2019 (10) TMI 89 - HC - Income Tax

Reopening of assessment u/s 147 after 4 years - Change of opinion - validity of reason to believe - HELD THAT - In this case, it is relevant to note that neither the notice issued under section 148 nor the proceedings stating the reasons for reopening the assessment, has alleged anywhere that the assessee has failed to disclose fully and truly any material facts necessary for assessment. On the other hand, perusal of the reasons stated for reopening would only show that the AO wanted to change his opinion already arrived on the materials available on record. The decisions relied on by the learned standing counsel for the respondent which were rendered prior to 1989 Amendment, in my considered view, neither can be applied to the facts and circumstances of the present case nor would help the revenue in any manner, in view of the fact that in the subsequent decision rendered in Kelvinator's case 2010 (1) TMI 11 - SUPREME COURT the law is now well settled by the Apex Court Therefore, the law laid down by the Apex Court in Kelvinator's case is squarely applicable to the facts and circumstances of the present case and thus, the reopening is bad as the same is not permissible, based on change of opinion. Consequently, the revenue cannot escape from the clutches of limitation. Such being the position, the reopening notice issued after the period of four years is undoubtedly, barred by limitation There is no dispute to the fact that the reasons for reopening were based on two heads namely, Asset Written Off and Factory Land Development Charges . It is not the case of the Revenue that the amount referable to those two heads were not at all shown in the profit and loss account. Assessee along with the return enclosed trading profit and loss account wherein the above two heads were specifically shown with the referable quantum of amount. Therefore, it is evident that the materials relevant to subject matter in issue for reopening, are already on record before the Assessing Officer. After perusing the return filed along with its enclosures, the Assessing Officer completed the assessment. Therefore, there is every reasonable presumption that the Assessing Officer has accepted the materials filed with returns except to the extent where he differed and stated so in his assessment order. If the issue is not specifically raised in the assessment order, it cannot be automatically presumed that such issue was not at all considered in the original assessment order. Consequently, if the Assessing Officer chooses to reopen the assessment based on such available materials, it would certainly amount to change of opinion only and cannot be called as an issue not raised or discussed, as contended by the learned counsel for the Revenue. Question as to whether the reasons for reopening the assessment would amount to change of opinion or not is to be considered and decided on the facts and circumstances of each case and therefore, the view expressed in one case based on the facts and circumstances of that particular case cannot be applied to another case to contend in either way, unless the facts and circumstances of both cases are one and the same. In other words, the question of change of opinion has to be considered and decided on case to case basis. Reopening of the assessment is bad in law as the same does not meet and satisfy the statutory requirement contemplated under Section 147 - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act after the expiry of four years.
2. Alleged failure to disclose fully and truly all material facts necessary for assessment.
3. Whether the reopening of the assessment is based on a mere change of opinion.

Detailed Analysis:

1. Validity of the notice issued under Section 148 after the expiry of four years:

The petitioner argued that the notice under Section 148 was issued after the expiry of four years from the end of the assessment year 2011-12, making it barred by limitation. The first proviso to Section 147 stipulates that no action shall be taken after the expiry of four years unless there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The court noted that the notice was indeed issued after the four-year period. Therefore, the revenue must prove that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment for the reopening to be valid.

2. Alleged failure to disclose fully and truly all material facts necessary for assessment:

The petitioner contended that all material facts were disclosed in the original return, and there was no failure to disclose fully and truly all material facts necessary for the assessment. The revenue argued that the assessee did not disclose certain details during the original assessment, specifically the expenses under "Asset Written Off" and "Factory Land Development Charges," which were later found to be in violation of Section 40A(3). The court examined the return filed by the petitioner and noted that the profit and loss account for the year ended 31.03.2011 clearly reflected the "Asset Written Off" and "Factory Land Development Charges." The auditor's report submitted with the return also indicated that it was not possible to verify whether payments exceeding ?20,000 were made otherwise than by account payee cheque or bank draft, as the necessary evidence was not in possession of the assessee. The court concluded that these details were already available on record at the time of the original assessment, and there was no failure on the part of the assessee to disclose material facts.

3. Whether the reopening of the assessment is based on a mere change of opinion:

The petitioner argued that the reopening was based on a mere change of opinion, which is not permissible under Section 147. The court referred to the decision in Kelvinator of India Ltd., which held that an assessment could not be reopened on a mere change of opinion. The court noted that the reasons for reopening the assessment were based on two issues: the amount debited under "Asset Written Off" and "Factory Land Development Charges." These amounts were already shown in the profit and loss account filed with the return. The court found that the Assessing Officer had accepted the return filed by the petitioner, including these two heads, and passed the order of assessment. The reopening was sought based on the same materials already available on record, indicating a change of opinion. The court concluded that the reopening was not permissible based on a mere change of opinion and was, therefore, invalid.

Conclusion:

The court held that the reopening of the assessment was invalid as it was based on a mere change of opinion and not on any tangible material that came to light subsequently. The reopening notice issued after the period of four years was barred by limitation. The writ petition was allowed, and the impugned orders were set aside.