2015 (2) TMI 1038 - HC - Income Tax

Reopening of assessment - Tribunal concluded that the reopening proceedings have been initiated on a mere change of opinion and thus impermissible - Held that - The impugned order of the Tribunal has recorded a finding of fact that all the issues which form the basis of the reopening notice, was a subject matter of consideration during the regular assessment proceedings. On the above facts the impugned order records that reconsideration of the same material would amount to a review of an assessment order which is not permissible. The Apex Court in CIT Vs. Kelvinator of India Ltd. reported in 2010 (1) TMI 11 - SUPREME COURT OF INDIA has held that jurisdiction to reopen an assessment is not jurisdiction to review the assessment order. The contention urged by the revenue that it was wrong application of law by the Assessing Officer while passing original assessment order does not detract from the fact that there was an opinion formed during the regular assessment proceedings. The Assessing Officer has to at the very outset satisfy the condition precedent under Section 147 and 148 of the Act before he can exercise the jurisdiction to reopen an assessment. In the present facts, the reopening notice is based on a change of opinion as all the grounds were admittedly a subject matter of inquiry during regular assessment proceedings. In view of the above, we find that the impugned order of the Tribunal has merely applied the well settled position in law that power to reopen an assessment is not the power to review an assessment and that reopening of an assessment cannot be taken place on a mere change of opinion. Decided in favour of assessee.

Summary

Issues:
1. Validity of initiation of reassessment proceedings under Section 147 of the Income Tax Act, 1961.
2. Justification for holding that income has escaped assessment and reassessment proceedings initiated on a mere change of opinion.

Analysis:
1. The appellant revenue challenged the order of the Income Tax Appellate Tribunal (Tribunal) regarding the Assessment Year 2003-04 under Section 260A of the Income Tax Act. The primary issue raised was whether the Tribunal was correct in quashing the reassessment order dated 28 November 2008, contending that the initiation of reassessment proceedings under Section 147 was not valid. The Tribunal had held that the Assessing Officer had no valid reason to believe that income had escaped assessment and that the reassessment was based on a mere change of opinion. The appellant argued that the Assessing Officer's view during the original assessment was erroneous and warranted the reopening notice.

2. The respondent assessee had filed its return of income for the subject assessment year, declaring an income of Rs. 311.82 Crores. The Assessing Officer completed the assessment by determining the income at Rs. 337.30 Crores. Subsequently, the Assessing Officer sought to reopen the assessment based on discrepancies in the treatment of software charges, long-term capital loss, and interest deduction. The Tribunal observed that all these issues were thoroughly considered during the original assessment proceedings in 2006. The Tribunal concluded that the reopening proceedings were based on a mere change of opinion, which is impermissible under the law.

3. The Tribunal's decision was based on the principle that the power to reopen an assessment is not a review of the assessment order. The Tribunal cited the Supreme Court's ruling that reopening an assessment cannot be done solely on a change of opinion. It emphasized that the Assessing Officer must satisfy the conditions precedent under Sections 147 and 148 of the Act before reopening an assessment. In this case, since all the grounds for reassessment were already examined during the regular assessment proceedings, the Tribunal found no valid reason for the reassessment based on a change of opinion.

4. Ultimately, the High Court upheld the Tribunal's decision, stating that no substantial question of law arose from the case. The Court dismissed the appeal, emphasizing that the power to reopen an assessment does not equate to the power to review an assessment order. Therefore, the reassessment based on a mere change of opinion was deemed impermissible under the law.