2022 (12) TMI 1286 - HC - Income Tax

Reopening of assessment u/s 147 - new tangible material available on record - reasons to believe - reopening based upon the audit objection - necessity of independent application of mind - HELD THAT - In the present case, the entire material was available with the Assessing Officer during the original assessment and therefore, there was no failure on part of the assessee to disclose truly and fully all material facts necessary for assessment and based upon such material supplied by the petitioner, the Assessing Officer passed the original assessment order. It appears that the notice for reopening is based upon the audit objection and there is nothing on record to suggest that such reopening is made on account of new tangible material available on record. It is therefore, apparent that there is change of opinion by the AO to reopen the assessment for the Assessment Year 2011- 2012, more particularly, when the issue raised in the reopening assessment is already considered during the original assessment proceedings. AO cannot have any jurisdiction to issue the notice u/s 148 for reopening the assessment for the year under consideration more particularly, when the assessment is sought to be reopened beyond a period of four years as held by the Supreme Court in case of Commissioner of Income tax v. Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT AO issued notice under section 148 of the Act only to make a roving inquiry into the facts which were already considered by the Assessing Officer at the time of framing the original assessment under section 143(3) of the Act. It appears that the Assessing Officer now wants to re-verify the facts which is not permissible to be an acceptable ground for exercising powers to reopen the assessment. The impugned notice issued u/s 148 by the respondent exercising the powers to reopen the assessment for the Assessment Year 2011-2012 is illegal and liable to be set aside. Appeal of assessee allowed.

Summary

Issues Involved:
1. Validity of notice under section 148 of the Income Tax Act, 1961 for reopening assessment.
2. Alleged failure to disclose fully and truly all material facts necessary for assessment.
3. Change of opinion by the Assessing Officer.
4. Jurisdiction of the Assessing Officer to reopen assessment beyond four years.

Issue-wise Detailed Analysis:

1. Validity of Notice under Section 148:
The petitioner challenged the notice dated 13.03.2018 issued under section 148 of the Income Tax Act, 1961 for reopening the assessment for the Assessment Year 2011-2012. The petitioner argued that the reasons for reopening were already discussed during the original assessment proceedings under section 143(3) and that the issuance of the notice was a mere change of opinion by the Assessing Officer, which is not permissible under the Act.

2. Alleged Failure to Disclose Fully and Truly All Material Facts:
The petitioner contended that all relevant details, including those related to the Guarantee Commission, excess interest payment, disallowance under section 14A, and income reconciliation as per 26AS, were provided during the original assessment proceedings. The Assessing Officer had considered these details and passed the assessment order without making any additions. Therefore, there was no failure on the part of the petitioner to disclose fully and truly all material facts necessary for assessment.

3. Change of Opinion by the Assessing Officer:
The court observed that the grounds for reopening the assessment, such as payment of Guarantee Commission, excess interest over 12%, disallowance under section 14A, and income reconciliation, were already considered during the original assessment proceedings. The court held that reopening the assessment on the same grounds amounts to a change of opinion, which is not permissible. The concept of "change of opinion" was emphasized as an in-built test to check the abuse of power by the Assessing Officer, as laid down by the Supreme Court in the case of CIT v. Kelvinator of India Ltd.

4. Jurisdiction of the Assessing Officer to Reopen Assessment Beyond Four Years:
The court noted that to confer jurisdiction to the Assessing Officer to reopen the assessment beyond four years, two conditions must be satisfied: the Assessing Officer must have reason to believe that income has escaped assessment, and this must be due to the failure of the assessee to disclose fully and truly all material facts necessary for assessment. In this case, the court found that all material facts were available with the Assessing Officer during the original assessment, and there was no failure on the part of the petitioner. Therefore, the reopening of the assessment was based on a mere change of opinion and was not justified.

Conclusion:
The court concluded that the impugned notice dated 13.03.2018 issued under section 148 of the Act for reopening the assessment for the Assessment Year 2011-2012 was illegal and liable to be set aside. Consequently, the order dated 3.10.2018 disposing of the objections against the notice was also set aside. The petition was allowed, and the rule was made absolute to the aforesaid extent, with no order as to costs.