2019 (2) TMI 1331 - HC - Income Tax

Reopening of assessment - reopening beyond a period of four years from the end of the relevant assessment year - HELD THAT - In the absence of any failure on the part of the petitioner to disclose fully and truly all material facts necessary for assessment, the reopening of assessment under section 147 of the Act beyond a period of four years from the end of the relevant assessment year is invalid. The record of the case reveals that at the time of scrutiny assessment, the AO had gone into this very issue of interest on NPA and had made addition in that regard, which had been carried in appeal before the CIT (Appeals) and in further appeal before the Tribunal. Therefore, it is evident that the AO seeks to reopen the assessment on a mere change of opinion inasmuch as, at the time of scrutiny assessment, AO had applied his mind to the issue and even recorded finding in respect thereof in the assessment order framed under section 143(3) - the assessment order has merged with the order passed by the CIT (Appeals) and the Tribunal and hence also, the reopening of the assessment on this very ground is without authority of law. Lastly, even on merits, the issue stands concluded in favour of the assessee by the above cited decision of this court, which has been confirmed by the Supreme Court and hence, on the reasons recorded for reopening the assessment, the AO could not have formed the belief that any income chargeable to tax has escaped assessment. The impugned notice under section 148 of the Act, therefore, cannot be sustained. - Decided in favour of assessee.

Summary

Issues involved:
Challenge to notice seeking to reopen assessment under section 148 of the Income Tax Act, 1961 for assessment year 2011-12.

Detailed Analysis:

1. Reopening of Assessment:
The petitioner, a cooperative bank, challenged the notice issued by the respondent seeking to reopen the assessment for the assessment year 2011-12 under section 148 of the Income Tax Act, 1961. The petitioner had previously filed its return of income, which was subjected to scrutiny resulting in an addition to the total income on account of accrued interest of Non-Performing Assets (NPA). The Income Tax Appellate Tribunal allowed the appeal against this addition. However, the respondent issued the impugned notice for reopening the assessment beyond the statutory period of four years from the end of the relevant assessment year.

2. Grounds for Challenging Reopening:
The petitioner contended that there was no failure on their part to disclose all material facts necessary for assessment during the original proceedings. They argued that the Assessing Officer had already considered and made an addition regarding interest on NPA during the initial assessment, which was subsequently overturned by the Tribunal. The petitioner further claimed that the reopening of assessment was based on a mere change of opinion as the issue had already been thoroughly examined during the previous proceedings.

3. Merger Doctrine and Legal Precedent:
The petitioner also raised the issue of merger, asserting that the assessment order had merged with the decisions of the Commissioner of Income Tax (Appeals) and the Tribunal. They argued that the reopening of assessment after these decisions was without legal authority. Additionally, the petitioner cited a legal precedent where the court had held that income from non-performing assets should be recognized on an accrued basis, which was confirmed by the Supreme Court.

4. Court's Decision:
After considering the arguments presented by both parties, the court found in favor of the petitioner. The court held that the impugned notice seeking to reopen the assessment for the assessment year 2011-12 was invalid and beyond the statutory period. The court concluded that there was no failure on the part of the petitioner to disclose material facts, and the reopening was based on a mere change of opinion. The court also upheld the principle of merger and cited the legal precedent in favor of the petitioner. Consequently, the court quashed and set aside the notice issued by the respondent under section 148 of the Income Tax Act for the assessment year 2011-12.

This detailed analysis encapsulates the key aspects of the legal judgment, addressing the issues involved and the court's rationale behind its decision.