2024 (9) TMI 149 - HC - Income Tax

Reopening of assessment u/s 147 - reasons to believe - eligibility of deduction u/s 80P - effect of change of opinion - HELD THAT - As during the course of original assessment proceedings, the AO has scrutinized the issue of deduction u/s 80P by raising specific query in the notice issued u/s 142(1) which was replied by assessee and thereafter the assessment order under Section 143 (3) of the Act was passed. Therefore, there is no failure on the part of the petitioner to disclose fully and truly all the material facts relevant for the assessment for the year under consideration. Thus, AO could not have assumed the jurisdiction to issue the impugned notice beyond four years from the end of the Assessment Year under Section 148 of the Act in view of the proviso to Section 147 - there is no new tangible material available with the Assessing Officer as the information of claim u/s 80P (2) (d) was deduced from the records available along with material and as such, it cannot be said that there is escapement of income which was claimed by the petitioner assessee under Section 85 (2) (d) of the Act Reliance placed by the learned advocate for the respondent on the decision of Totgars Co-operative Sales Society Ltd. 2010 (2) TMI 3 - SU PREME COURT would not be applicable in the facts of the case as the petitioner has claimed deduction under Section 80P(2) (d) of the Act from the interest earned from the Co-operative Bank which are infact Co-operative Societies and as such, there is a mere change of opinion on the part of the Assessing Officer while issuing impugned notice u/s148 of the Act. It is well settled by the decision of Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT wherein it is held that even after the amendment under Section 147, the concept of AO having tangible material to form a belief that the income chargeable to tax has escaped assessment is not done away with and in this context, the principle of change of opinion would squarely apply. Decided in favour of assessee.

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961 for reopening the assessment.
2. Whether the reopening of assessment was based on a mere change of opinion.
3. Applicability of the proviso to Section 147 of the Income Tax Act, 1961.
4. Sufficiency of the reasons for reopening the assessment.
5. Availability and adequacy of alternative remedies.

Issue-Wise Detailed Analysis:

1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961 for reopening the assessment:

The petitioner challenged the notice dated 27.03.2021, issued under Section 148 of the Income Tax Act, 1961, for reopening the assessment for the year 2014-15. The petitioner argued that there was no new information or tangible material apart from the assessment records already available at the time of the original scrutiny. The court noted that during the original assessment proceedings, the Assessing Officer had scrutinized the issue of deduction under Section 80P by raising specific queries, which were duly replied to by the petitioner. Therefore, there was no failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessment.

2. Whether the reopening of assessment was based on a mere change of opinion:

The petitioner contended that the reasons for reopening the assessment were based on a mere change of opinion, as the issue of deduction under Section 80P (2) (d) was already examined during the original assessment. The court observed that the reasons for reopening were deduced from the records available along with the material, and no new tangible material was presented. The court held that the reopening was indeed based on a mere change of opinion, which is not permissible under the law.

3. Applicability of the proviso to Section 147 of the Income Tax Act, 1961:

The court emphasized that the proviso to Section 147 of the Act stipulates that no action can be taken under Section 148 after the expiry of four years from the end of the relevant assessment year unless there is a failure on the part of the assessee to disclose fully and truly all material facts. Since the petitioner had fully disclosed all material facts during the original assessment, the court held that the respondent could not assume jurisdiction to issue the impugned notice beyond the four-year period.

4. Sufficiency of the reasons for reopening the assessment:

The respondent argued that the sufficiency or adequacy of the reasons for reopening the assessment need not be scrutinized at the stage of reopening. However, the court referred to the decision of the Hon'ble Apex Court in the case of Commissioner of Income Tax Vs. Kelvinator of India Ltd., which held that the Assessing Officer must have tangible material to form a belief that income has escaped assessment. The court found that the reasons recorded for reopening did not constitute new tangible material and were based on a mere change of opinion.

5. Availability and adequacy of alternative remedies:

The respondent contended that the petitioner had alternative remedies available under the Income Tax Act, such as appealing to the CIT (Appeals) and the Tribunal, and therefore, the writ petition was not maintainable. However, the court referred to the decision of the Hon'ble Apex Court in the case of Calcutta Discount Company Limited Vs Income-Tax Officer, which held that the existence of an alternative remedy is not always a sufficient reason for refusing relief by writ. The court allowed the writ petition, quashing the impugned notice under Section 148.

Conclusion:

In conclusion, the court quashed the notice dated 27.03.2021 issued under Section 148 of the Income Tax Act, 1961, for reopening the assessment for the year 2014-15. The court held that the reopening was based on a mere change of opinion and that there was no failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessment. The court also emphasized that the respondent could not assume jurisdiction to issue the impugned notice beyond the four-year period as stipulated by the proviso to Section 147 of the Act. The petition was allowed, and the rule was made absolute to the aforesaid extent, with no order as to costs.

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