2019 (2) TMI 337 - HC - Income Tax

Reopening of assessment - reasons to believe - Held that - In a given case, the situation may arise where even if the Assessing Officer has examined an issue during the assessment, he may receive additional information and material from outside sources prima facie suggesting that the stand of the assessee and the conclusion of the Assessing Officer on the basis of records of the assessment, were incorrect. In such situation, reopening of assessment may still be permitted. In the present case, however, no such material outside of the assessment records is shown to have been brought to the notice of the Assessing Officer. He only referred to the order of the assessment passed by the Assessing Officer of Morarjee Textiles Ltd. Such assessment was based on the documents which were already part of the assessment in case of the present petitioner The opinion formed by the AO of Morarjee Textiles can be seen to be another view point which may also be valid. However, the formation of the opinion by another AO on the same set of documents and materials cannot give justifiable ground to the Assessing Officer of the present assessee to contend that there is additional information or material at his command permitting him to have a relook at the situation. In plain terms, what the AO in the present case is attempting to do is to review his own conclusions formed during the original assessment after full examination, with the aid of not new or additional materials but on the basis of the conclusions of another AO; which are based on the same materials available during the original assessment before him. Situation thus, in the present case is that the AO during the assessment examined the transaction in question on the strength of certain documents and accepted the capital gain offered by the assessee arising out of such transaction. Another Assessing Officer in the case of Morarjee Textiles examined the same set of documents and formed a different opinion. When this was placed before him, the Assessing Officer of the petitioner wishes to change his view and adopt the view of the Assessing Officer of Morarjee Textiles, which is wholly impermissible. The concept of change of opinion not permitting reopening of assessment once an issue has been examined during the original scrutiny assessment is all too well established requiring reference to any judgments. In this case also a query was raised during the regular assessment proceedings and it was responded to by the assessee. This non consideration of the same in the assessment order is no evidence of the Assessing Officer not being satisfied with the issue raised. This was established on the basis of subsequent information received. This Court held that in such a situation, reopening of assessment even beyond the period of four years from the end of relevant assessment year would be permissible. In view of the detail discussion, on the facts on record, both the decisions cited by the learned counsel for the Revenue would have no applicability. - Decided in favour of assessee

Summary

Issues Involved:
1. Validity of the notice for reopening assessment under Section 147 of the Income Tax Act.
2. Whether the petitioner had disclosed all material facts during the original assessment.
3. Whether the reopening of the assessment was based on a mere change of opinion.

Detailed Analysis:

1. Validity of the Notice for Reopening Assessment:
The petitioner challenged the notice of reopening of assessment dated 29.3.2018 issued by the Assessing Officer (AO). The AO had recorded reasons for reopening, stating that the petitioner company had declared NIL income for the assessment year 2013-14 but had shown a receipt of ?40.51 crore on transfer of leasehold rights in a landed property. The AO believed that the petitioner did not own the land in question and had filed inaccurate particulars of income. The AO cited the Supreme Court judgment in ACIT V/s. Rajesh Jhaveri Stock Brokers Pvt Ltd., which allows reopening if there is "reason to believe" that income has escaped assessment. However, the court found that the AO's belief was based on the same set of documents already examined during the original assessment, rendering the reopening notice invalid.

2. Disclosure of Material Facts During Original Assessment:
The petitioner had disclosed the transaction of receiving ?40.51 crore from Morarjee Textiles Ltd. in the return of income and during the original assessment. The AO had examined this transaction, including the sequence of mergers and demergers, and accepted the capital gain offered by the petitioner. The court noted that the petitioner had provided detailed explanations and documents during the original assessment, including lease agreements, merger orders, and the computation of capital gains. Therefore, the court held that the petitioner had disclosed all material facts, and the AO's contention that the issue was not examined during the original assessment was unfounded.

3. Reopening Based on Change of Opinion:
The court emphasized that the concept of change of opinion does not permit reopening of assessment once an issue has been examined during the original scrutiny assessment. The AO's attempt to reopen the assessment was based on the conclusions of another AO in the case of Morarjee Textiles Ltd., which were based on the same documents already examined. The court held that this constituted a change of opinion, which is not a valid ground for reopening the assessment. The court cited several judgments, including CIT Vs. Kelvinator of India Ltd. and GKN Sinter Metals Ltd Vs. Ms. Ramapriya Raghavan, to support this principle.

Conclusion:
The court quashed the impugned notice for reopening the assessment, holding that the AO's reasons were based on a mere change of opinion and that the petitioner had disclosed all material facts during the original assessment. The petition was allowed, and the reopening notice was set aside.