2019 (7) TMI 1048 - HC - Income Tax

Reopening of assessment u/s 147 - intimation under Section 143(1) justifying reopening - as alleged reassessment by the respondent in the second attempt even though there were no fresh materials in his possession justifying the action - HELD THAT - Language employed in Section 147 does not make any distinction between an order passed under Section 143(3) and the intimation issued under Section 143(1) and therefore, it is not permissible to adopt different standards while interpreting the words reason to believe vis-a-vis Section 143(1) and Section 143(3). In the instant case, it is not in dispute that reopening is based upon the return of income filed by the assessee at the first instance. There is no allegation against the assessee that there was failure on the part of the assessee to make a true disclosure, nor the assessing officer had relied on any tangible material, which has come to his knowledge after the filing of the return and intimation under Section 143(1), justifying reopening. Therefore, to reopen an assessment based on the return filed by the assessee, will clearly be a case of change of opinion and consequently bad in law. - Decided in favour of assessee

Summary

Issues:
Validity of reopening assessment under Section 147 read with 143(3) for the assessment year 2001-02 based on lack of fresh materials justifying the action.

Analysis:
The High Court considered the appeal challenging the order passed by the Income Tax Appellate Tribunal regarding the reopening of the assessment for the assessment year 2001-02. The main issue was whether the reopening of the assessment was valid. The assessee had filed the return of income admitting total income at 'Nil' after claiming deduction under Section 80HHC. The notice under Section 148 was issued after more than two years, alleging excess claim of deduction under Section 80HHC. The assessee contended that the assessing officer had no tangible material to justify the reopening of the assessment. The Commissioner of Income Tax (Appeals) and the tribunal dismissed the appeal, leading the assessee to approach the High Court.

The High Court referred to legal precedents such as "ACIT -Vs- Rajesh Jhaveri Stock Brokers P.Ltd [2007] 291 ITR 500 (SC)" and others to establish the legal position. The key question was whether an assessment finalized under Section 143(1) could be reopened under Section 147 and under what circumstances. The Court cited the case of "CIT -Vs- Orient Craft Ltd (2013) 354 ITR 536" to emphasize that the expression "reason to believe" should be interpreted consistently, regardless of whether the assessment was under Section 143(1) or 143(3). The Court highlighted that the rigorous standards for reopening assessments should apply uniformly.

Further, the Court discussed the decision in "Principal CIT -Vs- Tupperware India (P) Ltd., (2016) 65 Taxmann.com 17(Delhi)" and "Khubchandani Healthparks (P) Ltd., -Vs- Income Tax Officer, Mumbai" to support the argument that a notice under Section 148 could be challenged for lack of valid reasons to believe income had escaped assessment, even if the assessment was completed under Section 143(1). The Court rejected the Revenue's argument based on a previous case and reiterated that reopening an assessment without fresh material justifying the action would amount to a change of opinion and be legally invalid.

In conclusion, the High Court allowed the appeal filed by the assessee, answering the substantial question of law in favor of the assessee. The Court held that reopening an assessment solely based on the return filed by the assessee without any new material justifying the action would be considered a change of opinion and hence, bad in law.