2014 (4) TMI 212 - HC - Income Tax

Validity of reassessment proceedings u/s 148 of the Act - Reason to believe as to the income escapement - Held that - Every aspect of the transaction was not only disclosed but was specifically noticed by the AO -every relevant aspect had been brought to the notice of the AO not merely in the return filed by the assessee but in answer to the specific queries and in response to the requisitions of the AO during the assessment proceedings - No aspect of the matter remained to be disclosed - No aspect of the matter remained to be even sought by the AO - the assessee had not failed to disclose any material relevant to the assessment of its income for the assessment year. Relying upon Rabo India Finance Limited vs. Deputy CIT 2012 (7) TMI 519 - BOMBAY HIGH COURT - there is nothing on record that indicates that the AO did not consider the material before him though the nature of the queries raised and the information sought by him indicates that he not only noticed but considered the information supplied by the assessee thus, it cannot be held that the assessee had failed to disclose fully and truly all material facts necessary for its assessment for the assessment year Decided in favour of Assessee.

Summary

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Validity of the reassessment proceedings initiated by the Deputy Commissioner of Income Tax.
3. Whether the petitioner had fully and truly disclosed all material facts necessary for the assessment year 2005-2006.
4. Whether the reassessment was based on a mere change of opinion.

Detailed Analysis:

1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice issued by the Assistant Commissioner of Income Tax under Section 148 of the Income Tax Act, 1961. This notice was issued on the basis that there was reason to believe that the petitioner's income for the assessment year (AY) 2005-2006 had escaped assessment within the meaning of Section 147. The court examined whether the notice was justified and concluded that the reasons provided for reopening the assessment were already considered during the original assessment proceedings.

2. Validity of the reassessment proceedings initiated by the Deputy Commissioner of Income Tax:
The petitioner contested the reassessment proceedings initiated by the Deputy Commissioner of Income Tax, which disposed of the petitioner's objections challenging the validity of the reassessment. The court found that the reassessment was not justified as it was based on the same set of facts and materials that were already available and considered during the original assessment. The court emphasized that the reassessment could not be initiated merely on the basis of a change of opinion.

3. Whether the petitioner had fully and truly disclosed all material facts necessary for the assessment year 2005-2006:
The court meticulously reviewed the series of queries raised and requisitions made by the Assessing Officer (AO) and the detailed responses provided by the petitioner. It was established that the petitioner disclosed all facts material to the assessment, and the AO considered these facts before making the assessment order dated 31.12.2007 under Section 143(3). The court concluded that the petitioner had not withheld or failed to disclose any material relevant to the assessment of its income for the AY 2005-2006.

4. Whether the reassessment was based on a mere change of opinion:
The court examined the reasons recorded for reopening the assessment and found that they were based on the same facts and materials that were already considered during the original assessment. The court highlighted that the reassessment was based on a mere change of opinion, which is not permissible. The court referred to the judgment in Rabo India Finance Limited vs. Deputy CIT, which established that if an AO calls for specific information and considers it, it is presumed that the AO applied his mind to the material before making the assessment order.

Conclusion:
The court ruled in favor of the petitioner, making the rule absolute in terms of prayer (a) and holding that the reassessment proceedings were not justified. The court emphasized that the petitioner had disclosed all material facts necessary for the assessment, and the reassessment was based on a mere change of opinion. Therefore, the notice issued under Section 148 and the reassessment proceedings initiated by the Deputy Commissioner of Income Tax were invalid. The court ordered that there shall be no order as to costs.