2016 (11) TMI 295 - HC - Income Tax

Reopening of assessment - ITAT quashed reopening orders - Held that - The Tribunal by the impugned order has rendered a finding of fact that this very issue which forms the basis of reopening notices was a subject matter of consideration during the regular assessment proceedings under Section 143(3) of the Act. Consequently, the reopening notices for both the assessment years were not based on reason to believe that the income chargeable to tax has escaped assessment as it proceeds on a mere change of opinion Thus, following the Apex Court decision in Commissioner of Income Tax Vs. Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT OF INDIA the impugned order of the Tribunal set aside the reopening notices dated 20th March, 2009 for both the assessment years. The impugned order of the Tribunal is unexceptionable as on the finding of fact that the notices of reopening are based on change of opinion, it applied the law as laid down by the Apex Court in Kelvinator of India (supra) that reopening notices on a mere change in opinion were not sustainable.

Summary

Issues:
Challenge to common order of Income Tax Appellate Tribunal for Assessment Years 2002-03 and 2004-05 regarding reassessment proceedings based on change of opinion.

Analysis:
The High Court heard two appeals by the Revenue challenging a common order of the Income Tax Appellate Tribunal concerning Assessment Years 2002-03 and 2004-05. The main question raised was whether the Tribunal was correct in quashing the reassessment proceedings based on a change of opinion by the Assessing Officer. It was noted that the regular assessment for both years was conducted under Section 143(3) of the Income Tax Act, where the treatment of technology expenses as capital or revenue under Section 35D was examined. The Tribunal had set aside the disallowance of expenditure made by the Assessing Officer on this issue. Subsequently, the Assessing Officer issued reopening notices under Section 148 of the Act for both years, focusing on the treatment of technology expenses. The Tribunal found that the issue in the reopening notices had already been considered during the regular assessment proceedings, concluding that the reopening was based on a change of opinion rather than a valid reason to believe income had escaped assessment. Citing the decision in Commissioner of Income Tax Vs. Kelvinator of India, the Tribunal set aside the reopening notices for both years.

The High Court agreed with the Tribunal's findings, stating that the notices of reopening were indeed based on a change of opinion rather than a valid reason to believe income had escaped assessment. The Court upheld the application of the law as laid down in the Kelvinator of India case, emphasizing that reopening notices on a mere change of opinion were unsustainable. Consequently, the Court found no substantial question of law arising from the appeals and dismissed them without costs.