2024 (9) TMI 877 - HC - Income Tax

Reopening of assessment - reason to believe - Period of limitation - HELD THAT - A perusal of Exts.P2 and P3 makes it clear that, as early as in the year 2011 itself, such details regarding accumulation for one purpose and utilization for another purpose have come to the attention of the department. The time limit of six years can be utilized by the department only in a situation where the department has a case that the assessee did not disclose fully and truly all the material facts necessary for the purpose of assessment. Such satisfaction should be with reference to the date of the notice. Notice at Ext.P5 has been issued on 30.03.2016. Almost four years back, all the above details were furnished before the assessing authority. Further, a perusal of the notice at Ext.P2 would make it clear that, even the department has noticed the above discrepancy, and that is why Ext.P2 was issued pursuant to a scrutiny assessment. In such circumstances, it cannot be said that the petitioner herein withheld certain information from the department. When that be the position, the department cannot be expected to have recourse to the extended period of six years for issuing the notice under Section 149. Whether the notice issued can be considered as a case of mere change of opinion on the part of the assessing authority ? - As decided in Kelvinator of India 2010 (1) TMI 11 - SUPREME COURT AO has power to reopen, provided there is tangible material to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Also decided in Marico Limited 2019 (8) TMI 1337 - BOMBAY HIGH COURT parties have responded to it and the assessment order makes no reference to the above issue at all. However, once a query has been raised by the Assessing Officer during the assessment proceedings and the assessee has responded to that query, it would necessarily follow, as held by our court that the Assessing Officer has accepted the petitioner's/ assessee's submissions, so as to not deal with that issue in the assessment order. Thus, the notice issued by the 3rd respondent u/s 148 of the Act is to be evaluated. The said notice proposes to reopen the petitioner s assessment under Section 147. The reasons for such steps are informed through Ext.P7. The said reason is with reference to the accumulation and mobilization of amounts for different purposes. The contention of Sri. Jose Joseph, that the said reason at Ext.P7 is a different one cannot be accepted. A cursory glance at Ext.P2 notice, Ext.P3 reply, and Ext.P7 would show that the reasons highlighted for initiation of the steps under the act are one and the same. The reliance made by the standing counsel on the judgment of the apex court in Techspan India 2018 (4) TMI 1376 - SUPREME COURT is not apposite. Thus, the issue raised in the case at hand is also to be decided against the revenue, in view of the fact that same issue was raised in Ext. P2 and clarified by the petitioner through Ext. P3. There was a query raised by the department and answered by the assessee. Therefore, the case at hand is a clear case of change of opinion . Assessee appeal allowed.

Summary

Issues Involved:
1. Barred by Limitation
2. Change of Opinion

Detailed Analysis:

1. Barred by Limitation:

The primary issue is whether the notice issued by the department (Ext.P5) and the subsequent order (Ext.P10) are barred by limitation. The assessment year in question is 2009-10, and the notice under Section 148 of the Income Tax Act was issued on 30.03.2016. According to Section 149 of the Act, the notice must be issued within four years from the end of the relevant assessment year unless it falls under Clause (b), which extends the period to six years if certain conditions are met. These conditions include the officer having a "reason to believe" that income has escaped assessment and that the escape was due to the assessee's failure to disclose fully and truly all material facts necessary for the assessment.

The petitioner argued that all relevant details regarding the accumulation and utilization of Rs.50 lakhs were disclosed to the department as early as 2011, evidenced by Ext.P2 notice and Ext.P3 reply. The department's scrutiny notice (Ext.P2) and the petitioner's detailed response (Ext.P3) indicate that the department was aware of the discrepancy in the utilization of funds. The court concluded that since the department had this information well before the extended six-year period, the notice issued in 2016 was barred by limitation.

2. Change of Opinion:

The second issue is whether the notice issued (Ext.P5) constitutes a "mere change of opinion" by the assessing authority. The court referred to the Supreme Court's judgment in Commissioner of Income Tax v. Kelvinator of India, which emphasized that reassessment based on a mere change of opinion is not permissible. The court noted that the department had already scrutinized the issue of fund utilization during the original assessment proceedings, as evidenced by Ext.P2 notice and Ext.P3 reply. The petitioner had provided explanations, and the assessment was finalized without any adverse findings on this issue.

The court also referred to several precedents, including Marico Limited v. Assistant Commissioner of Income Tax and G K N Sinter Metals Ltd. v. Ramapriya Raghav, which held that once a query is raised and answered during the original assessment, the assessing officer's failure to make any addition or rejection implies acceptance of the assessee's explanation. Thus, any subsequent reassessment on the same issue would amount to a change of opinion.

The court concluded that the reasons for reassessment stated in Ext.P7 were the same as those considered during the original assessment proceedings. Therefore, the reassessment proceedings initiated by Ext.P5 were based on a mere change of opinion, rendering them invalid.

Conclusion:

The writ petition was allowed, and the order issued by the 3rd respondent (Ext.P10) was quashed. The court found that the reassessment proceedings were both barred by limitation and constituted a mere change of opinion by the assessing authority.