2019 (3) TMI 1206 - HC - Income Tax

Re-assessment proceedings u/s 147/148 - addition of Development and Testing Charges holding it to be a Capital Expenditure which was claimed as Revenue Expenditure by the Assessee in the Profit and Loss Account - difference between 'change of opinion' and 'reasons to believe'- HELD THAT - The learned Single Judge was absolutely right in holding that the Assessee, having not raised an objection before the Assessing Authority to the re-opening of the assessment under Section 147/148 of the Act, should be deemed to have acquiesced to the same. Nothing prevented the Assessee from raising the objection, which could have been dealt with by the Assessing Authority in accordance with law. Having not raised any such objection before Assessing Authority that the expenditure claimed as Revenue Expenditure was already considered and allowed as Revenue Expenditure and therefore, for treating the same now as Capital Expenditure is a change of opinion, is not a tenable contention and therefore, it cannot be a ground to be raised in writ jurisdiction. Further, when a specific and adequate alternative remedy is available to the Assessee for taking such a plea to find as to whether the expenditure claimed by the Assessee is to be treated as Revenue Expenditure or Capital Expenditure, if the High Court was to entertain such controversy on merits, the entire litigation in this respect can be just brought on the Board of the High Court instead of availing the regular Appellate Forum provided under the Act. We are satisfied that in the present case, there was no change of opinion on the part of the Assessing Authority and therefore, the re-opening of the Assessment Order was initiated on valid and reasonable grounds. Even if there is a correct disclosure of the expenditure, it may be, in the opinion of the Assessee, a Revenue Expenditure but, in the opinion of the Assessing Authority, it can be a Capital Expenditure. But, that deserves to be decided on the basis of facts by the higher Appellate Forums and that cannot become the ground to straightaway invoke the writ jurisdiction under Article 226 of the Constitution of India. Therefore, we are satisfied that the order of the learned Single Judge does not suffer from infirmity so as to call for any interference - Decided against assessee.

Summary

Issues Involved:
Challenging re-assessment proceedings under Section 147/148 of the Income Tax Act, 1961 for Assessment Year 2011-2012.

Detailed Analysis:

1. Reasons for Re-assessment Proceedings:
The Assessee challenged the initiation of re-assessment proceedings based on discrepancies in the financial statements. The Assessing Authority added back Development and Testing Charges claimed as Revenue Expenditure to be Capital Expenditure, leading to the re-assessment order.

2. Jurisdiction and Maintainability of Writ Petitions:
The Assessee contended lack of jurisdiction in re-opening the assessment, citing previous assessments where the charges were allowed as Revenue Expenditure. The Assessee argued that failure to object earlier did not waive the right to question jurisdiction. The court held that the Assessee should have raised objections before the Assessing Authority and that the writ petition was not maintainable.

3. Change of Opinion and Legal Remedies:
The Assessee argued that re-assessment was based on a change of opinion by the Assessing Authority, which was not permissible. The court emphasized that the Income Tax Act provides statutory remedies for such disputes, and the High Court was not the appropriate forum for deciding mixed questions of fact and law.

4. Validity of Re-assessment Order:
The court concluded that there was no change of opinion by the Assessing Authority in re-opening the assessment. The distinction between 'change of opinion' and 'reasons to believe' under Sections 147 and 148 of the Act was highlighted. The court emphasized that such disputes should be resolved through higher Appellate Forums, not through writ jurisdiction.

5. Final Decision and Directions:
The court dismissed the appeals, stating that the order of the Single Judge did not warrant interference. The Assessee was directed to file regular Statutory Appeals within two weeks, subject to compliance with conditions under Section 246 of the Act. No costs were awarded, and a connected miscellaneous petition was also dismissed.

In conclusion, the High Court upheld the re-assessment proceedings, emphasizing the importance of following statutory remedies for tax disputes and the limitations of writ jurisdiction in such matters. The Assessee was directed to pursue regular Statutory Appeals for further resolution of the issues raised.