2008 (7) TMI 238 - HC - Income Tax

Section 148 reopening invalid where no new material or law change; mere change of opinion on Section 80M

HC held that reopening assessment under section 148 was invalid where no new material, information, or change of law had emerged between the original ... Reopening of the assessment - notice u/s 148 - escaped assessment - neither any change of law not any new material been brought on record - claimed that the deduction under Section 80M was wrongly allowed - HELD THAT:- Admittedly between the date of the order of assessment sought to be reopened and the date of forming of opinion by the respondent No.1, nothing new has happened and there is no change of law, no new material has come on record, no information has been received. It is merely a fresh application of mind by the same officer to the same set of facts. Thus, it is a case of mere change of opinion, which in our opinion, which, in our opinion, does not provide jurisdiction to the respondent No.1 to initiate proceedings under Section 148 of the Act. It is clear that in the present case proceedings under Section 147 are initiated only because of change of mind or change of opinion by the respondent No.1, and therefore, in our opinion, in view of the settled law, it cannot be said that the respondent No.1 was justified in issuing the notice and rejecting the objection. In the result, therefore, petition succeeds and is allowed. Issues:Challenge to notice under Section 148 for reopening assessment year 2003-04 and rejection of objection.Analysis:The Petitioner, a company engaged in trading and investments, challenged a notice dated 27th December, 2006 issued under Section 148 of the Income-tax Act for reopening the assessment for the year 2003-04. The Petitioner had received dividends and distributed dividends to its shareholders. The assessing officer allowed the deduction under Section 80M in the regular assessment order. However, the notice under Section 148 claimed that the deduction was wrongly allowed, resulting in underassessment of income. The Petitioner objected to the notice, which was rejected on 14th May, 2008, leading to the petition against the notice and rejection of objection.The Petitioner contended that necessary details for claiming the deduction under Section 80M were provided in the returns, and the assessing officer had allowed the deduction after due consideration. The Petitioner argued that the power under Section 147 cannot be used to review the order made by the authorities, citing legal precedents to support this position.The Respondents relied on Explanation 2 to Section 147 of the Income-tax Act to support their position. However, the court noted that the initiation of proceedings under Section 147 was based on a mere change of opinion by the assessing officer, without any new material or change in circumstances. The court emphasized that the power under Section 147 cannot be used as a review mechanism, as observed in various judgments, including the Full Bench of the Delhi High Court. The court highlighted that the jurisdiction to reopen assessments cannot be based on a mere change of opinion, and rectification of mistakes is limited to specific circumstances under the law.Ultimately, the court concluded that the initiation of proceedings under Section 147 in the present case was solely due to a change of mind or opinion by the assessing officer, which did not justify the notice issued or the rejection of the objection. Therefore, the petition succeeded, and the rule was made absolute in favor of the Petitioner, with no order as to costs.