2022 (6) TMI 810 - HC - Income Tax

Reopening of assessment u/s 147 - eligibility of reasons to believe - change of opinion - Proceedings initiated after expiry of four years from the end of the relevant assessment year - HELD THAT - The impugned notice under Section 148 and the proceedings under Section 147 of the Act is bad in law since it does not fulfil the criteria for reopening of reassessment after expiry of four years from the end of relevant assessment year that in addition to escapement of income additional duty cast upon the assessing officer is to establish that the escapement was due to omission or failure on the part of the assessee to disclose fully or truly necessary material facts necessary for the assessment and that some new material facts have come to his possession which was not made available by the assessee at the time of regular assessment. It is also admitted position that in this case regular assessment under Section 143(3) of the Act was made and it is not a case of summary assessment. It also appears on perusal of the recorded reasons that the successor of the assessing officer who intends to invoke the provisions of Section 147 of the Act on the ground and by taking a view that the disallowance which was made under Section 36(i)(iii) of the Act in course of regular assessment should have been more than the amount which has been disallowed in the original assessment made by his predecessor. In our considered view, this is a clear case of change of opinion. Furthermore from the recorded reasons it appears that nowhere assessing officer has been able to make out a case that there was any omission or failure on the part of the petitioner to disclose fully and truly the necessary material facts on the basis of which predecessor of the assessing officer has formed an opinion for disallowing lesser amount under Section 36(i)(iii) of the Income Tax Act in the assessment order under Section 143(3) of the Income Tax Act, 1961. Assessing officer in his recorded reasons also could not make out a case that the basis of reopening the assessment in question is some new material which came into his possession subsequently and which was not available or was undisclosed or suppressed by the assessee/petitioner in course of regular assessment. From the recorded reason it appears that one of the grounds for reopening of the assessment is that in regular assessment there was mistake of calculation in disallowance under the aforesaid provisions of the Act to which we are of the view that if at all there was any clerical/arithmetical mistake apparent from record then recourse was available to the assessing officer by way of rectification under Section 154 of the Income Tax Act, 1961 and that cannot be a ground of reopening of an assessment for correcting a mistake in calculation of an amount of disallowance causing alleged escapement of income. - Decided in favour of assessee.

Summary

Issues:
Challenging impugned notice under Section 148 of the Income Tax Act, 1961 and the order rejecting objection to the notice for assessment year 2010-11.

Analysis:

The petitioner contested the validity of the impugned notice under Section 148 and the proceedings under Section 147, arguing that they did not meet the criteria for reopening assessment after four years from the relevant assessment year. The petitioner emphasized the necessity for the assessing officer to establish that any income escapement was due to the assessee's failure to disclose material facts. The Court noted that the reassessment was initiated after the four-year limit and pointed out that the reasons for reopening did not demonstrate any failure on the part of the petitioner to disclose relevant facts during the regular assessment under Section 143(3). The Court found that the assessing officer's basis for reopening the assessment was a mere mistake in calculation, which could have been rectified under Section 154 of the Income Tax Act, rather than a valid ground for reassessment.

The Court highlighted that the case presented a clear instance of a change in opinion by the assessing officer, as the same materials considered during the regular assessment were being revisited without any new substantial facts coming to light. Citing legal precedents, the Court emphasized that reassessment based on a change of opinion without fresh material was impermissible, especially after the expiry of the four-year period from the relevant assessment year. The Court referred to judgments that underscored the importance of establishing a genuine reason for reassessment and not merely relying on a different interpretation of existing facts.

The respondent Income Tax Authority argued that procedural irregularities were absent, and income escapement resulted from incorrect claims made by the assessee. However, the Court disagreed, stating that the assessing officer failed to demonstrate any omission or failure on the petitioner's part in disclosing material facts during the initial assessment. Consequently, the Court concluded that the impugned notice under Section 148 and the proceedings under Section 147 were unsustainable in law and ordered their quashing. The Court emphasized that the reassessment was a case of change of opinion without valid grounds, leading to the disposal of the writ petition in favor of the petitioner.

Ultimately, the Court quashed the impugned notice and subsequent proceedings related to the assessment year 2010-11, highlighting the importance of establishing a genuine reason for reassessment and prohibiting changes in opinion without fresh material after the expiry of the statutory period. The Court disposed of the writ petition in favor of the petitioner, with no costs imposed on either party.