2023 (7) TMI 1213 - HC - Income Tax

Court rules against reopening assessments based on change of opinion

The Principal Commissioner of Income Tax, Trichy. Versus M/s. Raja Transports

The High Court upheld the ITAT's decision that reopening the assessment under Section 147 was a change of opinion and not permissible under law. The court ... Reopening of assessment - assessee firm had not deducted TDS as required u/s 194(C) on the entire hire charges - reliance on audit objection - ITAT, dismissed the appeal of the revenue holding that reopening of the assessment was purely based on a change of opinion - HELD THAT:- Assessee in this case is engaged in the transport contract business and claimed expenses in the returns filed. AO sought an explanation from the assessee regarding the substantial expenses claimed under the category 'other expenses' in the Profit and Loss account which was responded by assessee submitting letter stating that the expenses were related to transport contracts for transporting gypsum and cement to the companies. Upon careful examination of the documents and details provided by the assessee along with the IT statement, the AO completed the assessment u/s 143(3). Assessment order explicitly stated that the AO had examined all the documents and details submitted by the assessee and accepted the income returned. Thus, it is evident from the assessment order that the AO had already scrutinized the expenses claimed by the assessee during the original assessment. While so, reopening the assessment solely on the basis of an audit objection amounts to a clear case of change of opinion, as observed by the Tribunal. Reopening the assessment by AO without any substantive basis or new material would only tantamount to a change of opinion and it is not at all a valid ground for reopening. Therefore, the Tribunal has rightly held that reopening the assessment u/s 147 is indeed a change of opinion, which is not permissible under law, in the light of the judgment of CIT V. Kelvinator India Ltd. [2010 (1) TMI 11 - SUPREME COURT] - Decided in favour of assessee. Issues involved:The issues involved in the judgment are the validity of reopening the assessment under Section 147, whether it constitutes a change of opinion, and the grounds for challenging the order of reopening the assessment.Reopening of Assessment:The Assessing Officer initiated reopening proceedings under Section 147, alleging that the assessee firm had not deducted TDS as required under Section 194(C) on the entire hire charges. The Assessing Officer disallowed 30% of the charges under Section 40(a)(ia) and completed the reopened assessment. The CIT(A) annulled the assessment, stating that the Assessing Officer's action to reopen the assessment merely to verify certain details was not a valid ground.Appeal to ITAT:The Revenue filed an appeal before the ITAT challenging the CIT(A)'s decision. The ITAT dismissed the appeal, holding that reopening of the assessment was based on a change of opinion. The Revenue contended that the ITAT erred in considering the reopening as a mere change of opinion and failed to appreciate the validity of reopening based on a factual error pointed out by internal audit.Assessment Details:The assessee, engaged in transport contract business, claimed expenses in the returns filed. The Assessing Officer scrutinized the expenses during the original assessment and accepted the income returned. Reopening the assessment solely on the basis of an audit objection was deemed a change of opinion by the Tribunal. The Tribunal held that reopening without substantive basis or new material amounted to a change of opinion, citing the judgment in CIT v. Kelvinator India Limited.Conclusion:The High Court dismissed the tax case appeal, upholding the ITAT's decision that reopening the assessment under Section 147 was a change of opinion and not permissible under law. The court found no infirmity in the order and did not warrant interference. The judgment emphasized the importance of valid reasons for reopening assessments and the prohibition against changes of opinion in such cases.