2021 (4) TMI 655 - HC - Income Tax

Reopening of assessment u/s 147 - eligibility to claim deduction under Section 80IA - jurisdictional requirements for invocation of Section 147/148 - HELD THAT - In the instant case, on a reading of the contents of the order, we find that the reason set out does not have any nexus to the fact that there had been a failure on the part of the respondent/assessee in fully disclosing all material facts or that there was any basis for interfering on account of the said reason there had been any escapement of income. In fact, the primary jurisdictional requirement for reopening any assessment beyond a period of four years must be fulfilled strictly, otherwise it would be an arbitrary exercise of power. In the instant case, on perusing the reasons recorded dated 15.3.2016 we do not find anything to the effect that the assessee had not disclosed fully and truly all material facts or that the assessee had not disclosed the fact that he was a developer. In fact the assessment for the assessment year 2010-11 was made on the basis that the respondent/assessee was a developer. If that was so, the impugned proceeding initiated on the premise that the assessee was a works contractor and not the developer is only a change of opinion and therefore does not fulfill the essential requirements of Sections 147/148 of the Act. As speaking through the Hon'ble Chief Justice, opined that the concept of 'change of opinion' must be treated as an inbuilt limitation on the power of the Assessing Officer; that 'mere change of opinion' on consideration of the very same material does not give any ground to invoke Section 147 of the Act. In order to reopen the concluded assessment, there must be tangible material to come to the conclusion that there is escapement of income from assessment. These are the tests, which have to be satisfied before issuance of notice under Section 147/148 of the Act. Having regard to the aforesaid observations and considering the same, in the light of the impugned notice dated 15.3.2016, we find that the reasons recorded do not also indicate that there was any tangible material which was the basis for issuance of the impugned notice. We hold that the learned Single Judge was justified in coming to the conclusion that the jurisdictional requirements for invocation of Section 147/148 of the Act in the instant case were not satisfied and therefore, the impugned notice was only a case of 'change of opinion' and did not come within the scope and ambit of 'reason to believe'. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the reassessment notice issued under Sections 147/148 of the Income Tax Act, 1961.
2. Whether the reassessment notice was based on a "change of opinion."
3. Compliance with the jurisdictional requirements for invoking Sections 147/148 of the Act.

Detailed Analysis:

1. Validity of the Reassessment Notice Issued Under Sections 147/148 of the Income Tax Act, 1961:
The Revenue appealed against the order quashing the reassessment notice dated 15.3.2016 for the Assessment Year 2010-11. The original assessment was completed on 28.3.2013, allowing partial deduction under Section 80-IA(4) of the Act. The reassessment notice was issued based on the scrutiny of the subsequent Assessment Year 2013-14, questioning whether the assessee was entitled to the deduction under Section 80IA(4) of the Act.

2. Whether the Reassessment Notice Was Based on a "Change of Opinion":
The respondent-assessee contended that there was no failure in disclosing all relevant facts and that the original assessment order was proper. The learned Single Judge quashed the reassessment notice, holding it was issued due to a "change of opinion." The Supreme Court's judgment in Commissioner of Income Tax Vs. Kelvinator of India Ltd. and the Mumbai High Court's judgment in Sitara Diamond Pvt. Ltd. were relied upon, emphasizing that reassessment cannot be based on a mere change of opinion without tangible material indicating income escapement.

3. Compliance with the Jurisdictional Requirements for Invoking Sections 147/148 of the Act:
The appellant-Revenue argued that the reassessment notice was justified and not merely a change of opinion. However, the court observed that the original assessment treated the assessee as a developer, and the reassessment notice, issued later, claimed the assessee was a works contractor. This was deemed a change of opinion, not fulfilling the conditions under Sections 147/148. The court cited the Full Bench decision in Dell India (P.) Ltd. Vs. Joint Commissioner of Income Tax, which clarified that reassessment requires tangible material indicating income escapement, not just a change of opinion.

Conclusion:
The court held that the reassessment notice dated 15.3.2016 was based on a change of opinion and did not meet the jurisdictional requirements under Sections 147/148 of the Act. The appeal was dismissed, affirming the quashing of the reassessment notice. The court clarified that the decision did not address the merits of the assessee's claim for deduction under Section 80IA of the Act.