2019 (8) TMI 1337 - HC - Income Tax

Court quashes notice reopening tax assessment citing impermissible change of opinion

The court held that the notice issued under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for a specific year was quashed as ... Reopening of assessment u/s 147 - within four year - original assessment u/s 143(3) - non discussion of issue in assessment order though the query was raised - HELD THAT:- Where the Revenue accepts the view propounded by the assessee in response to the Revenue’s query, the AO has certainly to form an opinion whether or not the stand taken by the assessee is acceptable. Therefore, it must follow that where queries have been raised during the assessment proceedings and the assessee has responded to the same, then the non-discussion of the same or non-rejection of the response of the assessee, would necessarily mean that the AO has formed an opinion accepting the view of the Assessee. Thus an opinion is formed during the regular Assessment proceedings, bars the AO to reopen the same only on account of a different view. Thus we find that the reasons in support of the impugned notice is the very issue in respect of which the AO has raised the query dated 25 September 2017 during the assessment proceedings and the Petitioner had responded to the same by its letters dated 10 December 2017 and 21 December 2017 justifying its stand. The non-rejection of the explanation in the AO would amount to the AO accepting the view of the assessee, thus taking a view/forming an opinion. Therefore, in these circumstances, the reasons in support of the impugned notice proceed on a mere change of opinion and therefore would be completely without jurisdiction in the present facts. Accordingly, the impugned notice dated 27 March 2019 is quashed and set aside. Issues Involved:1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.2. Jurisdiction to reopen an assessment based on a change of opinion.Detailed Analysis:1. Validity of the Notice Issued under Section 148 of the Income Tax Act, 1961:The petitioner challenged the notice dated 27 March 2019 issued by the Assistant Commissioner of Income Tax under Section 148, seeking to reopen the assessment for the Assessment Year 2014-15. The petitioner had filed a revised return of income for the said year, declaring total income and book profits under Section 115JB. During the scrutiny assessment, the Assessing Officer (AO) had questioned the petitioner’s claim of a deduction for amortization of brand value. The petitioner justified the deduction, and the AO accepted this in the assessment order dated 30 January 2018. However, the impugned notice was issued within four years from the end of the relevant assessment year, citing the reason that income chargeable to tax had escaped assessment due to the petitioner’s failure to disclose fully and truly all material facts.2. Jurisdiction to Reopen an Assessment Based on a Change of Opinion:The petitioner argued that the reopening of the assessment was based on a change of opinion, which is not permissible. The petitioner contended that the specific issue leading to the reopening notice had already been considered during the original assessment proceedings. The AO had raised a query regarding the deduction, and the petitioner had responded satisfactorily, leading to the acceptance of the claim in the assessment order. The petitioner relied on the Supreme Court’s decision in CIT v. Kelvinator of India Ltd., which held that reopening an assessment based on a mere change of opinion is not permissible.The respondents argued that the notice was issued within four years and that mere disclosure of material facts does not oust the AO’s jurisdiction to reopen the assessment. They contended that the AO had not formed any opinion on the issue in the original assessment order as there was no discussion on it.Court’s Analysis and Judgment:The court noted that the power to reopen an assessment within four years is not curtailed by the proviso to Section 147 of the Act. However, the reopening should not be based on a change of opinion. The court referred to the Supreme Court’s decision in Kelvinator of India Ltd., emphasizing that reassessment should be based on tangible material indicating escapement of income and not on a mere change of opinion.The court observed that during the original assessment proceedings, the AO had raised a specific query regarding the deduction, and the petitioner had responded in detail. The AO accepted the petitioner’s explanation and did not make the proposed disallowance in the assessment order. The court held that once a query is raised and responded to, it indicates that the AO has formed an opinion, even if not explicitly mentioned in the assessment order.The court rejected the respondents’ argument that the absence of discussion in the assessment order implies no opinion was formed. It stated that an adjudication is required only when the AO does not accept the assessee’s explanation. If the AO accepts the explanation, it means an opinion has been formed.The court concluded that the reasons for reopening the assessment were based on a mere change of opinion, which is not permissible. Therefore, the impugned notice dated 27 March 2019 was quashed and set aside.Conclusion:The petition was allowed, and the notice issued under Section 148 of the Income Tax Act, 1961, was quashed as it was based on a change of opinion, which is not permissible under the law.