2009 (12) TMI 543 - HC - Income Tax

Reassessment proceedings - section 147/147 - reasons for reopening an assessment - Held that - The only reason which has been given seeking reopening of the assessment for the years 1997-98 and 1998-99 is that suppression of sales has taken place on account of the fact that when average price of the closing stock is mul-tiplied with the quantity of the sales in the year then the value of the sales would be at a higher figure than that as declared by the assessee. - he reasons given for seeking reopening of the assessment contains the expression perusal of the case record reveals clearly showing that it is on the basis of the same assessment record as was filed by the assessee, during the relevant assessment years - merely change in an option can not be the basis for reassessment - notice u/s 148 quashed.

Issues Involved:
1. Validity of proceedings initiated under Section 147/148 of the Income-tax Act, 1961.
2. Alleged suppression of sales by the petitioner-company.
3. Alleged excess depreciation allowed.
4. Alleged improper deductions for PF and ESI contributions.
5. Alleged excessive relief under sections 80HHC and 80-IA.

Detailed Analysis:

1. Validity of Proceedings Initiated Under Section 147/148:
The petitioner-company challenged the initiation of proceedings under Section 147/148 of the Income-tax Act, 1961, seeking to quash the impugned notices dated March 25, 2004 (AY 1997-98), March 30, 2005 (AY 1998-99), and March 8, 2004 (AYs 1999-2000 and 2000-01). The petitioner argued that the assessments for these years were completed under Section 143(3) after detailed scrutiny, and the reassessment proceedings were merely a change of opinion on facts already considered, which is impermissible in law.

2. Alleged Suppression of Sales:
The respondent issued show-cause notices alleging suppression of sales based on the average rate of closing stock of rice and pulses. The petitioner contended that the Assessing Officer's rationale of multiplying the average price of closing stock with the quantity of sales to determine sales value was absurd and lacked a rational basis. The court agreed, noting that the sale price of rice/pulses is not constant throughout the year, and the reassessment was based on the same records available during the original assessment, indicating a change of opinion.

3. Alleged Excess Depreciation Allowed:
For AY 1999-2000, the respondent alleged that the petitioner was inadvertently allowed 100% depreciation on assets used for less than 180 days, which should have been 50%. The petitioner provided specific correspondence and notes justifying the depreciation claimed, which were considered during the original assessment. The court found that the reasons for reassessment referred to the same records and did not indicate any new material, thus constituting a change of opinion.

4. Alleged Improper Deductions for PF and ESI Contributions:
The respondent claimed that deductions for employees' contributions to PF and ESI were allowed despite being deposited beyond the due date. The petitioner argued that such payments made before the due date of filing returns are permissible deductions under Section 43B. The court noted that this issue was considered during the original assessment, and the reassessment reasons referred to the same records, indicating no new material.

5. Alleged Excessive Relief Under Sections 80HHC and 80-IA:
The respondent contended that the petitioner was allowed excessive relief under Sections 80HHC and 80-IA due to the alleged improper deductions for PF and ESI contributions. The court observed that the deductions under these sections were considered during the original assessment, and the reassessment reasons were based on the same records, constituting a change of opinion.

Conclusion:
The court allowed the writ petitions, quashing the impugned notices under Section 148 and prohibiting the respondents from framing any reassessment under Section 147/148 based on the recorded reasons. The court emphasized that the reassessment was based on the same records and constituted a change of opinion, which is impermissible. The petitions were allowed with costs quantified at Rs. 25,000 for each writ petition.

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