2023 (12) TMI 770 - HC - Income Tax

Reopening of assessment - Foreign currency transactions - Exchange differences arising on foreign exchange transactions settled during the year are recognised in the profit and loss account for the year - HELD THAT - There is disclosure in the Statement, Profit and Loss Account for the year ended 31.03.2014. The report of the Independent Auditor under Section 227(3) of the Companies Act, 1956, states that the petitioner company does not have any accumulated losses at the end of the financial year and also has not incurred any cash losses in the financial year and in the immediately preceding financial year. Thus, there is no case made out for reopening the Assessment that was completed earlier. Reopening of the Assessment was inspired from a review and a change of opinion by the subsequent officer. Such practice has been deprecated and frowned upon by the Courts. Although the petitioner has resorted to window dressing of the statement of actual of statements filed along with the Statement of Profit and Loss for the year ended 31st March 2014, it cannot be said that the petitioner has not disclosed material. There is a complete disclosure by the petitioner along with the regular returns filed under Section 139 of the Income Tax Act, 1961 on 28.11.2014. The petitioner has also uploaded the hard copy of the same in response to a notice issued under Section 143(2) of the Income Tax Act, 1961 on 28.08.2015. The reasons given for re-opening of the Assessment along with a notice issued u/s 143(2) r.w.s.147 of the Income Tax Act, 1961 on 05.05.2021 is also based on the Profit and Loss Account. Thus, there is no scope for re-opening of the assessment which was completed on 28.09.2018 under Section 143(3) read with section 92CA(3) and Section 144C(8) of the Act. Clearly, the reasons given for re-opening of the assessment is inspired from change of opinion. Decided in favour of assessee.

Summary

Issues Involved:
1. Challenge to the order disposing of the objection against reopening of the assessment under Section 148 of the Income Tax Act.
2. Challenge to the revised assessment order.
3. Challenge to the notice seeking to impose penalty under Section 274 read with Section 271(1)(c) of the Income Tax Act.

Summary:

Issue 1: Challenge to the Order Disposing Objection Against Reopening of Assessment
The petitioner challenged the impugned order dated 01.03.2022, disposing of the objection against reopening the assessment for the assessment year 2014-2015 under Section 148 of the Income Tax Act, 1961. The petitioner argued that the invocation of Section 148 was without jurisdiction as all required documents were already filed before the original assessment order dated 28.09.2018. The petitioner contended that the reopening was based on a change of opinion, which is contrary to the law settled by the Division Bench of Delhi High Court and affirmed by the Hon'ble Supreme Court in Commissioner of Income-tax, Delhi Vs. Kelvinator of India Ltd., [2010] 320 ITR 561. The Court found that the petitioner had disclosed all necessary information in the original assessment, and the reopening was indeed based on a change of opinion. Thus, the impugned order dated 01.03.2022 was quashed.

Issue 2: Challenge to the Revised Assessment Order
The revised assessment order dated 30.03.2022 was challenged in WP.No.27432 of 2022. The Court noted that this order was a consequence of the impugned order dated 01.03.2022, which was quashed. Therefore, the revised assessment order was also quashed.

Issue 3: Challenge to the Notice Seeking to Impose Penalty
The petitioner challenged the notice dated 30.03.2022 issued under Section 274 read with Section 271(1)(c) of the Income Tax Act, seeking to impose a penalty. The Court found that since the reopening of the assessment itself was quashed, the penalty notice had no basis and was also quashed.

Conclusion:
All three Writ Petitions were allowed, and the connected Miscellaneous Petitions were closed with no costs.