2017 (12) TMI 1131 - HC - Income Tax

Reopening of assessment - reasons to believe - claim for unabsorbed depreciation - Held that - The decision of this Court in the case of the assessee for the Assessment Year 2004-05 2010 (3) TMI 164 - BOMBAY HIGH COURT holds that a mere change of opinion would not justify the Assessing Officer in seeking a recourse to the powers under Sections 147 and 148 unless there is tangible material before the Assessing Officer to prove that income chargeable to tax has escaped assessment. This Court further held, while allowing the petition, during the course of the assessment proceedings, that the Assessing Officer brought his mind to bear upon the questions involved and there was absence of tangible material on the basis of which assessment could have been reopened. In the present case the very same assessment year was under consideration whereas this Court has already taken a view in the aforesaid assessee's case. There was no warrant for issue of further notice. It is evident that this has occasioned only as a change of opinion and an afterthought and in any event, the reopening sought to be effected is beyond the period of 4 years. In CIT v/s. Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT it has been held by the Supreme Court that even within the period of 4 years there has to be tangible material on the basis of which assessment can be reopened. No justification for reopening the assessment. Lastly we express our displeasure at the conduct of the officer of revenue in issuing a fresh notice despite a binding decision in the case of the assessee and the law laid down by the Supreme Court. The revenue must reign in their officers in matters which have attained finality failing which costs thrown away may have to be imposed. The impugned order, therefore, cannot be sustained. - Decided in favour of assessee.

Summary

Issues:
Challenge to validity of notice under Section 148 of the Income Tax Act, 1961 and rejection of objections for Assessment Year 2005-06.

Analysis:

Issue 1: Challenge to Notice under Section 148
The petitioners filed a writ petition under Article 226 challenging the validity of the notice dated 24th March, 2010 issued by the Deputy Commissioner of Income Tax under Section 148 of the Income Tax Act, 1961 for the Assessment Year 2005-06. The notice sought to reassess the income based on reasons furnished on 1st December, 2008, alleging escapement of income due to provisions for doubtful debts and diminution in value of investments. Subsequently, an order was passed enhancing the book profit, leading to a series of appeals and cross-appeals. The Tribunal ultimately held the reassessment order to be bad in law and dismissed the revenue's appeal as infructuous.

Issue 2: Rejection of Objections
The petitioners challenged the order rejecting objections to reassessment dated 24th December, 2010, primarily contending that there was no change of opinion and that the objections were rejected without granting an opportunity of hearing. The Deputy Commissioner of Income Tax contended that the reassessment was necessary due to a prima facie mistake apparent on the record regarding unabsorbed depreciation set off against book profit. The petitioners argued that the impugned orders were passed against settled law and were illegal, emphasizing the need for a personal hearing. The respondents justified the reassessment citing an alleged escapement of income assessment and the need to bring it to tax within the statutory period.

Judgment
The High Court observed that there was no tangible material to justify the reassessment and noted that the reopening was beyond the permissible 4-year period. Referring to relevant case law, the Court held that the reassessment was merely a change of opinion without any new material. The Court expressed displeasure at the revenue officer's conduct in issuing a fresh notice despite binding decisions, ultimately ruling in favor of the petitioners. The Court made the rule absolute, disposed of the writ petition accordingly, and ordered no costs to be imposed.

This comprehensive analysis delves into the legal intricacies of the judgment, highlighting the key issues, arguments presented, and the final decision rendered by the High Court.