2021 (9) TMI 1145 - HC - Income Tax

Court invalidates reassessment under Section 148 of Income Tax Act for AY 2011-12 as change of opinion.

N.S. Srinivasan Versus The Asst. Commissioner of Income Tax, Non-Corporate Circle, 14 (1), Chennai

The court held that the reopening of the assessment under Section 148 of the Income Tax Act, 1961 for the Assessment Year 2011-12 was invalid. It was ... Reopening of assessment u/s 147 - assessment reopened beyond four years from the end of the relevant Assessment Year - as submitted type of scrutiny was limited and therefore, the issues pointed out in the reasons were not subject matter of the scrutiny assessment under Section 143(3) - HELD THAT:- The scrutiny assessment was not a limited scrutiny. Apart from the fact that there is nothing on record to show that the assessee was intimated that the scrutiny was a limited scrutiny, in fact, we find that, on more than five occasions, the case has been discussed by the Assessing Officer with the assessee and on each occasion, the assessee has cooperated and furnished details. There is no allegation that the details were either inadequate or not fully or truly furnished or the facts or figures were distorted. Thus, the AOhaving been satisfied, has completed the assessment under Section 143(3) of the Act. In the reasons for reopening, dated 07.05.2018, all the materials which were subject matter of scrutiny assessment have been verbatim taken up on the alleged ground of reopening. That apart, these materials were culled out from the records, relating to the assessee, which are stated to be miscellaneous records. In any event, they are part of the assessment records and in the absence of any contention that the income chargeable to tax has escaped assessment on account of the reason of failure on the part of the assessee to disclose fully and truly all material facts, if a reopening is done, it would clearly amount to a case of change of opinion and a review of the earlier Assessment Order, which is impermissible in law. Assessee had rebutted the averments in Para No.18 of the counter affidavit, by giving full details regarding the professional receipts and that the credit of TDS on those credits was claimed in the hands of assessee, was absolutely false. The details in this regard have also been furnished in the rejoinder affidavit in Para No.18. Likewise, the averments in Para Nos.19 and 20 of the counter affidavit have also been denied and it was pointed out that the assessee had submitted copies of the Bank statements, as well as documents evidencing the sale and purchase of the property, and all the transactions were duly routed through the Bank and the statement of accounts were furnished and examined by the Assessing Officer and it cannot be stated that those aspects were neither called for nor examined - reopening of assessment was a clear case of change of opinion and what the Assessing Officer attempted was to review the scrutiny assessment, which is impermissible in law. - Decided in favour of assessee. Issues Involved:1. Validity of reopening the assessment under Section 148 of the Income Tax Act, 1961.2. Alleged failure to disclose fully and truly all material facts necessary for the assessment.3. Whether the reopening constitutes a change of opinion by the Assessing Officer.4. Whether the original assessment was a limited scrutiny or a comprehensive scrutiny.Detailed Analysis:1. Validity of Reopening the Assessment under Section 148 of the Income Tax Act, 1961:The appellant/assessee challenged the reopening of the assessment for the Assessment Year 2011-12, initiated by the respondent through proceedings dated 29.03.2018 under Section 148 of the Income Tax Act, 1961. The initial assessment was completed under Section 143(3) on 20.01.2014. The reopening notice was issued after four years, invoking the first proviso under Section 147, which restricts reopening unless there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment.2. Alleged Failure to Disclose Fully and Truly All Material Facts Necessary for the Assessment:The Assessing Officer cited three reasons for reopening: AIR 26AS-194 J omitted, excess investment unexplained, and investment in pursuance of house property. However, there was no specific allegation that the income chargeable to tax had escaped assessment due to the assessee's failure to disclose fully and truly all material facts. The court noted that the reasons for reopening were derived from the assessee's records, indicating that the necessary facts were already on record at the time of the original assessment.3. Whether the Reopening Constitutes a Change of Opinion by the Assessing Officer:The assessee argued that the reopening was a clear case of change of opinion, as the original assessment involved detailed scrutiny where all relevant details were furnished and considered. The court found that the original assessment was comprehensive, involving multiple hearings and detailed submissions by the assessee, including documents related to professional fees, property transactions, and investments. The reopening was based on the same materials that were available during the original assessment, which the court concluded amounted to a change of opinion and a review of the earlier order, which is impermissible in law.4. Whether the Original Assessment was a Limited Scrutiny or a Comprehensive Scrutiny:The Assessing Officer contended that the original assessment was a limited scrutiny focusing only on the taxability of the sale of property. However, the court found no evidence on record to support this claim. The notice issued under Section 142(1) and the subsequent detailed submissions by the assessee indicated that the assessment covered various aspects, including professional income, property transactions, and investments. The court concluded that the original assessment was not limited but comprehensive, and the reopening was not justified on the grounds of limited scrutiny.Conclusion:The court held that the reopening of the assessment was invalid as it was based on a change of opinion and there was no failure on the part of the assessee to disclose fully and truly all material facts. The writ appeal was allowed, the order in the writ petition was set aside, and the reassessment proceedings were quashed.