2015 (5) TMI 222 - HC - Income Tax

Court invalidates reassessment beyond time limit, deeming it impermissible for lack of new facts.

The court held that the reassessment proceedings for A.Y. 2009-2010 initiated beyond the four-year period were impermissible as there was no failure on ... Reopening of assessment - accounting treatment in respect of unutilized Cenvat credit questioned - Held that:- Identical question came to be considered by the Division Bench of this Court in the case of Heavy Metal and Tubes Limited (2015 (2) TMI 820 - GUJARAT HIGH COURT) and in identical facts and circumstances of the case, the Division Bench quash and set aside the reassessment proceedings which were sought to be initiated on the very grounds on which the impugned reassessment proceedings are initiated against the petitioner - assessee, by observing that where the issue of accounting treatment in respect of unutilized Cenvat credit for the purpose of valuing closing stock was already examined by the Assessing Officer during the scrutiny assessment, reassessment proceedings on the same issue without any tangible material was mere a change of opinion and hence not sustainable. Applying the decision of the Division Bench of this Court in the case of Heavy Metal and Tubes Limited (supra) as well as Lanxess ABS Limited Now known as INEOS ABS (India) Ltd. (2012 (5) TMI 133 - Gujarat High Court), to the facts of the case on hand and as observed hereinabove, there does not appear to be failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment, the initiation of the impugned reassessment proceedings which are initiated beyond the period of four years, are not permissible and the same cannot be sustained and on that ground alone, the impugned reassessment proceedings deserve to be quashed and set aside. - Decided in favour of assessee. Issues Involved:1. Legality of reopening assessment under Section 148 of the Income Tax Act, 1961 beyond four years.2. Whether there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment.3. Applicability of the doctrine of change of opinion in the context of reassessment.Issue-Wise Detailed Analysis:1. Legality of Reopening Assessment under Section 148 of the Income Tax Act, 1961 Beyond Four Years:The petitioner challenged the reopening of the assessment for A.Y. 2009-2010 under Section 148 of the Income Tax Act, 1961, arguing that it was initiated beyond the permissible period of four years. The court noted that as per the first proviso to Section 147, reassessment beyond four years is only permissible if there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The court emphasized that unless it is established that the income escaped assessment due to such failure, the Assessing Officer is not authorized to reopen the assessment.2. Whether There Was a Failure on the Part of the Assessee to Disclose Fully and Truly All Material Facts Necessary for Assessment:The petitioner contended that there was no failure on their part to disclose all material facts necessary for the assessment. The court examined the facts and communications between the assessee and the Assessing Officer during the original assessment. It was observed that the assessee had provided detailed explanations and documents regarding the unutilized balance of Modvat credit, and the Assessing Officer had accepted the exclusive method of accounting adopted by the assessee. Therefore, the court concluded that there was no omission or failure on the part of the assessee to disclose fully and truly all material facts.3. Applicability of the Doctrine of Change of Opinion in the Context of Reassessment:The petitioner argued that the reopening of the assessment was based on a mere change of opinion, which is not permissible. The court referred to previous judgments, including the cases of Heavy Metal and Tubes Limited and Lanxess ABS Limited, where it was held that reassessment on the same issue without any tangible material amounts to a change of opinion and is not sustainable. The court found that the reasons for reopening the assessment were based on the same facts and issues that were already examined during the original assessment. Hence, it was concluded that the reassessment proceedings were initiated based on a change of opinion.Conclusion:The court held that the initiation of reassessment proceedings beyond the period of four years was not permissible as there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The reassessment proceedings were deemed to be based on a mere change of opinion, which is not valid. Consequently, the court quashed the impugned notice under Section 148 and terminated the reassessment proceedings for A.Y. 2009-2010. The petition was allowed, and the rule was made absolute with no order as to costs.