2022 (8) TMI 269 - HC - Income Tax

Reopening of assessment u/s 147 - correctness of exercise of power by the assessing officer under Section 147/148 of the Act and reopening the assessment which was completed - Tribunal justification in law in quashing the order passed u/s 147 - HELD THAT - Three issues which were raised by the assessing officer and one such issue pertains to the basis of realizable market value for claim of deduction under Section 80IA of the Act. In response to the said notices the assessee had submitted a reply on 13th March, 2003 and on 21st March, 2003. In the reply dated 21st March, 2003 the assessee has extracted the question posed to the assessee by the AO regarding the claim of deduction under Section 80IA - We find that there were six questions which were asked to the assessee and the assessee has submitted a detailed reply. If that be the position whether the assessment could have been reopened. In our considered view, the Tribunal rightly granted relief to the assessee after noting the factual position, by pointing out that relevant material was placed on record by the assessee when they made the claim for deduction u/s 80IA of the Act and query was raised and the case was discussed and the assessee had placed material before the assessing officer and it is only thereafter the realisable market value of the power as adopted by the assessee was initially accepted by the assessing officer. Therefore, the Tribunal, in our considered view, rightly stated that the reassessment proceedings were clearly a case of change of opinion. As in INDIAN AND EASTERN NEWSPAPER SOCIETY 1979 (8) TMI 1 - SUPREME COURT and the legal position was explained by stating that the proposition in Kalyanji Mavji Co. to the effect that a case where income had escaped assessment due to oversight, inadvertence or mistake of the ITO must fall within S.34(1)(b) of the 1922 Act, is stated too widely and travels further than the statute warrants in so far as it can be said to lay down that if, on reappraising the material considered by him during the original assessment, the ITO discovers that he has committed an error in consequence of which income has escaped assessment, it is open to him to reopen the assessment. An error discovered on a reconsideration of the same material does not give him that power. Decided against revenue,

Summary

Issues:
1. Validity of reopening assessment under Section 147 of the Income Tax Act, 1961.
2. Whether there was a change of opinion by the Assessing Officer.

Issue 1: Validity of reopening assessment under Section 147:
The High Court considered the appeal by the revenue challenging the order passed by the Income Tax Appellate Tribunal. The Tribunal had quashed the order passed under Section 147 of the Income Tax Act, 1961, for the assessment year 2000-2001. The Court analyzed the basis for reopening the assessment, noting that the assessing officer had already received records from the assessee during the original scrutiny assessment. The assessee had responded to notices and provided detailed replies regarding the claim of deduction under Section 80IA of the Act. The Tribunal found that the reassessment proceedings were a case of change of opinion, as the assessing officer had initially accepted the realizable market value of power as adopted by the assessee after considering the material placed before him. The Court cited relevant legal precedents emphasizing that reassessment should be based on specific pre-conditions and not on a mere change of opinion.

Issue 2: Change of opinion by the Assessing Officer:
The Court referred to the decision of the Supreme Court in a similar matter involving the same issue in the assessee's case for previous assessment years. The Tribunal had granted relief to the assessee in those cases, and the revenue's appeals were dismissed. The Court highlighted the importance of not allowing a fresh decision based on the same material already considered during the original assessment, as it would amount to a review of the original assessment. Relying on legal interpretations, the Court concluded that the Tribunal's order was correct and did not contain any errors. Consequently, the appeal by the revenue was dismissed, and the substantial questions of law were answered against the revenue. The Court also dismissed the stay application in connection with the appeal.

In summary, the High Court of Calcutta analyzed the validity of reopening the assessment under Section 147 of the Income Tax Act, 1961, and the issue of a change of opinion by the Assessing Officer. The Court found that the reassessment proceedings were indeed a case of change of opinion, and the Tribunal's decision to grant relief to the assessee was justified. Legal precedents were cited to support the conclusion that reassessment should not be based on a mere change of opinion but on specific pre-conditions. The Court dismissed the revenue's appeal and upheld the Tribunal's order, emphasizing that a fresh decision based on the same material would amount to a review of the original assessment.