Company wins challenge against tax assessment reopening under Section 147 for complete disclosure of foreign exchange transactions

The HC ruled in favor of the assessee, quashing the reopening of assessment under Section 147 of the Income Tax Act, 1961. The court found that the petitioner company had made complete disclosure of foreign exchange transactions in its profit and loss account and returns filed under Section 139. The assessing officer's attempt to reopen the completed assessment was based merely on a change of opinion by a subsequent officer, which courts have consistently deprecated. Despite allegations of window dressing, the court noted there was no case of non-disclosure of material facts, as the company had no accumulated losses and properly disclosed all relevant information in its financial statements and tax returns.

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Issues Involved:
1. Challenge to the order disposing of the objection against reopening of the assessment under Section 148 of the Income Tax Act.
2. Challenge to the revised assessment order.
3. Challenge to the notice seeking to impose penalty under Section 274 read with Section 271(1)(c) of the Income Tax Act.

Summary:

Issue 1: Challenge to the Order Disposing Objection Against Reopening of Assessment
The petitioner challenged the impugned order dated 01.03.2022, disposing of the objection against reopening the assessment for the assessment year 2014-2015 under Section 148 of the Income Tax Act, 1961. The petitioner argued that the invocation of Section 148 was without jurisdiction as all required documents were already filed before the original assessment order dated 28.09.2018. The petitioner contended that the reopening was based on a change of opinion, which is contrary to the law settled by the Division Bench of Delhi High Court and affirmed by the Hon'ble Supreme Court in Commissioner of Income-tax, Delhi Vs. Kelvinator of India Ltd., [2010] 320 ITR 561. The Court found that the petitioner had disclosed all necessary information in the original assessment, and the reopening was indeed based on a change of opinion. Thus, the impugned order dated 01.03.2022 was quashed.

Issue 2: Challenge to the Revised Assessment Order
The revised assessment order dated 30.03.2022 was challenged in WP.No.27432 of 2022. The Court noted that this order was a consequence of the impugned order dated 01.03.2022, which was quashed. Therefore, the revised assessment order was also quashed.

Issue 3: Challenge to the Notice Seeking to Impose Penalty
The petitioner challenged the notice dated 30.03.2022 issued under Section 274 read with Section 271(1)(c) of the Income Tax Act, seeking to impose a penalty. The Court found that since the reopening of the assessment itself was quashed, the penalty notice had no basis and was also quashed.

Conclusion:
All three Writ Petitions were allowed, and the connected Miscellaneous Petitions were closed with no costs.

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