2021 (11) TMI 58 - HC - Income Tax

High Court upholds ITAT decision on reassessment citing lack of new material or valid grounds.

Pr. Commissioner of Income Tax-15, Mumbai Versus EPC Industries Ltd.

The High Court of Bombay upheld the ITAT's decision, emphasizing that the reassessment lacked new tangible material and was based on a mere change of ... Reopening of assessment u/s 147 - Eligibility of reasons to believe - change of opinion - HELD THAT:- In the facts of the present appeal a query was raised by the Assessing Officer in original assessment in respect of waiver of loan on account of One Time Settlement with the banks and assessee had filed detailed submission as to why principal amount was waived by the bank on account of One Time Settlement is not taxable. Once there was query raised with regard to a particular issue during regular assessment proceedings it must follow that the Assessing Officer had applied his mind and taken a view in the matter as reflected in the assessment order. See Aroni Commercials Ltd. vs. Assistant Commissioner of Income Tax - [2014 (2) TMI 659 - BOMBAY HIGH COURT] - Decided in favour of assessee. Issues:1. Validity of reassessment made under section 143 read with section 147 of the Income Tax Act, 1961.2. Whether the reassessment was based on a mere change of opinion without new tangible material.3. Whether the Assessing Officer had formed an opinion during the original assessment proceedings.Analysis:Issue 1: Validity of reassessment under sections 143 and 147The appeal challenged the order of the Income Tax Appellate Tribunal (ITAT) dated 10/2/2017 regarding the Assessment Year 2007-2008. The Revenue raised questions regarding the validity of the reassessment under sections 143 and 147 of the Income Tax Act, 1961. The appellant, engaged in the manufacturing business, had filed its return declaring nil income, which was later assessed before the ITAT.Issue 2: Reassessment based on a mere change of opinionThe Assessing Officer issued a notice for reopening the assessment based on the claim of deduction for waiver of a loan on account of One Time Settlement (OTS) with banks and NCD holders. The appellant objected to the reopening, stating that all necessary information had been provided during the original assessment. The ITAT allowed the appeal, noting that the reassessment was done without new tangible material and was based on information already on record. The ITAT emphasized that the original assessment had considered the waiver of the loan, and no new grounds justified the reassessment.Issue 3: Formation of opinion during original assessmentThe Revenue argued that since the original assessment did not mention the deduction of the loan waiver, there was no formed opinion by the Assessing Officer, justifying the reopening. However, the court referred to precedents stating that when queries are raised during assessment and the assessee responds, the Assessing Officer forms an opinion. The court cited previous judgments, including one by a Division Bench, emphasizing that non-discussion or non-rejection of the assessee's response during the original assessment indicates the formation of an opinion. Therefore, the court concluded that no substantial question of law arose in the present appeal and dismissed it.In conclusion, the High Court of Bombay upheld the ITAT's decision, emphasizing that the reassessment lacked new tangible material and was based on a mere change of opinion without valid grounds. The court highlighted the importance of the Assessing Officer forming an opinion during the original assessment proceedings, barring the reassessment solely on a different view.