Tax Assessment Reopening Denied: HC Rules Change of Opinion Insufficient Grounds u/s 148, Quashes Notices.

The HC allowed the petition, determining that the notice to reopen the assessment was based on a change of opinion, which is insufficient to justify reopening under Section 148 of the Income Tax Act, 1961. Consequently, the HC quashed the notice dated 28th March 2008 and the subsequent order on objections dated 22nd May 2009. The petition was disposed of with no order as to costs.

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Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Alleged change of opinion by the Assessing Officer (AO).
3. Allowability of interest and other expenses as revenue expenditure.

Summary:

1. Validity of the Notice Issued Under Section 148:
The petitioner challenged a notice dated 28th March 2008 issued under Section 148 of the Income Tax Act, 1961, for the assessment year 2003-2004, and the subsequent order on objections dated 22nd May 2009. The petitioner contended that the notice was issued without proper reasons to believe that income had escaped assessment, arguing that it was based on a mere change of opinion by the AO.

2. Alleged Change of Opinion by the Assessing Officer (AO):
The court found that the AO had previously scrutinized the same issues during the original assessment proceedings, as evidenced by the detailed queries raised and responses provided by the petitioner. The court held that once a query is raised and answered during the assessment proceedings, it is presumed to have been considered by the AO. The court referenced the judgment in Aroni Commercials Ltd. Vs. Deputy Commissioner of Income Tax-2(1), stating, "It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised." The court concluded that the notice to reopen the assessment was merely based on a change of opinion, which does not justify reopening under Section 148.

3. Allowability of Interest and Other Expenses as Revenue Expenditure:
The petitioner argued that the interest on borrowings should be allowed as revenue expenditure, citing the Supreme Court's decision in Deputy Commissioner of Income Tax Vs. Core Health Care Ltd. and the Bombay High Court's decision in Commissioner of Income Tax Vs. Maharashtra Hybrid Seeds Co. Ltd. The court noted that if the petitioner succeeded on the issue of change of opinion, it would not need to address the allowability of interest expenses further. However, the court acknowledged the principle that interest on money borrowed for business purposes is a necessary item of expenditure, irrespective of whether the borrowing was for acquiring a capital or revenue asset.

Judgment:
The court allowed the petition, stating that the notice to reopen the assessment was based on a change of opinion, which does not constitute justification or reasons to believe that income chargeable to tax had escaped assessment. The court quashed and canceled the notice issued under Section 148 dated 28th March 2008, and the order on objections dated 22nd May 2009. The petition was disposed of with no order as to costs.

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