1981 (2) TMI 30 - HC - Income Tax

Invalid Notice: Change of Opinion Not Grounds for Reopening Assessment

The court held that the notice under section 148 to reopen the assessment was invalid as it was solely due to a change of opinion by the new assessing ... Reopening assessment on the ground of change of opinion - validity of notice under s. 148 for reopening assessment - interpolations/overwriting in books of account as basis for reopening - escaped assessment within the meaning of s. 147Reopening assessment on the ground of change of opinion - validity of notice under s. 148 for reopening assessment - interpolations/overwriting in books of account as basis for reopening - Notice under s. 148 issued to reopen assessment for assessment year 1977-78 was without jurisdiction and liable to be quashed where it was founded on a mere change of opinion of the successor officer regarding the effect of entries in books of account already examined by the predecessor. - HELD THAT: - The predecessor ITO issued a notice dated December 27, 1979, and examined the petitioner's books of account on January 17, 1980; the assessment was completed by order dated January 25, 1980. The same books, in which interpolations or overwritings are now relied upon, were therefore available to and examined by the officer who passed the original assessment. The successor ITO subsequently issued a notice under s. 148, asserting that income had escaped assessment because of overwriting/interpolation. The Court held that where the predecessor, on the same materials, has formed a view and completed assessment, the successor's contrary conclusion amounts to a mere change of opinion. A mere change of opinion cannot constitute the juridical basis for reopening an assessment under s. 147 by issuing a notice under s. 148. Accordingly the notice issued by the respondent was ultravires and liable to be set aside.Notice dated October 4, 1980 under s. 148 for reopening the assessment for assessment year 1977-78 quashed; respondent directed to cease further proceedings thereon and to pay costs of the petition.Final Conclusion: The Court quashed the s. 148 notice dated October 4, 1980 as issued without jurisdiction because it rested on a mere change of opinion by the successor officer regarding matters already examined by the predecessor at the time of the original assessment; petitioner granted costs. Issues:Jurisdiction of the assessing officer under sections 143(1) and 143(3) of the Income Tax Act, 1961; Validity of notice under section 148 for reopening assessment based on change of opinion; Examination of books of account by previous assessing officer; Allegations of overwriting and interpolation in the books of account.Analysis:The petitioner, a registered firm, was assessed for the year 1977-78 by the Income Tax Officer (ITO) under section 143(1) of the Income Tax Act, 1961. Subsequently, the jurisdiction was transferred to a new ITO who issued a notice under section 148 for reopening the assessment based on alleged underassessment due to overwriting and interpolation in the books of account. The petitioner contended that all books of account were examined by the previous ITO before passing the assessment order under section 143(3), and any discrepancies should have been noticed at that time. The court held that the new ITO cannot issue a notice under section 148 merely due to a change in opinion from the previous assessing officer. The notice under section 148 was quashed, and the respondent was directed to cease further proceedings against the petitioner. The court emphasized that a change of opinion cannot be the basis for reopening an assessment under section 147 of the Act.The court referred to a notice dated December 27, 1979, which required the petitioner to attend the office and provide further information regarding the return of income for the assessment year 1977-78. This notice, along with the examination of books of account by the previous ITO, indicated that all relevant documents were already scrutinized before the assessment order was passed. The court highlighted that the authenticity of this notice cannot be doubted, as it was signed by the then ITO and carried the seal of his office. Therefore, the court concluded that the new ITO's decision to reopen the assessment based on alleged discrepancies in the books of account was without jurisdiction.In summary, the court found that the notice under section 148 for reopening the assessment was invalid as it was solely based on a change of opinion by the new assessing officer. The court emphasized that the previous assessing officer had already examined all relevant documents before passing the assessment order, and discrepancies should have been identified at that time. Consequently, the court quashed the notice under section 148 and directed the respondent to discontinue further proceedings against the petitioner. The respondent was also ordered to bear the costs of the legal proceedings.