Court quashes assessment order for A.Y. 2013-14 due to change of opinion

The court allowed the petition, quashing the notices and the draft assessment order for reopening the assessment for A.Y. 2013-14. The court held that the reopening was based on a change of opinion and not on any failure by the petitioner to disclose material facts. The petition was disposed of with no order as to costs.

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Issues Involved:
1. Validity of the notices for reopening assessment under Section 148 of the Income Tax Act.
2. Whether there was a failure on the part of the petitioner to fully and truly disclose all material facts necessary for the assessment.
3. Whether the reopening of the assessment was based on a mere change of opinion by the Assessing Officer.

Detailed Analysis:

1. Validity of the Notices for Reopening Assessment:
The petitioner sought reliefs to quash the notices and the draft assessment order issued by the respondent for reopening the assessment proceedings for the assessment year 2013-14. The petitioner had filed its return of income for A.Y. 2013-14 on 30th September 2013, and an assessment order was passed on 30th November 2015 under Section 143(3) of the Income Tax Act. The petitioner later received a notice dated 20th March 2020 under Section 148 of the Act, indicating that the income chargeable to tax for A.Y. 2013-14 had escaped assessment. Since the notice was received after four years from the end of the relevant assessment year, the proviso to Section 147 applied, requiring the respondents to show a failure on the part of the petitioner to fully and truly disclose all material facts.

2. Failure to Fully and Truly Disclose Material Facts:
The respondents cited three points in the reasons for reopening the assessment:
(a) Claim of expenses made without establishing the nature of expenses with respect to work done and documentary evidence.
(b) Discrepancy in the Tax Audit Report regarding brought forward losses.
(c) Claim of dividend receipts without submitting the Annual Accounts and Balance Sheet of the foreign companies.

For points (a) and (b), the petitioner had already provided detailed responses and documentation during the original assessment proceedings. The court noted that once a query is raised and replied to during the assessment proceedings, it follows that the query was considered by the Assessing Officer. It is not necessary for the assessment order to discuss every query raised. As for point (c), the break-up of other income, including dividend from foreign companies, was provided in the profit and loss account, and the assessment order included income from other sources.

3. Reopening Based on Change of Opinion:
The court emphasized that it is settled law that the Assessing Officer cannot reopen an assessment based on a mere change of opinion. The court referenced the case of Aroni Commercials Limited, where it was held that once a query is raised and answered, it is considered that the Assessing Officer has deliberated on the issue. The court found that the reasons for reopening the assessment in this case were based on the same set of primary facts submitted during the original assessment proceedings, indicating a change of opinion rather than new tangible material.

Participation in Assessment Proceedings:
The respondent argued that the petitioner had participated in the assessment proceedings and should not be granted relief. However, the court found that the petitioner faced technical issues and lockdown constraints due to the Covid-19 pandemic, which hindered their ability to respond promptly. The petitioner made multiple attempts to file objections and provide information but faced technical glitches. The court concluded that the petitioner had not participated in the assessment proceedings in a manner that would disentitle them to relief under Article 226 of the Constitution of India.

Conclusion:
The court allowed the petition, quashing the notices and the draft assessment order for reopening the assessment for A.Y. 2013-14. The court held that the reopening was based on a change of opinion and not on any failure by the petitioner to disclose material facts. The petition was disposed of with no order as to costs.

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