2018 (3) TMI 958 - HC - Income Tax

Reopening of assessment u/s 147 - change of opinion - entitlement of the deduction under Section 80 HHC - eligibility of reasons to believe - Held that - It cannot be said that the re-assessment was merely based on a change of opinion. The appellate authority had for the other years affirmed the findings of the Assessing Officer that a deduction under Section 80 HHC could be claimed successfully only if there were produced certificate of the export house. Admittedly, no certificates were produced by the assessee and inadvertently the Assessing Officer had allowed the deduction for the two years which are before us. On receipt of information by way of the appellate order, the Assessing Officer realised the escapement of assessment in the assessment years 1987-88 and 1988-89. The appellate order has already been held to be coming within the ambit of information as contemplated under Section 147. Hence there could be no vitiating factor found in the re-assessment having been carried out. - Decided in favour of revenue

Summary

Issues:
Re-opening of assessment under Section 147 of the Income Tax Act based on an appellate order from an earlier year.

Analysis:
The judgment concerns the re-opening of assessments for the years 1987-88 and 1988-89 based on the reliance of an appellate order from a previous year. The primary issues revolve around whether the re-opening of assessment under Section 147 constitutes a mere change of opinion and if the appellate order can be considered as information under Section 147.

The background reveals that the original assessments were completed without the production of certificates from the export house, contrary to CBDT Circular No. 466. Subsequently, the Assessing Officer received an appellate order from the Commissioner of Income Tax for earlier years, affirming the disallowance of deductions under Section 80 HHC due to the absence of the required certificates. This appellate order was then used as the basis for re-opening the assessments for the years in question.

The legal arguments presented by the parties included references to decisions such as the Kelvinator case, where it was established that re-assessment based solely on a change of opinion is not permissible. The case law highlighted instances where re-opening assessments based on information already available during the original assessment, without new substantial information, would amount to a mere change of opinion.

The judgment also referenced precedents like Gurbux Rai Hurbux Rai and Kerala State Industrial Development Corporation Limited to emphasize the significance of definite information in re-opening assessments. It was clarified that the appellate order can be considered as valid information for re-assessment purposes if it reveals an escapement of assessment due to non-compliance with statutory requirements.

Ultimately, the Court ruled in favor of the revenue, rejecting the appeals and upholding the re-assessment carried out under Section 147. The decision was based on the finding that the appellate order provided valid information leading to the realization of the escapement of assessment, thereby justifying the re-opening of assessments for the relevant years.

In conclusion, the judgment clarifies the legal principles governing the re-opening of assessments under Section 147 based on appellate orders and highlights the importance of substantial information and non-arbitrary decision-making in such proceedings.