2021 (12) TMI 1139 - HC - Income Tax

Reopening of assessment u/s 147 - eligibility of reason to believe - change of opinion - HELD THAT - Petitioner is correct in its submissions that it is nothing but change of opinion. It is pertinent to note that there was scrutiny assessment under Section 143(3) of the Act. In the reasons recorded indicate the grounds on which re-assessment is sought to be initiated. Paragraph 3.1 starts with the words, During the year, in the submissions furnished by the assessee, it is found that the assessee company had shown 7 outlets but the company showed sales only from 2 outlets, i.e., one at Bandra and other at Colaba, debited expenses on account of 7 outlets. The new Assessing Officer has problem with the earlier Assessing Officer having allowed expenditure relating to all the 7 outlets when sales was shown only from 2 outlets. Paragraph 3.1 ends with the words, . therefore, the said expenditure cannot be allowable as business expenditure during the relevant AY 20120-13 being expenditure not related to the period under consideration . This is certainly change of opinion. Paragraph 3.2 also relates to payment of rent for 5 outlets and repairs and renovation for all the outlets and that paragraph ends as, .. The Assessing Officer has not examined these issues .. . Therefore, it is nothing but change of opinion based on which assessment cannot be re-opened. - Decided in favour of assessee.

Summary

Issues:
Impugning a notice under Section 148 of the Income Tax Act, 1961 for AY 2012-13 alleging escaped assessment, rejection of objections to re-assessment, validity of proposed re-assessment after the expiry of 4 years, change of opinion in re-assessment reasons, legality of re-opening assessment based on non-disclosure of material facts.

Analysis:
The Petitioner challenged a notice dated 30/03/2019 issued under Section 148 of the Income Tax Act, 1961 for AY 2012-13, alleging that the Petitioner's income chargeable to tax had escaped assessment under Section 147 of the Act. The Petitioner filed objections to the re-assessment reasons provided on 07/06/2019, which were subsequently rejected by an order dated 24/07/2019, also challenged in the Petition.

The Petitioner contended that the proposed re-assessment, made after the expiry of 4 years from the end of the assessment year, required the Respondents to demonstrate a failure on the Petitioner's part to fully disclose material facts during assessment. The Petitioner argued that the reasons provided did not indicate any undisclosed material facts.

The Court noted that no reply had been filed despite granted time extensions. The Respondents argued that there was no change of opinion and relied on Explanation (1) to Section 147, suggesting non-disclosure of material facts. However, the Court opined that the reasons presented indeed reflected a change of opinion, especially in scrutinizing the assessment under Section 143(3) of the Act.

The Court analyzed the reasons provided for re-assessment, highlighting discrepancies related to outlets, sales, expenses, and allowable business expenditure. It was observed that the new Assessing Officer's concerns regarding expenditure and issues not previously examined by the earlier Assessing Officer constituted a change of opinion, rendering the re-opening of assessment unjustified.

Consequently, the Court allowed the Petition, declaring the Impugned Notice under Section 148, the Order on objections, and the re-assessment proceedings for AY 2012-13 as without jurisdiction, illegal, arbitrary, and liable to be quashed. The Petition was disposed of in favor of the Petitioner.