2019 (3) TMI 811 - HC - Income Tax

Reopening of assessment - management training expense being incurred for Post Graduate programme of Director of the company - - Query raised by AO duly replied by assessee in original assessment u/s 143(3) - nexus between the expense of course fees and the relevance of the same wholly and exclusively for business purpose - change of opinion - HELD THAT - From the facts as emerging from the record, it is evident that at the time of scrutiny assessment the Assessing Officer had duly considered this issue in detail and upon being satisfied with regard to the nexus between the expenses incurred by the petitioner for the management training of its Director and the business of the petitioner, had allowed such expenditure. AO now seeks to reopen the assessment on the very same ground, which is clearly, nothing but a mere change of opinion. AO cannot sit in appeal over the opinion expressed by his predecessor in the assessment order. In the present case, as recorded by the respondent in the reasons recorded, the predecessor of the respondent had gone into the issue and therefore, in effect and substance, the respondent seeks to sit in appeal over the opinion expressed by his predecessor, and, therefore, the assumption of jurisdiction on the part of the Assessing Officer under section 147 of the Act, which is based on a mere change of opinion, is invalid - Decided in favour of assessee.

Issues Involved:
1. Legality of the notice issued under section 148 of the Income Tax Act, 1961 for reopening the assessment.
2. Validity of the assessment order passed under section 144 read with section 147 of the Income Tax Act, 1961.
3. Examination of whether the reopening of assessment was based on a mere change of opinion.

Detailed Analysis:

1. Legality of the notice issued under section 148 of the Income Tax Act, 1961 for reopening the assessment:
The petitioner challenged the notice dated 31.3.2018 issued by the respondent under section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the assessment year 2013-14. The petitioner argued that the reopening was based on a mere change of opinion, which is impermissible in law. The petitioner had originally filed a return on 28.9.2013 and a revised return on 22.11.2013, showing a total income of ?76,19,380/-. The expenditure of ?30,10,000/- for management and training expenses was claimed as a deductible revenue expenditure. The Assessing Officer had initially accepted this during the scrutiny assessment without making any disallowances. The reopening was based on the grounds that the expense was personal and not for business purposes, and the petitioner had not provided sufficient evidence to prove the nexus between the expense and the business purpose.

2. Validity of the assessment order passed under section 144 read with section 147 of the Income Tax Act, 1961:
The petitioner amended the petition to challenge the assessment order passed on 23.10.2018. The petitioner contended that the reopening of the assessment was without authority of law. The Assessing Officer had considered all details during the original assessment and accepted the expenses as deductible. The reopening was thus argued to be invalid as it was based on a mere change of opinion. The court noted that during the scrutiny assessment, the petitioner had provided comprehensive details regarding the management training expenses, and the Assessing Officer had accepted these details.

3. Examination of whether the reopening of assessment was based on a mere change of opinion:
The court examined the reasons recorded by the Assessing Officer for reopening the assessment, which stated that the expense was personal and not for business purposes. The court found that during the original assessment, the Assessing Officer had thoroughly examined the details and allowed the expenses. The reopening of the assessment on the same grounds was deemed a mere change of opinion. The court referenced the Supreme Court decision in CIT v. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC), which established that reopening based on a change of opinion is not permissible.

Conclusion:
The court concluded that the reopening of the assessment was invalid as it was based on a mere change of opinion. The impugned notice dated 31.3.2018 and the assessment order dated 23.10.2018 were quashed and set aside. The petition was allowed with no order as to costs. The civil application for stay was disposed of accordingly, as it no longer survived in light of the order passed in the main petition.

← Previous Next →