2018 (10) TMI 442 - HC - Income Tax

Reopening of the assessment u/s 148 - validity of reason to believe - Held that - Every non disclosure of material facts will not or cannot be a justifiable reason for reopening sustainable under judicial scrutiny. Such non disclosure of a material fact must be of such nature that, but for such non disclosure, the income, relatable to such material fact, would not have escaped assessment. In other words, it should lead to an irrebuttable conclusion that by the conduct of the assessee, either by providing wrong or incorrect particulars or by not providing the full and correct particulars, he should have made the Assessing Officer not to bring a particular income to tax, which is otherwise liable to be taxed. If this test is applied to the present case, the Revenue has to fail. It is settled law that mere change of opinion on the existing material cannot be a ground for reopening the assessment in the absence of any new material that had come to the possession of the Assessing Officer. In this case, there is no tangible material available before the Assessing Officer to reopen the assessment and on the other hand, it was purely out of his change of opinion on the material already existed. - Decided in favour of assessee.

Summary

Issues Involved:
1. Reopening of assessment under Section 148 of the Income Tax Act.
2. Validity of the reopening beyond the four-year limitation period.
3. Alleged failure to disclose fully and truly all material facts by the petitioner.
4. Determination of the commencement date of manufacturing for Section 10B deduction.
5. Whether the reopening was based on a mere change of opinion without new tangible material.

Detailed Analysis:

1. Reopening of Assessment under Section 148 of the Income Tax Act:
The petitioner challenged the reopening of the assessment for the Assessment Year 2010-11 under Section 148, asserting that the reopening was based on a change of opinion without new tangible material. The original assessment had accepted the petitioner's claim for deduction under Section 10B after scrutiny. The respondent issued a notice for reopening on the grounds that the petitioner extended its 10B holiday period beyond the permissible ten years, making it ineligible for the deduction.

2. Validity of the Reopening Beyond the Four-Year Limitation Period:
The reopening notice was issued on 03.01.2017, beyond the four-year period from the end of the relevant assessment year (31.03.2015). According to Section 147, reopening beyond four years is permissible only if there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The petitioner argued that all necessary details were disclosed in the original return, and thus, the reopening was barred by limitation.

3. Alleged Failure to Disclose Fully and Truly All Material Facts by the Petitioner:
The respondent contended that the petitioner failed to disclose the correct date of commencement of manufacturing, which was crucial for determining eligibility for the Section 10B deduction. The petitioner claimed the manufacturing commenced on 25.05.2000, whereas Form 56G mentioned 28.03.2000. The discrepancy was argued to be a typographical error, not a failure to disclose material facts.

4. Determination of the Commencement Date of Manufacturing for Section 10B Deduction:
The petitioner argued that the actual commencement of manufacturing was on 25.05.2000, making the assessment year 2010-11 the tenth year for claiming the deduction. The respondent, however, based the reopening on the date 28.03.2000 mentioned in Form 56G, which implied that the assessment year 2010-11 was the eleventh year, thus ineligible for the deduction. The court noted that the Assessing Officer had originally accepted the deduction claim after considering all materials, including Form 56G.

5. Whether the Reopening was Based on a Mere Change of Opinion Without New Tangible Material:
The court held that the reopening was based on a mere change of opinion by the Assessing Officer on the same set of facts already considered during the original assessment. The court emphasized that reassessment based on a change of opinion is not permissible, citing relevant case laws, including CIT v. Kelvinator of India Ltd. and ITO vs Techspan India P. Ltd. The court concluded that there was no new material to justify the reopening.

Conclusion:
The court found that the reopening of the assessment was not justified as it was based on a mere change of opinion without new tangible material. The petitioner had disclosed all necessary facts in the original return, and the discrepancy in the commencement date was not sufficient to invoke the extended period of limitation under Section 147. Consequently, the court allowed the writ petition, setting aside the reopening of the assessment for the assessment year 2010-11.