2023 (2) TMI 813 - HC - Income Tax

Reopening of assessment u/s 147 - Deduction u/s 80P - reopening beyond the period of four years - Scope of change of opinion - HELD THAT - AO did not have any tangible material with him based upon which he could form his reason to believe that income had escaped assessment. The entire basis for reopening is nothing but a change of opinion on the part of the A.O. that the benefit of deduction under Section 80P ought not to have been allowed at all. As between the date of the assessment order under Section 143(3) of the Act and the date when the reasons were recorded there has been neither any change in law nor any new material has been shown to have come to the knowledge of the A.O. This therefore is nothing but a clear case of change of opinion. As reasons recorded do not at all alleged any such failure on the part of the assessee which was a condition prerequisite for invoking jurisdiction for reopening in addition to the condition of reasons to believe as this was a case of reopening beyond the period of four years. For the reasons mentioned hereinabove we have no hesitation in holding that in the facts and circumstances of the present case the reopening of the assessment is unsustainable. Decided in favour of assessee.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, rejection of objections to reopening, assessment order under Section 147 r/w Section 144B for the assessment year 2014-15.

Analysis:
The petitioner, a co-operative credit society, filed a return for the assessment year 2014-15 claiming deduction under Section 80P of the Act. The assessment order disallowed a portion of the deduction related to holiday home charges. Subsequently, a notice under Section 148 was issued, seeking to reopen the assessment due to an alleged under-assessment of income. The reasons for reopening highlighted discrepancies in the deduction claimed under Section 80P(2)(d) of the Act. Objections to the reopening were rejected, leading to an assessment order under Section 147 and 144B of the Act.

The petitioner argued that the reassessment was based on a change of opinion by the Assessing Officer (A.O.) and lacked tangible material. The A.O. was criticized for not establishing any failure on the part of the petitioner to disclose material facts during the original assessment. It was contended that the reassessment proceedings were legally flawed. Conversely, the Revenue's counsel supported the A.O.'s actions, emphasizing the alleged erroneous grant of the deduction under Section 80P to the petitioner.

The High Court analyzed the reasons recorded for reopening and found them lacking in substantive evidence. It noted that the A.O.'s satisfaction was solely based on a review of existing records, indicating a change of opinion rather than new findings. The Court emphasized the importance of clear, unambiguous reasons for reopening assessments, as per legal precedents. Referring to Hindustan Lever Ltd. V/s. R. B. Wadkar, the Court highlighted the necessity of a vital link between reasons and evidence to prevent arbitrary reassessments. Ultimately, the Court held the reassessment unsustainable due to the absence of valid grounds for reopening.

In conclusion, the High Court allowed the petition, setting aside the notice under Section 148 and the assessment order dated 30th March, 2022. The Court found the reassessment proceedings to be legally unsound and disposed of the writ petition accordingly.