2015 (8) TMI 480 - SC - Income Tax

Reopening of assessment - Capital gains arising on the sale of the premises should not be taxed in the assessment year 1991-92 - HC allowed assessee appeal on validity of reopening notice - Held that - After going through the detailed order passed by the High Court we find that the main issue which is involved in this case is not at all addressed by the High Court. Since the assessee s return was accepted under section 143(1) of the Income-tax Act there was no question of change of opinion inasmuch as while accepting the return under the aforesaid provision no opinion was formed and therefore on this basis the notice issued was valid. As decided in Asst. CIT v. Rajesh Jhaveri Stock Brokers Private Ltd. 2007 (5) TMI 197 - SUPREME Court So long as the ingredients of section 147 are fulfilled the Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) The offshoot of the aforesaid discussion is to hold that the judgment of the High Court is erroneous and warrants to be set aside. We allow this appeal setting aside the impugned judgment of the High Court. - Decided in favour of revenue.

Summary

Issues:
1. Validity of notice issued under section 143 read with section 147 of the Income-tax Act challenging the acceptance of the Income-tax return for the assessment year 1991-92.
2. Interpretation of the concept of "change of opinion" in relation to acceptance of return under section 143(1) of the Income-tax Act.
3. Error in judgment by the High Court in not addressing the main issue regarding the validity of the notice issued by the appellant-Department.

Analysis:
1. The judgment addressed the issue of the validity of the notice issued under section 143 read with section 147 of the Income-tax Act challenging the acceptance of the Income-tax return for the assessment year 1991-92. The respondent-assessee had filed the return, which was accepted under section 143(1) of the Act. However, the Assessing Officer later raised a query regarding the taxation of capital gains arising from a sale agreement entered into by the assessee. The High Court allowed the writ petition challenging the validity of the notice, leading to the appeal in the Supreme Court. The Supreme Court found that the High Court's judgment was erroneous and set it aside, thereby upholding the validity of the notice issued by the appellant-Department.

2. The judgment delved into the interpretation of the concept of "change of opinion" in the context of the acceptance of the return under section 143(1) of the Income-tax Act. The appellant-Department contended that since the return was accepted under section 143(1), there was no "change of opinion" justifying the issuance of the notice challenging the acceptance. The Supreme Court referred to the judgment in Asst. CIT v. Rajesh Jhaveri Stock Brokers Private Ltd. to emphasize that the intimation under section 143(1)(a) does not amount to an assessment order, and therefore, the question of "change of opinion" does not arise in such cases. The Court held that the notice issued was valid based on this interpretation, overturning the High Court's decision.

3. The judgment highlighted the error in the High Court's decision for not addressing the main issue concerning the validity of the notice issued by the appellant-Department. The Court found that the High Court failed to consider the aspect of "change of opinion" in the context of accepting the return under section 143(1) of the Income-tax Act. Consequently, the Supreme Court set aside the High Court's judgment and allowed the appeal, thereby reinstating the validity of the notice challenging the acceptance of the Income-tax return for the assessment year 1991-92. Additionally, the Court remitted the matter back to the Income-tax Appellate Tribunal to decide the appeal of the respondent on its merits, following the setting aside of the High Court's judgment.