2025 (2) TMI 871 - HC - Income Tax

Reopening of assessment u/s 147 - failure to disclose all material facts necessary for assessment - HELD THAT - No fresh tangible material could be said to have come to the knowledge of the assessing officer for reopening of the assessment. Admittedly the Petitioner s case was selected for scrutiny and several queries were raised. In particular the queries were raised regarding the claims u/s 35AC and deductions u/s 80G of the IT Act. Upon considering the Petitioner s response these claims were allowed in the assessment order u/s 143 (3) of the IT Act. Though this was a case of reopening within 4 years still in the absence of any fresh tangible material coming to the knowledge of the assessing officer reopening of the assessment only on re-examination of the very same material based on which the original assessment order was passed cannot be permitted. In this case the Petitioner has not claimed any benefits under Section 37. Petitioner has however claimed deductions under Section 35AC. No provision was shown to us based on which we could infer that such a deduction could not at least prima facie be claimed. On the contrary Mr Kamdar referred us to the statement of objects and reasons accompanying the Finance (No. 2) Bill 2014 by which these amendments were introduced. In any event we do not propose to go into the merits of the matter. This Petition must be allowed because there was no tangible fresh material based upon which the AO could have reason to believe that any income had escaped assessment. This is as noted earlier a scrutiny case where several queries including queries particular to this issue had been raised. The queries were answered by the Petitioners and upon consideration of all these materials an assessment order was made u/s 143 (3) of the IT Act. On the ground that some other view was possible the AO could not have changed his earlier opinion and based upon such change of opinion issued the impugned notice seeking to reopen the assessment. For all these reasons the impugned notice and the consequential orders will have to be set aside.

Summary

ISSUES PRESENTED and CONSIDERED:1. Whether the notice seeking to reopen the assessment for the assessment year 2016-2017 under Section 148 of the Income Tax Act, 1961 is valid?2. Whether the income chargeable to tax has escaped assessment due to failure to disclose all material facts necessary for assessment?3. Whether the assessing officer's decision to reopen the assessment based on the same material as the original assessment is permissible?4. Whether the claims made by the Petitioner under Section 35AC and deductions under Section 80G of the IT Act were valid?ISSUE-WISE DETAILED ANALYSIS:The Court considered the relevant legal framework and precedents, the assessing officer's interpretation and reasoning, key evidence and findings, application of law to facts, treatment of competing arguments, and reached conclusions on each issue.1. The assessing officer issued a notice to reopen the assessment based on the claim of CSR expenses and donations under Sections 35AC and 80G. The Court found that no fresh tangible material justified the reopening, as the same material was previously considered during scrutiny. The Court cited the Castrol India Ltd. case, emphasizing that assessments cannot be reopened merely on a change of opinion.2. The assessing officer's reasons for reopening the assessment focused on disallowing CSR expenses claimed under both Section 35AC and 80G, arguing that this defeated the legislative intent. The Court noted that the Petitioner had responded to queries during scrutiny, and the claims were allowed in the original assessment order. The Court held that without new material, the reassessment was not justified.3. The Respondent argued that post-amendments, CSR expenses were not deductible. However, the Petitioner had not claimed benefits under Section 37 but under Section 35AC, which was not prohibited. The Court referenced legislative intent and CBDT circulars supporting deductions for CSR expenses under Sections 30 to 36 of the IT Act, rejecting the Respondent's argument.SIGNIFICANT HOLDINGS:The Court held that the assessing officer's decision to reopen the assessment lacked fresh tangible material and was based on the same grounds as the original assessment, rendering it impermissible. The Court emphasized that assessments cannot be reopened solely on a change of opinion and ruled in favor of the Petitioner, quashing the notice to reopen the assessment for the assessment year 2016-2017.The core principle established is that assessments cannot be reopened without new tangible material and that claims made under relevant sections of the IT Act should be considered based on legislative intent and applicable circulars.Final determinations on each issue:1. The notice seeking to reopen the assessment for the assessment year 2016-2017 was quashed.2. The income chargeable to tax was not found to have escaped assessment due to failure to disclose material facts.3. The assessing officer's decision to reopen the assessment based on the same material was deemed impermissible.4. The claims made by the Petitioner under Section 35AC and deductions under Section 80G were upheld as valid.Overall, the Court's decision focused on the lack of new material to justify the reopening of the assessment and emphasized the importance of following legislative intent and applicable provisions in tax assessments.