2014 (3) TMI 28 - HC - Income Tax

Validity of Notice u/s 148 of the Act Reassessment of income after four years - Claim of deduction u/s 80IB and 80JJA of the Act allowed by the AO - Held that - The assessee specifically claimed the deduction under section 80JJA of the Act which has been allowed by the AO on due application of mind - Even with respect to claim under section 80IB of the Act, the claim was made by the petitioner - Relying upon Sri Krishna(P.) Ltd. v. ITO 1996 (7) TMI 2 - SUPREME Court and Sowdagar Ahmed Khan v. ITO 1967 (11) TMI 10 - SUPREME Court - assessee and the same has been dealt with and considered by the AO and thereafter, after due application of mind, the AO has allowed the said claims thus, it cannot be said that there was any concealment and/or non-disclosure of true and correct facts by the assessee - the original assessment is sought to be reopened in exercise of powers under section 147/148 of the Act on change of opinion by the AO, which is not permissible more particularly when the original assessment is sought to be reopened after a period of four years from the end of the assessment year - the conditions stipulated under first proviso to section 147 are not satisfied thus, the notice deserved to be set aside Decided in favour of Assessee.

Issues Involved:
1. Jurisdiction and legality of notice issued under Section 148 of the Income Tax Act, 1961.
2. Alleged non-disclosure or concealment of material facts by the assessee.
3. Reopening of assessment based on change of opinion.
4. Reopening of assessment based on audit objection.

Analysis of Judgment:

1. Jurisdiction and Legality of Notice under Section 148:
The petitioner challenged the notice dated 03.12.2012 issued under Section 148 of the Income Tax Act, 1961 for the assessment year 2007-08, claiming it was issued without jurisdiction and was bad in law. The notice was issued after four years from the end of the assessment year, which requires the Assessing Officer (AO) to have reasons to believe that income chargeable to tax had escaped assessment due to the assessee's failure to disclose fully and truly all material facts necessary for the assessment. The court noted that the reasons recorded for reopening the assessment did not indicate any new material or evidence suggesting non-disclosure by the assessee. Hence, the notice was deemed without jurisdiction and bad in law.

2. Alleged Non-Disclosure or Concealment of Material Facts:
The AO claimed that the assessee had made incorrect claims under Sections 80JJA and 80IB of the Act, which led to the reopening of the assessment. The court observed that the assessee had disclosed all relevant facts during the original assessment proceedings, and the AO had accepted these claims after due consideration. There was no evidence of suppression or concealment of material facts by the assessee. Therefore, the court held that the reopening of the assessment was not justified on the grounds of non-disclosure or concealment.

3. Reopening of Assessment Based on Change of Opinion:
The court emphasized that reopening an assessment based on a mere change of opinion is not permissible under the law. The original assessment was completed after the AO had duly considered and accepted the claims under Sections 80JJA and 80IB. The court referred to the Supreme Court's decision in CIT v. Kelvinator of India Ltd., which held that the AO cannot reopen an assessment on a mere change of opinion. Consequently, the court found that the reopening of the assessment in this case was based on a change of opinion, which is not allowed.

4. Reopening of Assessment Based on Audit Objection:
The petitioner argued that the reopening was based on an audit objection, which is not permissible. The court noted that the information obtained under the Right to Information Act indicated that the assessment was reopened due to an audit objection. The court referred to the Supreme Court's decision in CIT v. Lucas T.V.S. Ltd., which held that reopening based on an audit objection is not valid. Therefore, the court concluded that the reopening of the assessment based on the audit objection was not permissible.

Conclusion:
The court held that the impugned notice dated 03.12.2012 issued under Section 148 of the Act was without jurisdiction, bad in law, and deserved to be quashed and set aside. The conditions stipulated under the first proviso to Section 147 were not satisfied, as there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The court allowed the petition and quashed the impugned notice, making the rule absolute to the aforesaid extent. No order as to costs was made.

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