Validity of Notice under Income Tax Act Upheld: Court Emphasizes Prima Facie Belief for Reopening Assessment

M/s. Eleganza Jewellery Ltd. Versus Commissioner of Income Tax

M/s. Eleganza Jewellery Ltd. Versus Commissioner of Income Tax - [2014] 364 ITR 232 (Bom) Issues:
1) Validity of notice issued under Section 148 of the Income Tax Act, 1961 for reopening assessment year 2008-09.

Analysis:
1) The petitioner, a 100% Export Oriented Unit in a Special Economic Zone, challenged a notice issued under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the year 2008-09. The notice was based on discrepancies in the export turnover and receipt of convertible foreign exchange, leading to an alleged escapement of income chargeable to tax.

2) The petitioner contended that the reopening was without jurisdiction, citing full disclosure during the original assessment and reliance on RBI Circular No.91 of 2003 regarding export proceeds. The Assessing Officer rejected these objections, stating they would be considered during reassessment proceedings based on evidence produced.

3) The petitioner argued that the reopening was a change of opinion, as the original assessment considered the issues raised. The petitioner claimed entitlement to deduction under Section 10AA of the Act, emphasizing compliance with RBI Circular and challenging the interpretation of export turnover under Section 10AA.

4) The revenue, opposing the petitioner's arguments, justified the reopening within the statutory period of four years, asserting the Assessing Officer's reasonable belief of income escapement. The revenue maintained that the issues prompting reassessment were not examined in the original assessment.

5) The Court analyzed the jurisdictional aspect of the reopening, emphasizing that a mere change of opinion is not sufficient. It noted that the grounds for reopening were not part of the original assessment, indicating a lack of consideration. The Court cited precedent to support the permissibility of reassessment when specific issues were not addressed initially.

6) Ultimately, the Court upheld the validity of the notice dated 25 March 2013 under Section 148 of the Act, dismissing the petitioner's challenge. It clarified that the Assessing Officer's prima facie belief of income escapement suffices for issuing notices, leaving the detailed examination of merits for the reassessment proceedings.

7) The judgment highlights the importance of distinguishing between a change of opinion and valid reasons for reassessment, emphasizing that the Assessing Officer must have tangible grounds to believe income has escaped assessment. The decision underscores the procedural requirements and jurisdictional aspects governing the reopening of assessments under the Income Tax Act.