2014 (10) TMI 224 - HC - Income Tax

Notice for reopening of assessment u/s 148 Notice issued on the basis of CBDT circular - Change of opinion Held that - Following the decision in Hindustan Lever Ltd. v/s. R.B. Wadkar, Asst. Commissioner of Income Tax & Others 2004 (2) TMI 41 - BOMBAY High Court - the reasons for reopening of an assessment are required to be tested/examined as recorded at the time of issuing of notice u/s 148 of the Act - No substitution, deletion or addition to the reasons recorded at the time of issuing notice can be made to support the impugned notices either by affidavit or in the order disposing of objections - The reopening notices would stand or fall by the reasons recorded at the time when the notices were issued - the submission of Mr. Pinto that there is a failure on the part of the Petitioner to disclose truly and fully all material facts necessary for assessment cannot be accepted. The notice have been issued in reasons in support only on the basis of CBDT circular dated 8th September, 2004 which is merely an opinion on the statutory provisions AO has to apply his own mind to form a reasonable belief that income chargeable to tax has escaped the assessment - the question of opinion on statutory provision is an issue which would only arise, if the statutory jurisdictional requirement of failure to disclose fully and truly all material facts necessary for assessment is satisfied thus, the notice for reopening of assessment is to be set aside Decided in favour of assessee.

Summary

Issues:
Challenging notices under Section 148 of the Income Tax Act for reopening assessments for A.Y. 1999-2000 and 1998-1999; rejection of objections to the notices issued; jurisdictional validity of the notices based on failure to disclose material facts; reliance on CBDT circular for reopening assessments; interpretation of statutory provisions by CBDT; whether the impugned notices were based on a mere change of opinion; applicability of the decision in Topman Exports case to the present matter.

Analysis:
The judgment by the Bombay High Court involved two petitions challenging notices issued under Section 148 of the Income Tax Act for reopening assessments for A.Y. 1999-2000 and 1998-1999. The primary contention was the jurisdictional validity of the notices based on the failure to disclose material facts. The Petitioner argued that the notices were beyond the four-year period and amounted to a mere change of opinion as the claim for deduction under Section 80HHC had been examined previously. The Respondent, on the other hand, claimed there was a failure to disclose all material facts necessary for assessment regarding DEPB entitlements. The Court emphasized the importance of the statutory jurisdictional requirement for issuing notices beyond the four-year period, which necessitates a failure to disclose all material facts. The Court found no evidence of such failure in the reasons recorded for the impugned notices.

The Petitioner further contended that the reliance on a CBDT circular for reopening assessments was not valid as it amounted to a change of opinion without new material facts. The Court reiterated that the Assessing Officer must form a reasonable belief independently and cannot rely solely on an opinion from the CBDT. Additionally, the Court highlighted that the decision in the Topman Exports case favored the Petitioner, rendering the reassessment proceedings unnecessary. Despite the Respondent's argument that the decision was not available at the time of issuing the notices, the Court held that the law declared in the Topman Exports case was the correct position even at that time, leading to a failure of reasonable belief that income had escaped assessment.

Ultimately, the Court allowed both petitions, setting aside the impugned notices for reopening assessments for A.Y. 1999-2000 and 1998-1999. The rejection of the Petitioner's objections to the notices was also deemed invalid. The judgment emphasized the importance of fulfilling statutory requirements for reopening assessments and the necessity for the Assessing Officer to independently form a reasonable belief based on relevant facts rather than opinions or interpretations from external sources.