2019 (4) TMI 1239 - HC - Income Tax

Reopening of assessment u/s 147 - notice beyond the period of four years from the end of relevant assessment year - Assessee was beneficiary of bogus purchase bills and accommodation entries - change of opinion - HELD THAT - Factum of the petitioner being beneficiary of bogus purchase bills and accommodation entries was within the knowledge of the AO even during the original scrutiny assessment. He therefore, passed the order of assessment in which he added a sum of ₹ 45.14 lacs to the income of the assessee by taking profit ration of 9.20% on the total bogus purchases and accommodation entries. Through the reasons, now he wishes to add the entire amount holding a belief that such sum represents the petitioner's undisclosed income. We are not called upon to decide whether the AO's first approach of taxing only the profit element embedded in bogus purchases was correct or that his later approach of taxing the entire bogus purchases is correct. What we are called upon to judge is whether in facts of the present case, he can change his basis of assessing the income. In clear terms, once the Assessing Officer noticed the factum of bogus purchases and accommodation entries and in scrutiny assessment, taxed the same in the manner he thought was appropriate, he cannot be allowed to shift the stand by issuing notice of reopening of assessment. This would be based on mere change of opinion. We may stress on the point that after the assessment was completed, there was no further material available with the Assessing Officer which would enable him to form a belief that the income chargeable to tax had escaped assessment - Impugned notice is also set aside. - Decided in favour of assessee.

Summary

Issues:
Challenge to notice of reopening of assessment and assessment order dated 12.12.2018.

Analysis:
The petitioner, a Private Limited Company, challenged a notice of reopening of assessment dated 31.3.2018 issued by the Joint Commissioner of Income Tax, which was later amended to challenge an assessment order dated 12.12.2018 by the Deputy Commissioner of Income Tax. The petitioner's total income for the assessment year 2012-13 was under scrutiny due to obtaining bogus purchase bills/accommodation entries. The Assessing Officer added a sum to the total income based on profit ratio. The notice of reopening was issued beyond the four-year period from the end of the relevant assessment year, citing reasons for believing that income had escaped assessment due to undisclosed material facts. The petitioner raised objections to the notice, which were rejected, and the assessment order was passed without waiting for the period mandated by a previous court judgment. The court inquired about this oversight, and the Assessing Officer cited high work pressure and apologized. However, the assessment order passed in defiance of the court's order was set aside.

The court did not accept the assessment order passed in defiance of the court's previous judgment and set it aside, reverting to the pre-assessment order stage. On the merits of the challenge to the notice of reopening, the court noted that the Assessing Officer had already included a sum in the original assessment based on bogus purchases and accommodation entries. The officer now sought to tax the entire amount as undisclosed income, which the court found impermissible. The court held that the officer cannot change the basis of assessing income based on a mere change of opinion after completing the assessment without any new material. Therefore, the court set aside the impugned notice of reopening as well.

In conclusion, the court allowed the petition, setting aside both the notice of reopening of assessment and the assessment order dated 12.12.2018, based on the grounds that the Assessing Officer could not change the basis of assessing income without new material, and the notice of reopening was beyond the permissible period.