2019 (1) TMI 1020 - HC - Income Tax

Reopening of assessment - bogus purchases - material collected by the Sales Tax Department, prima facie suggesting that the assessee had indulged into bogus billing activities without actually carrying out the purchase and sale of the commodity - change of opinion - Held that - AO had examined the material collected by the Sales Tax Department, prima facie suggesting that the assessee had indulged into bogus billing activities without actually carrying out the purchase and sale of the commodity. It is on this basis that the notice of reopening of assessment was issued earlier and addition of ₹ 2,96,284/was made. There are reasons recorded for issuing the impugned notice. AO now believes that not mere 2.25% of the total bogus purchase of ₹ 1.31 crores (rounded of) is to be added but the entire amount should have been added as the undisclosed income of the assessee. With respect to the validity of such a contention of the AO, we have no comment to offer. What cannot be denied is that the AO merely wishes to change the nature of the assessment previously made. As during the previous reassessment proceedings, AO examined the alleged bogus sales of the assessee, taxed 2.25% thereof as assessee s additional income and passed the order of assessment accordingly. The Assessing Officer now believes that taxing 2.25% of the sales, was an error and instead the entire amount should have been added to the assessee s income. This would be a mere change of opinion. The Act recognizes the revisional powers of the Commissioner to be exercised in case where the assessment order is erroneous and prejudicial to the interest of the Revenue. However, the reopening of assessment is an entirely independent and vastly different jurisdiction and cannot be confused with the revisional powers of the higher authority. - Decided in favour of assessee.

Summary

Issues:
Challenge to notice of reopening of assessment beyond the statutory period.

Analysis:
The petitioner, an individual and dealer of iron and steel, filed the return of income for Assessment Year 2011-12, which was scrutinized by the Assessing Officer based on information from the Sales Tax Department regarding alleged Havala entries. The Assessing Officer made additions to the declared income, and later issued a notice of reopening of assessment beyond the statutory period. The reasons for reopening included discrepancies in the reported income and alleged bogus transactions flagged by the Sales Tax Department.

The petitioner objected to the notice of reopening, contending that the Assessing Officer's attempt to tax the entire amount of alleged bogus purchases was a mere change of opinion from the previous assessment. The High Court observed that if an issue had been examined during previous assessment proceedings and there was no new material, reassessing the same income based on a change of opinion was impermissible. The Court noted that the Assessing Officer's attempt to tax the entire amount instead of the initially assessed percentage constituted a mere change of opinion, not a valid ground for reassessment.

The Court emphasized the distinction between the revisional powers of the Commissioner and the reopening of assessment, stating that the latter is an independent jurisdiction. While acknowledging the Assessing Officer's belief that the entire amount of alleged bogus purchases should be taxed, the Court held that such a move would amount to a mere change of opinion and not a valid ground for reassessment. Consequently, the High Court quashed the impugned notice of reopening of assessment, disposing of the petition in favor of the petitioner.