the reassessment was not based on a change of opinion, making the ITAT's finding perverse and unsustainable.

Issue 2: Application of Section 115JB Regarding Book Profit for Tax Computation
Section 115JB mandates that if the income-tax payable on the total income is less than seven and one-half percent of the book profit, the book profit shall be deemed the total income. The original assessment did not address the tax liability under Section 115JB, resulting in non-application of mind by the Assessing Officer. The High Court emphasized that the original assessment order did not reflect any consideration of Section 115JB, thus justifying the reopening of the assessment to address this oversight.

Issue 3: Jurisdiction of the Assessing Officer for Reassessment
The ITAT had allowed the cross-objection of the assessee, holding that the reassessment was based on a change of opinion and thus lacked jurisdiction. The High Court disagreed, stating that the original assessment was non-speaking and cryptic, and therefore, it could not be said that the Assessing Officer had formed any opinion on the tax liability under Section 115JB. Consequently, the High Court ruled that the reassessment proceedings were valid and not based on a change of opinion.

Conclusion:
The High Court set aside the ITAT's order and restored the appeal before the ITAT for a decision on the merits. The substantial question of law was answered in favor of the revenue, and the cross-objection filed by the assessee was dismissed. The ITAT was directed to decide the appeal expeditiously, without being influenced by the observations made in the High Court's order regarding the merits of the case. The appeal of the revenue was allowed to the extent indicated.

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