2019 (3) TMI 1310 - HC - Income Tax

Reopening of assessment - During the pendency of the writ petition, the A.O. has passed fresh assessment order - tangible material forming a live link for change of opinion - change of opinion - recourse to legal remedies available - HELD THAT - We find force in the submissions of the learned counsel for the Revenue that the petitioner, if so advised, should resort to statutory remedy. It is well settled by now that Section 147 of the Income Tax Act does not permit reassessment of an income merely because of the fact that the AO has a change of opinion. Section 147 confers the power of reassess and not the power of review. The change of opinion implies formulation of an opinion and then a change thereof. Refereeing to case of INCOME TAX OFFICER WARD NO. 16 (2) VERSUS M/S TECHSPAN INDIA PRIVATE LTD. & ANOTHER 2018 (4) TMI 1376 - SUPREME COURT when we carefully examine the facts of the case in hand, we find that there is tangible material as pointed by the CITC in huge amount of income escaping assessment, therefore assessment was reopened. Thus there is tangible material forming a live link for change of opinion. It is not in dispute that after reopening, fresh assessment order has been passed. Thus, the reopening of assessment and the resultant assessment order dated 28.12.2018 both could be challenged more effectively in statutory remedies provided under the Income Tax Act, We, therefore, decline to exercise our extra ordinary powers conferred by article 226 of the Constitution of India. Writ petition fails and is hereby dismissed summarily. Petitioner is free to take recourse to legal remedies available to it under the law against the reopening of assessment and the fresh order of assessment and while doing so, this order shall not come in way.

Summary

Issues:
1) Challenge to Show Cause Notice and Order rejecting objections
2) Validity of reopening assessment and objections raised
3) Reopening based on change of opinion or substantial income escaping assessment
4) Availability of statutory remedy for challenging assessment

Issue 1: The petitioner sought to set aside the Show Cause Notice and Order rejecting objections against the reopening of assessment. The petitioner, a partnership concern engaged in various business activities, received a Show Cause Notice under section 148 of the Income Tax Act. The petitioner demanded reasons for the reopening of assessment, which were provided along with the requisite approval. The objections raised by the petitioner were subsequently rejected by the Dy. Commissioner of Income Tax.

Issue 2: During the proceedings, a fresh assessment order was passed by the Assessing Officer, which the petitioner sought to file along with an application for amendment. The Revenue opposed this, arguing that the petitioner should have availed the statutory remedy of appeal before challenging the assessment order. The Revenue contended that the amendment application and the writ petition should be rejected on this ground.

Issue 3: The petitioner contested the reopening of assessment on the grounds of full and true disclosure in the Profit & Loss account, arguing against the need for reopening based on a mere change of opinion. However, it was acknowledged that a substantial part of the income had escaped assessment, leading to the reopening of the assessment. The Revenue supported the reopening, emphasizing that it was not solely based on a change of opinion but on tangible material indicating income escapement.

Issue 4: The High Court analyzed the legal principles governing reassessment under Section 147 of the Income Tax Act. Referring to the Supreme Court decision in ITO Vs. Techspan India (P) LTD., it was highlighted that reassessment cannot be done solely due to a change of opinion by the Assessing Officer. The Court emphasized the need for tangible material linking to the belief of income escapement for a valid reassessment. In this case, the Court found that there was tangible material indicating income escapement, justifying the reopening of assessment. The Court concluded that the petitioner should avail the statutory remedies provided under the Income Tax Act to challenge the reopening and the subsequent assessment order.

In conclusion, the High Court dismissed the writ petition, allowing the petitioner to pursue legal remedies available under the law against the reopening of assessment and the fresh assessment order. The Court declined to exercise its extraordinary powers under Article 226 of the Constitution, emphasizing the availability of statutory remedies for challenging the assessment process.