2019 (7) TMI 548 - HC - Income Tax

Reopening of assessment u/s 148 - tangible material - change of opinion - HELD THAT - Necessary details were called for by the authority concerned in connection with the assessment proceedings by issuing notice u/s 142(1) . In response to such notice the writ applicant had furnished complete details as indicated from various documentary evidence on record. The entire case was discussed by the ITO with the writ applicant. The details furnished by the writ applicant in response to the notice issued were verified. Ultimately the assessment was carried out and that is how the order dated 26.10.2015 came to be passed. It cannot be said that the tangible material which is said to have come to the notice of the Assessing Officer was not taken into consideration at the relevant point of time on account of which the income chargeable to tax could be said to have escaped assessment. On the basis of the very same material the assessment cannot be reopened on some change of opinion. In the facts and circumstances of the present case we are of the view that the issue of notice u/s 148 is not justified. In the result this petition succeeds and is hereby allowed.

Summary

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961 for reopening the assessment.
2. Whether the reopening of the assessment was based on a "change of opinion."
3. Sufficiency and relevance of the reasons recorded for reopening the assessment.
4. Availability and adequacy of alternative remedies.

Issue-wise Detailed Analysis:

1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961 for reopening the assessment:

The petitioner, a company incorporated under the Companies Act, 1956, filed a writ application under Article 226 of the Constitution of India, seeking to quash the notice issued under Section 148 of the Income Tax Act, 1961. The notice aimed to reopen the assessment for the Assessment Year 2013-14. The petitioner argued that the notice was bad, illegal, barred by limitation, and without jurisdiction.

2. Whether the reopening of the assessment was based on a "change of opinion":

The petitioner contended that the reopening of the assessment was merely a change of opinion. During the original assessment proceedings under Section 143(3) of the Income Tax Act, 1961, the Assessing Officer had already called for and examined details of sales promotion expenses and other relevant documents. The petitioner argued that the Assessing Officer had consciously chosen not to make any additions regarding sales promotion expenses, purchases, or sales, and thus, reopening the assessment on the same grounds constituted a change of opinion, which is impermissible in law.

3. Sufficiency and relevance of the reasons recorded for reopening the assessment:

The reasons for reopening the assessment included two primary grounds: (1) Sales promotion expenses of ?20,00,271/- incurred on various tours were not expended wholly and exclusively for the business of the petitioner, and (2) Further verification and investigation of purchases and sales were required. The petitioner argued that the Assessing Officer had not recorded any satisfaction that income chargeable to tax had escaped assessment in relation to the second issue. The petitioner relied on the Supreme Court's decision in Commissioner of Income-Tax vs. Kelvinator of India Ltd., which emphasized that reopening an assessment based on a mere change of opinion is not permissible.

4. Availability and adequacy of alternative remedies:

The respondent argued that the petition was filed prematurely, as only a notice under Section 148 had been issued. The respondent contended that the petitioner had an alternative efficacious remedy available by way of an appeal to the CIT(A) and thereafter to the Tribunal as per the provisions of the Income Tax Act. The respondent cited the Supreme Court's decision in Commissioner of Income-tax vs. Chhabil Dass Agarwal, which held that a writ petition should not be entertained if there is an adequate alternative remedy available.

Judgment:

The court examined whether the notice under Section 148 was justified. It noted that during the original assessment proceedings, the Assessing Officer had called for and examined details of sales promotion expenses. The court observed that the reopening of the assessment was based on the same material that had already been scrutinized, and thus, it constituted a change of opinion. The court relied on the Supreme Court's decision in Kelvinator of India Ltd., which held that reopening an assessment based on a mere change of opinion is not permissible.

The court also referred to the decision in Gujarat Power Corporation Ltd., which clarified that reopening an assessment within four years from the end of the relevant assessment year is permissible as long as it is not based on a mere change of opinion. However, in the present case, the court found that the reopening was indeed based on a change of opinion.

The court concluded that the notice under Section 148 was not justified and quashed the impugned notice. Consequently, all proceedings undertaken pursuant to the issue of the notice under Section 148 also stood terminated.