2014 (11) TMI 271 - HC - Income Tax

Reopening of assessment u/s 147 Change of opinion Held that - The AO in the assessment order has referred to the facts - the Tribunal rightly concluded that the reasons which have been assigned to reopen the assessment are nothing but reflecting a change in the opinion - That cannot be the basis for reopening the same is the settled legal position - there is no tangible material based on which the AO can come to a conclusion that the payment made by the Assessee to foreign parties for software was a payment for license to use the software - In the absence of relevant materials and particulars substantiating and proving the reasons and grounds the Tribunal concluded that the reopening is purely on a change of opinion - so long as there are reasons and which constitute the belief for reopening the assessment whether they are established or proved is something which cannot be decided in the writ jurisdiction in Assistant Commissioner of Income-Tax Versus Rajesh Jhaveri Stock Brokers P. Limited 2007 (5) TMI 197 - SUPREME Court it has been held that if the AO has reason to believe that income and escaped assessment it confers jurisdiction to reopen the same - The ambit and scope of the powers being clear, in no case they enable the AO to reopen the assessment on mere change of opinion thus, the order of the Tribunal is upheld Decided against revenue.

Issues:
Challenges to the order passed by the Income Tax Appellate Tribunal for assessment years 1999-2000 and 2000-2001; Dispute over the reopening of assessment by the Revenue; Interpretation of section 40(a) of the Income Tax Act, 1961; Allegations of change of opinion in reopening the assessment; Admissibility of Appeals.

Analysis:
The High Court of Bombay addressed the challenges raised by the Revenue against the order of the Income Tax Appellate Tribunal for the assessment years 1999-2000 and 2000-2001. The Revenue contended that the Tribunal erred in law by not considering the merits of the claim or the grounds for reopening the assessment. The Revenue argued that the Assessing Officer had wide powers to reopen assessments within four years from the end of the relevant assessment year, and the Tribunal's conclusion of a change of opinion in the reopening was deemed erroneous. The Revenue relied on various judgments to support its position. On the other hand, the Assessee's counsel argued that the Tribunal's findings were not perverse, emphasizing that the Assessing Officer did not disallow any payments under section 40(a) of the Income Tax Act related to software transactions. The Assessee contended that the assessment was reopened without a proper basis, and the Tribunal found it to be a change of opinion, which was not a valid reason for reopening the assessment. The Court carefully examined the arguments and documents presented, ultimately concluding that the Revenue's Appeals lacked merit. The Court highlighted that the Tribunal's decision was based on established legal principles and factual analysis, dismissing the Revenue's claims of perversity or legal errors in the Tribunal's order.

The Court further delved into the legal principles governing the reopening of assessments, emphasizing that the Assessing Officer must have valid reasons to believe that income has escaped assessment. The Court noted that the scope of judicial review in such matters is limited, and the adequacy of reasons for reopening cannot be extensively probed in writ jurisdiction. The Court clarified that the Assessing Officer cannot reopen assessments solely based on a change of opinion, and the reasons for reopening must be substantiated with relevant materials and particulars. In this case, the Court found that the Tribunal's decision was in line with these principles, and there was no substantial question of law arising from the Tribunal's conclusions. Consequently, the Court dismissed the Appeals, emphasizing that the Tribunal's decision was well-founded and did not warrant interference in appellate jurisdiction.

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