2022 (4) TMI 1083 - HC - Income Tax

Reopening of assessment u/s 147 - Eligibility of reasons to believe - meaning of the expression change of opinion - HELD THAT - In the present case, at the time of making the assessment originally, the Assessing Officer had not formed any opinion regarding the reasons on which the notice under Section 148 of the Act has been issued. To say it more particularly, the A.O. had not formed any opinion regarding (1) receipt of payments by the petitioner under Sections 194 I and 194 J, which had not been shown in its P L account, (2) non-disclosure of the amount of reimbursement of expenses claimed by it, (3) non-submission of the details of expenses incurred by it for verification during the assessment proceedings and (4) non-production of any ledgers, bills and vouchers of expenses incurred on behalf of the Principal Companies etc. Therefore, it is not a case of change of opinion and challenge to the notice under Section 148 of the Act on the ground that it seeks to initiate reassessment on the ground of change of opinion, cannot be accepted. The approving authority the PCIT, has stated that he agrees with the comments of the A.O., which were annexed with the order, and has recorded his satisfaction that it was a fit case for issuance of the notice under Section 148 of the Act. The aforesaid order does not indicate non-application of mind by the PCIT to the proposal made by the A.O. and we are not able to accept the submission that the PCIT has granted approval without application of mind to the proposal put up by the A.O. In the instant case, the notice under Section 148 of the Act has been issued by the assessing officer after conducting an investigation and going through the income tax return and other related documents of the petitioner and after recording a reason to believe that the petitioner did not truly and fully disclose all the material facts, because of which income has escaped assessment. We are satisfied that there was prima facie material available on record before the assessing officer for issuing a notice under Section 148 of the Act. The notice dated 26-03-2021 issued under Section 148 of the Act as well as all the proceedings undertaken in consequence of the notice, including the order dated 18-02-2022 passed by the National Faceless Assessment Centre rejecting the petitioner s objections against the notice, does not suffer from any such illegality as to warrant interference by this Court in exercise of its Writ Jurisdiction - WP dismissed.

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Alleged change of opinion by the Assessing Officer (A.O.).
3. Compliance with CBDT Instruction No. 07 of 2017.
4. Full and true disclosure by the petitioner.

Issue-wise Detailed Analysis:

1. Validity of the Notice Issued Under Section 148:
The petitioner challenged the validity of the notice dated 26.03.2021 issued by the Income Tax Officer under Section 148 of the Income Tax Act, 1961, proposing to reassess the petitioner’s income for the assessment year 2013-14. The court examined whether there was prima facie material on the basis of which the Department could reopen the case. The court referred to the relevant provisions of Sections 147 and 148 of the Act, noting that the A.O. must have "reason to believe" that income chargeable to tax has escaped assessment. The court cited the Supreme Court's judgments in Raymond Woollen Mills Ltd. v. ITO and Phool Chand Bajrang Lal v. ITO, emphasizing that the sufficiency or correctness of the material is not to be considered at this stage, only whether there is some material on which the Department could reopen the case.

2. Alleged Change of Opinion by the A.O.:
The petitioner argued that the reassessment proceedings were initiated based on a change of opinion, which is not permissible in law. The court noted that the A.O. had recorded reasons to believe that the petitioner received payments under Sections 194 I and 194 J, which were not shown in its P&L account, and that the petitioner did not disclose the amount of reimbursement of expenses claimed or the details of expenses incurred. The court held that since the A.O. had not formed any opinion on these issues during the original assessment, it was not a case of change of opinion. The court cited the Supreme Court's judgment in CIT v. Techspan India (P) Ltd., explaining that reassessment is permissible if there is "tangible material" indicating income has escaped assessment.

3. Compliance with CBDT Instruction No. 07 of 2017:
The petitioner contended that the notice was issued in contravention of CBDT Instruction No. 07 of 2017, which prohibits remedial action if the audit objection is not accepted. The court noted that the A.O. had sent a report to the CIT (Audit) but did not have the authority to accept or reject the audit objection. The court found that the reassessment was not solely based on the audit objection but on multiple reasons, including the discrepancy in receipts shown by the petitioner in the P&L account and 26 AS. The court concluded that the reassessment was not in contravention of the CBDT Instruction.

4. Full and True Disclosure by the Petitioner:
The court examined whether the petitioner had made a full and true disclosure of all material facts necessary for the assessment. The A.O. recorded that the petitioner did not show receipts under Sections 194 I and 194 J, did not disclose the amount of reimbursement of expenses claimed, and did not produce any ledger, bills, or vouchers of expenses incurred. The court cited the Supreme Court's judgments in Phool Chand Bajrang Lal v. ITO and Srikrishna (P) Ltd. v. ITO, emphasizing that the obligation on the assessee is to make a full and true disclosure of all material facts. The court concluded that the petitioner had not made a full and true disclosure, thereby justifying the reassessment.

Conclusion:
The court dismissed the writ petition, holding that the notice issued under Section 148 of the Act and the proceedings initiated in consequence of the notice did not suffer from any illegality warranting interference. The court found that there was prima facie material available on record for the A.O. to issue the notice and that the reassessment was not based on a mere change of opinion but on tangible material indicating income had escaped assessment. The court also held that the reassessment was not in contravention of the CBDT Instruction No. 07 of 2017 and that the petitioner had not made a full and true disclosure of all material facts necessary for the assessment.

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