2022 (2) TMI 708 - HC - Income Tax

Reopening of assessment u/s 147 - Change of opinion - TP adjustment addition - HELD THAT - Petitioner had made available all details and documents relating to the issue raised in the reasons for re-opening. As per the Jurisdictional AO(JAO) petitioner had entered into a transaction with a related party being Nelco Limited. Tax Auditor and Transfer Pricing Auditor reported the transaction with Nelco Limited. Perusal of creditors details submitted during the course of assessment proceeding showed that the transaction entered into with Nelco Limited during the year were and therefore there is escapement of income. It is therefore clear that relying on the same set of documents and facts already considered before the original assessment proceeding re-opening is proposed to take a view different from the view already taken earlier. Courts have repeatedly held that change of mind cannot be the basis for re-opening. Courts have repeatedly held that once a query is raised and that has been explained by the assessee, even if there is no discussion on that aspect in the assessment order still the Assessing Officer is deemed to have consider these points and applied his mind. All these only indicate one thing that re-opening is proposed on the basis of change of opinion. - Decided in favour of assessee.

Summary

Issues:
1. Validity of notice issued under Section 148 of the Income Tax Act for A.Y. 2013-14.
2. Rejection of objections filed by the petitioner against the re-opening of assessment.
3. Alleged failure of the petitioner to disclose all material facts.
4. Compliance with the directions given in Asian Paints Ltd. case regarding the timeline for assessment proceedings.
5. Basis for re-opening assessment being a change of opinion by the Assessing Officer.

Analysis:
1. The petitioner's case was selected for scrutiny, and an assessment order was passed under Section 143(3) of the Income Tax Act. Subsequently, a notice was issued under Section 148 for A.Y. 2013-14, alleging escapement of income. The petitioner contended that the proviso to Section 147 should apply due to the lapse of more than four years since the original assessment. The court emphasized the requirement for the respondent to demonstrate a failure on the petitioner's part to fully disclose all material facts for the assessment.

2. The petitioner objected to the re-opening of assessment, but the objections were rejected within a short period, contrary to the directions provided in the Asian Paints Ltd. case. The court held that the assessment order passed in such haste was in breach of the court's directions, leading to its setting aside solely on this ground. The petitioner challenged both the notice under Section 148 and the order rejecting objections.

3. Upon examining the reasons for re-opening, the court found no indication of the petitioner's failure to disclose material facts. It was observed that the basis for re-opening was a change of opinion by the Assessing Officer, which cannot serve as a valid reason according to established legal principles. The petitioner had provided all relevant details and documents related to the issue in question during the original assessment proceedings.

4. The respondent argued that the issue under consideration was not examined during the regular assessment. However, the court noted that the petitioner had responded to queries raised by the Assessing Officer with detailed explanations, indicating that the Assessing Officer had considered the points raised, even if not explicitly mentioned in the assessment order. The court reiterated that a change of opinion cannot justify the re-opening of an assessment.

5. Ultimately, the court quashed and set aside the notice dated 20th March, 2020, and consequently, the order rejecting objections dated 24th September, 2021. The decision was based on the finding that the re-opening of assessment was solely on the basis of a change of opinion, which is not a valid ground for such action.

6. The petition was disposed of in favor of the petitioner, emphasizing the importance of adhering to legal requirements and established principles in assessment proceedings to ensure fairness and transparency in tax matters.