2023 (11) TMI 868 - HC - Income Tax

Validity of Reopening of assessment u/s 147 - allowability of Deductions u/s 32AC questioned - reasons to believe or suspect - HELD THAT - There is not even a hint in the reasons to reopen, that there has been a failure to truly and fully disclose. The reason itself indicates that everything has been disclosed because it reads on perusal of the records it was observed that the assessee was allowed the deduction u/s 32AC. The assessee contended that for the purpose of calculation of allowance - it was seen that the addition to fixed assets in Note 11 of the annual account for the relevant period - the allowance of deduction was not in order. During the course of assessment proceedings, Petitioner was told to provide detailed break-up of various plants and machinery installed and commissioned pursuant to Section 32AC duly weighted by its Chartered Accountant. Petitioner provided the details vide letter dated 5th July 2015. Vide letter dated 7th October 2016, Petitioner also forwarded the details, which were called for during the hearing held on 22nd September 2016, of installation date item-wise in respect of the plant. In the order disposing the objections, there is no denial of the fact that these materials were made available or these details were called for during the assessment proceedings. The only explanation is that these have not been discussed in the assessment order. In Aroni Commercials Ltd 2014 (2) TMI 659 - BOMBAY HIGH COURT case this Court has held that once a query is raised during the assessment proceedings and assessee has replied to it, it follows that the query raised was the subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. It is also settled law that change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. Revenue as submitted that an audit query was raised and there was misapplication of provision of Section 32AC of the Act. However, the Assessing Officer himself has replied to the audit objection raised denying that there was any escapement of income. In fact, in the letter dated 4th March 2021 a copy whereof is annexed to the Petition it is stated audit objection/observation is not acceptable to the Department When the primary facts necessary for assessment are fully and truly disclosed, the AO is not entitled on change of opinion to commence proceedings for reassessment. Even if the AO, who passed the assessment order, may have raised too many legal inferences from the facts disclosed, on that account the AO, who has decided to reopen assessment, is not competent to reopen assessment proceedings. Where on consideration of material on record, one view is conclusively taken by the Assessing Officer, it is not open to reopen the assessment based on the very same material with a view to take another view. See Ananta Landmark Pvt. Ltd. 2021 (10) TMI 71 - BOMBAY HIGH COURT Decided in favour of assessee.

Summary

Issues Involved:
The issues involved in the judgment are the validity of reopening assessment under Section 147 of the Income Tax Act, 1961 based on the claim of deduction under Section 32AC, and the application of the principle of change of opinion in assessment proceedings.

Issue 1: Reopening of Assessment under Section 147:
The petitioner filed its return of income for Assessment Year 2014-15, which was processed, and an intimation under Section 143(1) of the Act was issued. Subsequently, the case was selected for scrutiny assessment, requiring details related to deductions under Section 32AC. The assessment was completed under Section 143(3) of the Act. An audit objection was raised on the deduction claim, leading to a notice under Section 148 alleging income escapement. The petitioner's objections were rejected on the basis that the assessment order did not discuss the deduction claim, thus denying the defense of change of opinion. However, the proviso to Section 147 restricts reopening if more than four years have passed from the end of the relevant assessment year without any income escapement due to non-disclosure of material facts.

Issue 2: Principle of Change of Opinion in Assessment:
The reasons cited for reopening the assessment focused on discrepancies in the deduction claim under Section 32AC, without indicating non-disclosure of material facts. The petitioner provided detailed information during assessment proceedings, which were not discussed in the assessment order. The court emphasized that the mere absence of discussion in the order does not negate the consideration of provided details during assessment. Additionally, it was highlighted that change of opinion is not a valid reason for reopening assessments when all necessary facts have been disclosed. Previous court decisions were cited to support the principle that reopening assessments based on a change of opinion without new material is impermissible under the law.

Conclusion:
The High Court held in favor of the petitioner, quashing the notice seeking to reopen the assessment for the assessment year 2014-15. The court emphasized the importance of full and true disclosure of material facts by the assessee and reiterated that the principle of change of opinion cannot be a sole justification for reopening assessments when all relevant details have been provided during the proceedings. The judgment reaffirmed the legal principle that assessments cannot be reopened based on a change of opinion without new material justifying such action.