2021 (11) TMI 59 - HC - Income Tax

Reopening of assessment u/s 147 - Change of opinion - HELD THAT - As fact was not discussed by the AO while finalizing the assessment and the same has not been brought to the notice of the AO by the assessee with a view to conceal the above facts from the AO. The second part of this observation is incorrect inasmuch as in the Affidavit-in-Reply and as it appears from the reasons for reopening of assessment itself, the details have been brought to the notice of the AO when the original Assessment Order was passed. As regards non-discussion by the Assessing Officer while finalizing the assessment, it is settled law that it is not necessary that an Assessment Order should contain reference and / or discussion to disclose its satisfaction in respect of every item. If the AO has materials before him but has not chosen to deal with that in his Assessment Order, he is deemed to have accepted the explanation or returns of the assessee. We find support for this view in Aroni Commercial Ltd . 2014 (2) TMI 659 - BOMBAY HIGH COURT It is settled law that an Assessing Officer cannot reopen an assessment even within a period of 4 years merely on the basis of a change of opinion. In this case, the assessment is sought to be reopened after a period of 4 years and hence the proviso to Section 147 of the Act is applicable which stipulates a requirement that there must be a failure on the part of the assessee to disclose fully and truly all material facts necessary. It is also settled law that the AO has no power to review an assessment which has been concluded - In the reasons for reopening of assessment, there is not even a single ground for reopening mentioned. As noted earlier, the entire basis for reopening is based on the balance-sheet which has been filed by Respondents.

Summary

Issues:
Impugned notice under Section 148 of the Income Tax Act, 1961 for AY 2012-13 based on alleged escapement of income due to failure to disclose material facts fully and truly. Reopening of assessment based on change of opinion by Assessing Officer regarding deduction claimed under Section 36(1)(vii).

Analysis:

1. The notice under Section 148 was issued to the Petitioner for AY 2012-13, alleging that income chargeable to tax had escaped assessment due to failure to disclose all material facts. The reasons for reopening highlighted that the Petitioner claimed a deduction under Section 36(1)(vii) based on the balance-sheet, which the Assessing Officer deemed incorrect. The notice was challenged on the grounds that it was a mere change of opinion by the Assessing Officer.

2. The Petitioner argued that all relevant details, including bad debts written off, were provided during the original assessment proceedings, indicating that the Assessing Officer had the necessary information before finalizing the assessment. The Petitioner contended that the Assessing Officer's observation of non-disclosure was incorrect, as the details were indeed brought to his notice during the initial assessment.

3. The legal principle that an Assessing Officer cannot reopen an assessment solely on the basis of a change of opinion, especially after a period of 4 years, was emphasized. The court noted that the basis for reopening the assessment was solely the balance-sheet filed by the Respondents, which did not provide sufficient grounds for reopening. It was concluded that the Assessing Officer had no valid reason for reopening the assessment, leading to the decision to set aside the impugned notice and subsequent orders.

4. The judgment highlighted the importance of full and true disclosure of material facts by the assessee and the limitations on the Assessing Officer's power to review concluded assessments. The court's decision to set aside the notice and orders was based on the lack of substantial grounds for reopening the assessment beyond a mere change of opinion. The legal principles governing assessment procedures and the requirement for valid reasons to reopen assessments were central to the court's decision in this case.