2019 (6) TMI 615 - HC - Income Tax

Reopening of assessment u/s 147 - original order u/s 143(3) - change of opinion - disallowance made of loss on sale of stores treating them to be revenue in nature - HELD THAT - The finding of fact recorded by the Appellate Tribunal is that no new material has surfaced on the basis of which the assessment proceedings could be reopened. It appears that the reopening was clearly on account of change of opinion by the AO and this is something which is not permissible under the scheme of the Act. This principle has been well explained by this court in the above referred decision in the case of Gujarat Power Corporation 2012 (9) TMI 69 - GUJARAT HIGH COURT . - appeal of revenue is dismissed

Issues:
1. Legality and validity of the order passed by the Income Tax Appellate Tribunal for the Assessment Year 2007-08.
2. Reopening of assessment by the Assessing Officer.
3. Disallowance made on the loss of sale of stores.
4. Substantial questions of law proposed by the appellant.
5. Interpretation of the Tribunal on the legality of the reassessment proceedings.
6. Finding of fact recorded by the Appellate Tribunal regarding the reopening of assessment.

Analysis:

1. The appeal before the Gujarat High Court concerned the legality and validity of the order passed by the Income Tax Appellate Tribunal for the Assessment Year 2007-08. The respondent-assessee, a company engaged in manufacturing pharmaceuticals, fertilizers, chemicals, and paints, had filed its return declaring total income under normal provisions and MAT provisions. The Income Tax return was assessed, and subsequently, the Assessing Officer thought fit to reopen the assessment, leading to objections raised by the assessee.

2. The Assessing Officer's decision to reopen the assessment was challenged by the assessee, claiming it was a mere change of opinion. Despite the objections raised, the Assessing Officer passed the reassessment order, allowing a specific claim. The assessee then appealed to the CIT Appeals, which dismissed the appeal. Subsequently, the assessee appealed to the Income Tax Appellate Tribunal, which allowed the appeal on 11.07.2018, leading to the current appeal before the High Court by the Income Tax Department.

3. The appellant raised substantial questions of law in its memorandum of appeal, questioning the Tribunal's decision. The Tribunal, after hearing arguments from both parties, found that no substantial question of law was involved in the present appeal. The Tribunal cited a previous decision by the Gujarat High Court to support its conclusion, highlighting that the Assessing Officer had formed an opinion during the scrutiny assessment process, and the reopening of the assessment was deemed impermissible due to a change of opinion.

4. The Appellate Tribunal's finding of fact indicated that no new material had surfaced to justify the reopening of the assessment proceedings. The Tribunal concluded that the reopening was solely based on a change of opinion by the Assessing Officer, which was not permissible under the Income Tax Act. This principle was further supported by a previous decision of the Gujarat High Court, emphasizing the impermissibility of reassessment based solely on a change of opinion.

5. Ultimately, the High Court upheld the Tribunal's decision, dismissing the appeal by the Income Tax Department. The Court concurred with the Tribunal's interpretation and finding that the reassessment proceedings were impermissible due to being solely based on a change of opinion without any new material warranting such action. The appeal was therefore dismissed based on the established legal principles and precedents cited during the proceedings.

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