Validity of Income Tax assessment reopening under Section 147 upheld by High Court

Deputy Commissioner of Income Tax, Assistant Commissioner of Income Tax (OSD) Versus M/s. Daimler India Commercial Vehicles Private Ltd.

Deputy Commissioner of Income Tax, Assistant Commissioner of Income Tax (OSD) Versus M/s. Daimler India Commercial Vehicles Private Ltd. - [2021] 437 ITR ... Issues Involved:
1. Validity of the reopening of assessment under Section 147 of the Income Tax Act, 1961.
2. Whether the reopening was based on a mere change of opinion.
3. The adequacy of the reasons provided for reopening the assessment.
4. The maintainability of the writ petition challenging the reopening.

Detailed Analysis:

1. Validity of the Reopening of Assessment under Section 147:
The respondent filed a writ petition challenging the notice issued by the 1st appellant under Section 148 of the Income Tax Act, 1961, for the assessment year 2009-10, claiming that the income had escaped assessment. The reopening was based on the assertion that the respondent had not fully disclosed material facts, particularly regarding the commencement of business and the treatment of certain expenses which should have been capitalized. The learned Single Judge held that the reopening was invalid, as it was based on materials already available during the original assessment, constituting a change of opinion.

2. Whether the Reopening was Based on a Mere Change of Opinion:
The Single Judge observed that the Assessing Officer had all the necessary materials during the original assessment and had formed an opinion based on those materials. The reopening was thus seen as an attempt to reappraise the same materials, which is impermissible. The learned Single Judge referenced the Supreme Court's decision in Kelvinator of India Limited, emphasizing that reassessment must be based on "tangible material" and not a mere change of opinion.

3. The Adequacy of the Reasons Provided for Reopening the Assessment:
The reasons for reopening included the assertion that the respondent had not commenced its business during the relevant year and had not fully disclosed this fact, leading to the improper treatment of expenses and other income. The Single Judge found these reasons insufficient, as they were based on information already available during the original assessment. The Judge pointed out that the Assessing Officer did not have any new tangible material to justify the reopening, making the reassessment invalid.

4. The Maintainability of the Writ Petition Challenging the Reopening:
The appellants argued that the writ petition was not maintainable as the respondent had not exhausted the statutory remedies available under the Income Tax Act. However, the Single Judge held that the writ petition was maintainable, as the reopening was based on a change of opinion, which is a jurisdictional error.

Conclusion:
The High Court set aside the order of the learned Single Judge, holding that the reopening of the assessment was valid. The court emphasized that the reasons provided for reopening were adequate and that the Assessing Officer had the jurisdiction to reassess the income. The court also noted that the respondent could raise all its objections during the reassessment proceedings and, if aggrieved by the final order, could exercise the statutory appeal remedy. The appeal by the Revenue was allowed, and the order of the learned Single Judge was set aside.