2021 (8) TMI 1189 - HC - Income Tax

Reopening of assessment u/s 147 - objections in reassessment proceedings - whether violation of procedures since the reopening of the assessment proved ? - reasons for reopening that assessee has not fully and truly disclosed the material fact and that they had not commenced its business during the year and mere production of the account books or other evidence before the AO will not necessarily amount to disclosure -whether the notice sent by the 1st appellant for reopening of the assessment in respect of returns submitted by the assessee for the assessment year 2009-10, is right or wrong? - HELD THAT - The appellants issued notice u/s.148 of the Act and on the request by the respondent herein/assesee seeking reason for reopening, reasons recorded was provided to assessee. Again the assessee raised objections and after considering the objections, 2nd appellant passed the order dated 25.10.2016 disposing the objections. So the answer is, each case shall be examined on its own merits keeping in view the scope of the judicial review while entertaining such matters. When a notice under Section 148 of the Act has been issued to the assessee for reopening the assessment, it shows it involved complex facts and circumstances and the same are to be adjudicated by producing documents and by adducing evidence by the assessee. Power exercised by the assessing officer to reopen the assessment - In this case, the appellants clearly stated that there is escapement of assessment and also stated the reason by its letter dated 04.05.2016, pointing out that the assessee company has not commenced its business during the year, therefore, the expense claimed needs to be capitalised. During the year, the assessee company has received other income and the same has to be treated as income from other sources . The material fact has not been disclosed fully and truly during the course of assessment proceedings. Therefore, there are definite reasons to believe that income has escaped assessment. Maintainability of writ - alternative statutory remedy - When there is hierarchy of appeals provided under the statute, the assessee must exhaust the statutory remedies. When there is an alternative statutory remedy, writ jurisdiction of this court under Article 226 of the Constitution of India ought not to be invoked. There is no bar to entertain the writ petition when alternative remedy is available if it is the case that the order passed by the concerned authority is prejudicially affecting their rights or interest. In the present case on hand, the appellants clearly stated the reason for reopening that particular fact has not been disclosed fully and truly in the assessment proceedings and so whether the assessee had disclosed it or not, can be decided by the authorities concerned. The respondent has got every right to make its submission during the enquiry under the reassessment proceedings and can furnish the required documents in support of its stand and if the statutory authority, not considered all the grounds, the assessee has right of appeal under the statutory provisions. Therefore, these questions cannot be decided in the writ proceedings - correctness of the reasons set out by the Joint Commissioner of Income Tax, and the rejection of objections raised by the respondent by order by the 2nd appellant, can be decided during the re-assessment proceedings and not in the writ.

Issues Involved:
1. Validity of the reopening of assessment under Section 147 of the Income Tax Act, 1961.
2. Whether the reopening was based on a mere change of opinion.
3. The adequacy of the reasons provided for reopening the assessment.
4. The maintainability of the writ petition challenging the reopening.

Detailed Analysis:

1. Validity of the Reopening of Assessment under Section 147:
The respondent filed a writ petition challenging the notice issued by the 1st appellant under Section 148 of the Income Tax Act, 1961, for the assessment year 2009-10, claiming that the income had escaped assessment. The reopening was based on the assertion that the respondent had not fully disclosed material facts, particularly regarding the commencement of business and the treatment of certain expenses which should have been capitalized. The learned Single Judge held that the reopening was invalid, as it was based on materials already available during the original assessment, constituting a change of opinion.

2. Whether the Reopening was Based on a Mere Change of Opinion:
The Single Judge observed that the Assessing Officer had all the necessary materials during the original assessment and had formed an opinion based on those materials. The reopening was thus seen as an attempt to reappraise the same materials, which is impermissible. The learned Single Judge referenced the Supreme Court's decision in Kelvinator of India Limited, emphasizing that reassessment must be based on "tangible material" and not a mere change of opinion.

3. The Adequacy of the Reasons Provided for Reopening the Assessment:
The reasons for reopening included the assertion that the respondent had not commenced its business during the relevant year and had not fully disclosed this fact, leading to the improper treatment of expenses and other income. The Single Judge found these reasons insufficient, as they were based on information already available during the original assessment. The Judge pointed out that the Assessing Officer did not have any new tangible material to justify the reopening, making the reassessment invalid.

4. The Maintainability of the Writ Petition Challenging the Reopening:
The appellants argued that the writ petition was not maintainable as the respondent had not exhausted the statutory remedies available under the Income Tax Act. However, the Single Judge held that the writ petition was maintainable, as the reopening was based on a change of opinion, which is a jurisdictional error.

Conclusion:
The High Court set aside the order of the learned Single Judge, holding that the reopening of the assessment was valid. The court emphasized that the reasons provided for reopening were adequate and that the Assessing Officer had the jurisdiction to reassess the income. The court also noted that the respondent could raise all its objections during the reassessment proceedings and, if aggrieved by the final order, could exercise the statutory appeal remedy. The appeal by the Revenue was allowed, and the order of the learned Single Judge was set aside.

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