2024 (9) TMI 913 - HC - Income Tax

Reopening of assessment - change of opinion - reopening within 4 years of the original assessment - new tangible material before the AO at the time of reopening of assessment or not? - HELD THAT - All the information which formed reason to believe escapement of income was already made available during the assessment proceedings. There was nothing new which has been brought on record because these materials were on the face of documents available before the AO. Therefore the ITAT came to a conclusion correctly that it was a clear case of change of opinion. No substantial question of law arises. Appeal dismissed.

Summary

Issues:
1. Interpretation of proviso to Section 147 for quashing the order of the Assessing Officer within 4 years.
2. Application of explanation 1 & 2 (c)(ii) regarding income chargeable to tax.
3. Reliance on judgment of Hon'ble Supreme Court in CIT Vs. Kelvinator of India Ltd. for quashing order under Section 147.
4. Consideration of decisions by Hon'ble Bombay High Court and Hon'ble Gujrat High Court in similar cases.

Analysis:
1. The case involved the reopening of an assessment under Section 147 of the Income Tax Act, 1961, within 4 years of the original assessment. The Assessing Officer (AO) passed a fresh assessment order based on a shortfall in the General Ledger balance, resulting in a change in the total income of the Assessee. The ITAT allowed the appeal by the Assessee, stating that the reopening was merely a change of opinion without new tangible material, as all facts were disclosed earlier.

2. The ITAT's decision was based on the premise that all relevant information indicating an escapement of income was already provided during the initial assessment proceedings. The documents submitted by the Assessee, including Form No. 3CD, Annual Report, and computation of total income, clearly outlined the provisions and write-offs relating to prior years. The ITAT concluded that there was no new evidence to support the reopening, making it a case of change of opinion rather than a valid reassessment under Section 147.

3. The ITAT's judgment highlighted the importance of distinguishing between a genuine case of income escapement and a mere change of opinion by the Assessing Officer. It emphasized that the reasons for reopening an assessment must be based on new material or information not previously disclosed. In this case, the AO's reasons were solely reliant on documents already in possession, leading to the quashing of the reassessment order.

4. The High Court upheld the ITAT's decision, stating that no substantial question of law arose from the appeal. The Court found no grounds to interfere with the ITAT's ruling, as the reassessment was deemed a clear instance of a change of opinion rather than a valid exercise of power under Section 147. Therefore, the appeal was dismissed, affirming the ITAT's decision in favor of the Assessee.