2019 (8) TMI 998 - HC - Income Tax

Reopening of assessment u/s 147 - change of opinion - addition in respect of the transaction as to the receipt of advances as well as repayment of the same - HELD THAT - AO after due consideration of the details and information furnished by the writ applicant from time to time consciously chose not to make any addition in respect of the transactions as to the receipt of 6 crore as well as the repayment of the same while framing the assessment under Section 143(3) of the Act. Thus the issue on hand had been minutely scrutinized by the then Assessing Officer at the stage of the original assessment. Now the respondent is looking forward to touch the very same issue by re-opening the writ applicant s case which is nothing but change of opinion. The action of re-opening the writ applicant s case under Section 147 merely based on change of opinion is not tenable in the eye of law. - Decided in favour of assessee.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for re-opening income tax assessment for Assessment Year 2011-12.

Analysis:
The writ applicant challenged the notice dated 28.03.2018 issued under Section 148 of the Income Tax Act, 1961 to re-open the income tax assessment for the Assessment Year 2011-12. The applicant, engaged in the business of running petrol pumps, received a sum of &8377; 6 Crore in Financial Year 2006-07, which was repaid in Financial Year 2010-11. The Assessing Officer had earlier called for various details and information, but no addition was made in the assessment under Section 143(3) dated 24.01.2014. However, a notice was issued in 2018 to re-open the case based on alleged unexplained income of &8377; 6 Crore. The applicant contended that the re-opening was beyond the permissible period and lacked valid reasons. The applicant's submissions included arguments against the re-opening based on change of opinion, lack of valid reasons, and absence of a cause-effect relationship.

The High Court noted the submissions made by the applicant's counsel and observed that the transaction in question should not have been examined under the Assessment Year 2011-12 as it pertained to 2006. Citing the Supreme Court's decision in Commissioner of Income-Tax vs. Kelvinator of India Ltd., the Court emphasized that re-opening assessments should be based on tangible material indicating income escapement. The Court found merit in the argument that the re-opening appeared to be a case of change of opinion rather than a valid reason to believe income escapement. The Court highlighted the importance of a live link between the reasons recorded for re-opening and the belief of income escapement.

The Court further examined the details provided by the applicant in response to the Assessing Officer's requests in 2013, which included bank account details and confirmations of loan accounts. The Assessing Officer had consciously chosen not to make any additions during the original assessment under Section 143(3). The Court concluded that re-opening the case based on the same issue was merely a change of opinion, which is not permissible under the law. Consequently, the Court allowed the petition, quashed the impugned notice, and terminated any related proceedings.

In summary, the High Court ruled in favor of the writ applicant, holding that the re-opening of the income tax assessment for the Assessment Year 2011-12 was unjustified as it appeared to be based on a change of opinion rather than valid reasons to believe income escapement. The Court emphasized the need for a live link between the reasons recorded for re-opening and the belief of income escapement, as per legal precedents and provisions of the Income Tax Act, 1961.