Assessment reopening notice quashed as mere change of opinion after original queries were answered

The Bombay HC quashed a notice u/s 148 for reopening assessment, finding it was based on mere change of opinion. The petitioner had received notices during original assessment proceedings seeking details of depreciation, interest on unsecured loans, and expenses, to which responses were provided. Though the assessment order lacked elaborate discussion, there was disallowance indicating the AO had considered these matters. The court held that once queries are raised and replied to during assessment, the AO is deemed to have considered them. The reopening was invalid as it constituted change of opinion rather than reasons to believe income escaped assessment.

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Issues:
The issues involved in the judgment are the impugning of a notice under Section 148 of the Income Tax Act, 1961 for Assessment Year 2017-2018, related to the business activities of the petitioner, specifically concerning short term/long term borrowings, non-commencement of a project, financial costs, and other expenses.

Details of the Judgment:

1. The petitioner, engaged in real estate development and construction, filed its return of income for Assessment Year 2018-2019, showing a total loss. Subsequently, a notice was issued under Section 148 for Assessment Year 2017-2018, alleging that income chargeable to tax had escaped assessment due to certain financial discrepancies.

2. The reasons for reopening the assessment highlighted the petitioner's borrowings, project status, financial costs, and alleged failure to disclose material facts necessary for assessment. The notice aimed to disallow certain financial costs and add them to the total income of the petitioner.

3. During the assessment proceedings, queries were raised regarding interest on unsecured loans, details of loans received, and other financial aspects. Although these were not extensively discussed in the assessment order, there was a disallowance indicating that these matters were considered during the assessment.

4. The petitioner argued that the reopening was based on a change of opinion by the Assessing Officer, citing precedents to support the claim that once a query is raised and responded to during assessment, it is considered by the officer, even if not explicitly mentioned in the order.

5. The judgment referred to a case law to emphasize that the Assessing Officer's consideration of issues raised during assessment, even if not explicitly stated in the order, is sufficient to prevent reopening based solely on a change of opinion. The court allowed the petition, quashing the notice issued under Section 148 for Assessment Year 2017-2018.

6. The court's decision was in favor of the petitioner, concluding that the notice for reassessment lacked justification and was primarily based on a change of opinion rather than new evidence or grounds for believing that income had escaped assessment.

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