2024 (9) TMI 973 - HC - Income Tax

Reopening of assessment u/s 147 - notice is given within four years - assessment previously framed after scrutiny - deduction of foreign exchange loss - HELD THAT - It emerges from the facts of the case that during the regular assessment, AO has called for the details with regard to claim of deduction made by the petitioner which was provided by the petitioner. AO also called for the details for deduction of foreign exchange loss. AO has, therefore, on the same facts and scrutiny on record has formed reason to believe that the foreign exchange loss pertaining to indigenous assets could not have been allowed as per the provisions of Section 43A. Petitioner has provided justification before the AO in regular course of assessment for the said deduction. There was no new tangible material available with the AO with regard to the said deduction and in absence of such new information, the AO could not have assumed the jurisdiction to reopen the assessment merely on change of opinion . AO while framing the original scrutiny assessment, has examined the claim of deduction made by the petitioner and as such, after considering the explanation tendered by the petitioner, the regular assessment order was passed and in the process, if he had made any legal error, then the succeeding AO cannot correct such error. Therefore, process of reopening of assessment from the reasons recorded clearly reflects that as AO seeks to correct the error in his opinion, such foreign exchange loss could not have been allowed. We are therefore of the opinion that such reasons cannot be the basis for reopening of the assessment previously framed after scrutiny. Decided in favour of assessee.

Issues Involved:
1. Validity of notice under Section 148 of the Income Tax Act, 1961.
2. Applicability of Section 43A of the Income Tax Act, 1961.
3. Concept of "change of opinion" in reassessment proceedings.
4. Jurisdiction to reopen assessment beyond four years.
5. Disclosure of material facts by the assessee.

Issue-wise Detailed Analysis:

1. Validity of Notice under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice dated 30th March 2019 issued by the Assessing Officer under Section 148 for the Assessment Year 2012-13. The petitioner argued that the notice was issued beyond four years from the end of the relevant assessment year without any new tangible material, thus constituting a mere "change of opinion". The court concluded that the Assessing Officer could not reopen the assessment based on the same facts already scrutinized during the original assessment.

2. Applicability of Section 43A of the Income Tax Act, 1961:
The Assessing Officer issued the notice based on the belief that the foreign exchange loss of Rs. 1,20,50,206/- claimed by the petitioner was not allowable under Section 43A, as the assets acquired were indigenous and not from outside India. The court noted that the petitioner had already provided justification for the deduction during the original assessment, and no new material was presented to justify the reopening.

3. Concept of "Change of Opinion" in Reassessment Proceedings:
The court emphasized that the reassessment was sought based on the same material already available during the original assessment, which constitutes a "change of opinion". Citing the Supreme Court's decision in Commissioner of Income Tax v. Kelvinator of India Ltd., the court reiterated that "change of opinion" cannot be a ground for reopening assessments.

4. Jurisdiction to Reopen Assessment Beyond Four Years:
The court highlighted that to reopen an assessment beyond four years, the Assessing Officer must have reasons to believe that income has escaped assessment due to the assessee's failure to disclose fully and truly all material facts. In this case, the court found no such failure on the part of the petitioner, as all necessary details were provided during the original assessment.

5. Disclosure of Material Facts by the Assessee:
The respondent argued that the petitioner failed to disclose how the foreign exchange loss was revenue in nature and not capital. However, the court observed that the petitioner had disclosed all relevant facts and provided detailed explanations during the original assessment. Therefore, the court held that the reassessment notice was unjustified.

Conclusion:
The court allowed the petition, quashing the notice dated 30th March 2019 issued under Section 148 and the subsequent order dated 21st November 2019 disposing of the petitioner's objections. The court ruled that the reopening of the assessment was based on a "change of opinion" and lacked new tangible material, thus invalidating the reassessment proceedings.

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