2021 (3) TMI 889 - HC - Income Tax

Reopening of assessment u/s 147 - claim of deduction under Section 80IA in respect of various power generation units - assessee argued the proceedings initiated is mere a change of opinion on the part of the Assessing Office as the issue already decided in the previous assessment order and no case can be reopened on account of the reasons recorded by the Assessing Officer which are subject matter of any appeal, reference or revision - HELD THAT - A bare perusal of the reasons recorded for reopening reveals that the Assessing Officer upon perusal of the records found that the assessee Company has concealed its income. AO while recording the reasons, has verified the profit and loss account and case records and he has noticed deduction under Section 80IA towards profit of business of the company from generation of power and during the A.Y. 2011-12, the assessee company claimed deduction under Section 80IA in respect of profits derived from a generation of power from its 5 units and after considering the unit wise details, provided by the company along with IOCCD, he further noticed that the assessee company had claimed deduction on profit on sale of electricity and steam in respect of some of the units as referred in the reasons. While framing the assessment order under Section 143(3), had raised the issue of deduction and in response to issue No. (37), the assessee company had furnished all the details / information along with the complete working of profit and gains eligible for the claim and after considering all the primary materials, disclosed by the assessee company, the erstwhile Assessing Officer assigned cogent reasons and discussed the issue at length and disallowed the claim of deduction to the extent of ₹ 3,65,25,860/- out of total claim of ₹ 23,37,65,504/- stating that deduction is available only in relation to profits and gain derived from the generation of powers. Now on the same set of facts and materials, the Assessing Officer formed the belief about the escapement of assessment which is nothing but mere a change of opinion on the facts which were already before the Assessing Officer while making the first assessment on which conscious application of mind is reflected from the proceedings. Therefore, on the issue of steam power, the relevant material was available on record, however, the then Assessing Officer failed to apply his mind to that material in making the assessment order, now in the present proceedings, again the Assessing Officer cannot take recourse to the provisions of Section 147 for the failure of the Assessing Officer to apply his mind to the material which according to him is relevant. As examined all the material facts as well as reasons recorded for reopening of the assessment for the year under consideration. We are of the opinion that the impugned action on the part of the respondent to issue Notice is without authority of law mainly on the ground of change of opinion and the claim under Section 80IA in respect of time usage charge component is still pending for disposal before the Second Appellate Authority. Therefore, we are of the firm view that the impugned notice as well as the proceeding are required to be quashed and set aside. - Decided in favour of assessee.

Issues Involved:
1. Validity of the reopening of the assessment under Section 148 of the Income Tax Act, 1961.
2. Whether the reopening was based on a mere change of opinion.
3. Compliance with the conditions under Section 147 for reopening beyond four years.
4. Examination of the subject matter of appeal, reference, or revision in the context of reopening.

Issue-wise Detailed Analysis:

1. Validity of the reopening of the assessment under Section 148 of the Income Tax Act, 1961:
The writ applicant challenged the Notice dated 30.03.2018 issued under Section 148 of the Income Tax Act, 1961, for reopening the assessment for the A.Y. 2011-12. The main contention was that the conditions precedent for invoking Section 147 were not satisfied. The assessee argued that they had fully and truly disclosed all necessary material facts during the original assessment, and the reopening was unjustified as it was based on the same set of facts already scrutinized. The court noted that the original assessment had undergone detailed scrutiny, and the reopening was not justified as it was based on the same material facts, indicating a mere change of opinion.

2. Whether the reopening was based on a mere change of opinion:
The court emphasized that mere change of opinion cannot be a basis for reopening a completed assessment. The original assessment involved detailed scrutiny under Section 143(3), where the Assessing Officer had considered all relevant details and disallowed part of the deduction claimed under Section 80IA. The court referred to the case of CIT Vs. Kelvinator India Ltd, which established that the concept of "change of opinion" must be treated as an in-built test to check the abuse of power by the Assessing Officer. Since the reopening was based on the same material facts, it was deemed a mere change of opinion and thus invalid.

3. Compliance with the conditions under Section 147 for reopening beyond four years:
The court reiterated that for reopening beyond four years, two conditions must be satisfied: (a) there must be a reason to believe that income chargeable to tax has escaped assessment, and (b) such escapement occurred due to the failure of the assessee to disclose fully and truly all material facts necessary for assessment. The court found that the assessee had disclosed all primary facts during the original assessment, and the reopening was not based on any new tangible material. Therefore, the reopening did not comply with the conditions under Section 147.

4. Examination of the subject matter of appeal, reference, or revision in the context of reopening:
The court noted that the issue of disallowance under Section 80IA was already decided by the CIT (Appeals) and was pending before the Second Appellate Authority. According to the third proviso to Section 147, the Assessing Officer cannot reopen an assessment on matters that are the subject of any appeal, reference, or revision. The court referred to the case of Prashant Project Ltd. Vs. ACIT, which held that reopening cannot be based on issues already canvassed in appeal and determined in appellate proceedings. Thus, the reopening was invalid as it involved matters pending in appeal.

Conclusion:
The court concluded that the reopening of the assessment was invalid as it was based on a mere change of opinion, did not comply with the conditions under Section 147, and involved matters pending in appeal. Consequently, the impugned notice and proceedings were quashed and set aside.

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