2022 (1) TMI 692 - HC - Income Tax

Reopening of assessment u/s 147 - eligibility of reasons to believe - valuation of shares of petitioner which was issued to its parent company Zoetis Pharmaceutical Research P. Ltd. and expenses as cost of samples under the head Advertisement and Business Promotion - HELD THAT - Valuation of shares as per discounted cash flow method and addition under Section 56(2)(viib) of the Act, in our view it is nothing but change of opinion Petitioner has annexed to the petition a letter dated 23rd December, 2016 and another letter dated 26th December, 2016 where petitioner has given details of the shares issued by the company, provided valuation report issued by Deloitte Haskins Sells and also explained why the provisions of Section 56(2)(viib) of the Act was not applicable. After considering these points the assessment order dated 28th December, 2016 has been passed. Of course, this point has not been discussed in the assessment order but it is settled law that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. It is also settled law that change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment - See ARONI COMMERCIALS LIMITED 2014 (2) TMI 659 - BOMBAY HIGH COURT Cost of samples - We say this has also been discussed during the assessment proceeding as could be seen from letter dated 22nd December, 2016 and 23rd December, 2016 submitted by petitioner to Assistant Commissioner of Income Tax 11(3)(3). In the letter dated 22nd December, 2016 petitioner has also discussed as to why the circular of CBDT dated 1st August, 2012 relied upon by the JAO is not applicable. Therefore, it is quite obvious that the Assessing Officer has decided to reopen relying on the same set of facts. When primary facts necessary for assessment are fully and truly disclosed, the Assessing Officer is not entitled on change of opinion to commence proceedings for reassessment. On consideration of material on record, one view is conclusively taken by the Assessing Officer, it would not open to reopen the assessment passed on the very same material with a view to take another view. Moreover, either in the reasons for re-opening or in the order rejecting the objections, the Assessing Officer has not disclosed as to what were the material facts that were not disclosed truly and fully by petitioner during the assessment. - Decided in favour of assessee.

Summary

Issues:
1. Impugning notice for reopening assessment for A.Y. 2013-14.
2. Valuation of shares and expenses claimed as cost of samples.

Analysis:
1. The petitioner challenged the notice dated 13th March, 2020, seeking to reopen the assessment for A.Y. 2013-14. The notice was issued under Section 148 of the Act, requiring the respondent to show that the petitioner failed to disclose material facts fully and truly for assessment. The court found no evidence of such failure and noted that the re-opening was based on the valuation of shares and claimed expenses.

2. The re-opening was triggered by two points: valuation of shares issued to the parent company and claimed expenses for samples under Advertisement and Business Promotion. Regarding the valuation of shares, the Assessing Officer (JAO) contended that the valuation method used by the petitioner was incorrect, resulting in an alleged escape of assessment under Section 56(2)(viib) of the Act. However, the court deemed this as a mere change of opinion, as the valuation was discussed during assessment proceedings and adequately explained by the petitioner.

3. On the second point of claimed expenses, the JAO argued that the expenses were in violation of circulars prohibiting such expenditures. The court observed that the petitioner had addressed this issue during assessment proceedings, providing explanations that were not considered by the Assessing Officer. The court emphasized that when primary facts are fully disclosed, reassessment based on a change of opinion is not justified.

4. Referring to legal precedents, the court reiterated that if one view is conclusively taken based on the material available, the Assessing Officer cannot reopen the assessment to take another view. Moreover, the court highlighted the lack of disclosure by the Assessing Officer regarding the material facts that were allegedly not fully disclosed by the petitioner during the assessment process.

5. Consequently, the court quashed the notice for reopening assessment, the undated order, rejection order, and reference order. The judgment emphasized that when primary facts are fully disclosed, reassessment based on a change of opinion is unwarranted. The petition was disposed of with no order as to costs.