2024 (9) TMI 911 - HC - Income Tax

Reopening of assessment u/s 147 - reason to believe - concept of change of opinion - HELD THAT - Petitioner has disclosed fully and truly all material facts at the time of regular assessment and therefore, as per proviso to Section 147 the impugned notice is without jurisdiction coupled with the fact that the reasons recorded clearly shows that the respondent no.1 - AO has recorded the belief only on verification of the record without there being any fresh tangible material to come to the conclusion that the income has escaped assessment resulting into mere change of opinion on the part of the respondent no.1. As decided in M/S. KELVINATOR OF INDIA LIMITED 2010 (1) TMI 11 - SUPREME COURT conceptual difference between power to review and power to re-assess. AO has no power to review; he has the power to re-assess. But re- assessment has to be based on fulfillment of certain pre-condition and if the concept of change of opinion is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of change of opinion as an in- built test to check abuse of power by the Assessing Officer - Decided in favour of assessee.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for A.Y. 2013-14.

Analysis:
The petitioner challenged a notice issued under Section 148 of the Income Tax Act, 1961 for the A.Y. 2013-14, contending that the notice sought to reopen the assessment based on the petitioner's reduction of a specific amount under Section 115JB of the Act. The petitioner argued that all material facts were disclosed during the regular assessment conducted under Section 143(3) of the Act, including the deduction claimed. The respondent, however, maintained that the petitioner wrongly availed the reduction and that the notice was valid. The High Court analyzed the facts and legal provisions, emphasizing that the petitioner had fully disclosed all material facts during the regular assessment, rendering the notice under Section 148 without jurisdiction. The Court cited legal precedents to support its decision, highlighting the importance of the "change of opinion" concept in re-opening assessments post the Direct Tax Laws (Amendment) Act, 1987. Ultimately, the Court quashed and set aside the impugned notice, ruling it to be without jurisdiction.

The petitioner's argument centered on the contention that all material facts, including the deduction claimed under Section 115JB of the Act, were fully disclosed during the regular assessment. The petitioner asserted that the notice under Section 148 was a mere change of opinion by the Assessing Officer, lacking fresh tangible material to support the belief that income had escaped assessment. The respondent, on the other hand, argued that the petitioner had wrongly claimed the deduction, justifying the notice. The High Court carefully examined the submissions and found that the petitioner had indeed disclosed all relevant facts during the regular assessment, rendering the notice without jurisdiction. The Court also referenced the legal position post the Direct Tax Laws (Amendment) Act, 1987, emphasizing the need for a valid reason to believe that income had escaped assessment.

The High Court's decision was based on a thorough analysis of the facts and legal provisions. The Court noted that the petitioner had submitted the required audit report disclosing all material facts, including the deduction claimed, during the regular assessment. The Court highlighted the importance of the "change of opinion" concept in re-opening assessments, citing legal precedents to support its ruling. Ultimately, the Court quashed and set aside the notice under Section 148, holding it to be without jurisdiction. The decision underscored the significance of fully disclosing material facts during assessments and the limitations on re-opening assessments based on a mere change of opinion by the Assessing Officer.