2014 (10) TMI 9 - HC - Income Tax

Validity of notice for reopening of assessment u/s 148 Held that - A specific declaration in the notice that it was being issued after obtaining the necessary satisfaction of the Commissioner and Chief Commissioner of Income Tax was scored out - there was every reason to believe that no permission of the CIT or the Chief Commissioner was obtained before issuing the notice - in the absence of reasons on 30th January, 2013, the Commissioner could not have recorded satisfaction u/s 151 of the said Act. Revenue cannot act beyond the reasons furnished - The only basis for reopening the assessment was error in computation of the indexed cost of acquisition on 1st April, 1981 - they are based on the opinion of an officer posted in Chennai - It is stated in the body of the reasons that it is based on such opinion - Therefore the assessment of the case of the assessee was sought to be reopened not on the basis of non-disclosure of income or concealment of income or under assessment of income but on a change of opinion. Relying upon Hindustan Lever Ltd. Vs. R.B. Wadkar, Assistant Commissioner of Income-Tax And Others (No.1) 2004 (2) TMI 41 - BOMBAY High Court - the formal reasons given in support of reopening the case cannot be added to or subtracted from or improved in the affidavit-in-opposition - the assessment was sought to be reopened on a mere change of opinion, the change of opinion being with regard to estimation of the indexed cost of acquisition on 1st April, 1981 - an assessment cannot be reopened on a change of opinion Decided in favour of assessee.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for assessment year 2006-2007 based on reasons of compensation received and indexed cost of acquisition.

Analysis:
The petitioner sought quashing of the notice under Section 148 of the Income Tax Act, 1961 dated 05th February, 2013, and subsequent notices under Sections 142 (1) and 143 (2) for the assessment year 2006-2007. The reasons for reopening the assessment were related to compensation received by the assessee company from the Govt. of Tamil Nadu for land acquisition, leading to a potential capital gain for the assessment year. The department's reasons highlighted a discrepancy in the indexed cost of acquisition, triggering the reassessment process.

The petitioner's counsel argued that the Commissioner's approval for reopening the assessment was granted before the reasons were recorded, indicating a lack of proper procedure. It was contended that the department's actions were based on a change of opinion rather than non-disclosure or under-assessment of income, which is impermissible under the law. The petitioner relied on precedents to support the argument that reasons for reassessment cannot be altered or improved upon after issuance.

The court agreed with the petitioner's contentions, emphasizing that an assessment cannot be reopened solely on a change of opinion. The judge referenced established legal principles to support the decision that reassessment based on a change of opinion is not permissible. Consequently, the writ application was allowed, and orders were passed in favor of the petitioner, quashing the notice and subsequent actions related to the reassessment for the assessment year in question.

In conclusion, the judgment highlighted the importance of adhering to procedural requirements and legal principles in initiating reassessment proceedings under the Income Tax Act, emphasizing that reassessment based solely on a change of opinion is not valid. The court's decision to quash the notice under Section 148 was based on the grounds that the reasons provided for reassessment did not meet the legal standards required for reopening an assessment.