Reassessment u/s 147/148 for AYs 2006-07, 2007-08 quashed as mere change of opinion on s.10A claim

HC quashed reassessment notices issued u/s 147/148 for AYs 2006-07 and 2007-08, holding that the Assessing Officer's reasons constituted a mere change of opinion. The AO's view that domain registry activities did not constitute IT enabled services involving value addition had already been considered and reversed in appellate proceedings, and no new tangible material was shown. Reliance on observations in the AY 2008-09 assessment, where no claim u/s 10A was made, was held to be a contrived basis to reopen earlier years. HC emphasised the need for consistency in a multi-year deduction u/s 10A and set aside the impugned notices.

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Issues Involved:
1. Validity of reopening assessments for Assessment Years 2006-07 and 2007-08.
2. Whether the reopening is based on a mere change of opinion.
3. The impact of prior assessments and appeals on the current reopening.
4. Interpretation of Section 10A of the Income Tax Act, 1961.
5. The requirement of "tangible material" for reopening assessments.

Detailed Analysis:

1. Validity of Reopening Assessments for Assessment Years 2006-07 and 2007-08:
The Assessing Officer issued notices dated 18 March 2011 to reopen assessments for the Assessment Years 2006-07 and 2007-08. The Petitioner challenged these notices under Article 226 of the Constitution, questioning the validity of the action initiated by the Assessing Officer. The reasons furnished for reopening included the assertion that the Petitioner's domain registration activities did not qualify as IT-enabled services or web-site services, thus disqualifying them from deductions under Section 10A.

2. Whether the Reopening is Based on a Mere Change of Opinion:
The Petitioner argued that the reopening was based on a mere change of opinion, which is impermissible. The Supreme Court in CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561/187 Taxman 312 held that reopening based on a mere change of opinion is not allowed. The Assessing Officer's reasons for reopening did not introduce any new or tangible material, but rather revisited previously considered facts, thus constituting a change of opinion.

3. The Impact of Prior Assessments and Appeals on the Current Reopening:
The Petitioner had previously been allowed deductions under Section 10A for Assessment Years 2002-03 and 2003-04 after detailed consideration by the Commissioner (Appeals). These decisions attained finality as the Revenue did not challenge them. The Petitioner was also allowed deductions for subsequent years (2004-05 to 2007-08). The reopening of assessments for 2006-07 and 2007-08 was partly based on an assessment for 2008-09, where no deduction under Section 10A was claimed due to a business loss. The court noted that the Assessing Officer's comments on the 2008-09 assessment were not relevant for reopening earlier years' assessments.

4. Interpretation of Section 10A of the Income Tax Act, 1961:
Section 10A(1) provides a deduction from the profits and gains derived from the export of articles or things or computer software for ten consecutive assessment years. The term 'computer software' includes services notified by the CBDT, such as 'Web-site Services'. The Commissioner (Appeals) had previously determined that the Petitioner's domain registration and web hosting services qualified as 'Web-site Services', thus entitling them to deductions under Section 10A.

5. The Requirement of "Tangible Material" for Reopening Assessments:
The court emphasized that the power to reopen assessments under Section 148 requires "reason to believe" that income has escaped assessment, which must be based on tangible material. The Assessing Officer cannot use this power to review an earlier determination without new material. The court found that the reopening in this case lacked any new tangible material and was simply a change in the Assessing Officer's opinion.

Conclusion:
The court concluded that the reopening of assessments for Assessment Years 2006-07 and 2007-08 was impermissible as it was based on a mere change of opinion without any new tangible material. The notices dated 18 March 2011 issued by the Assessing Officer were set aside, and the rule was made absolute with no order as to costs.

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