2022 (7) TMI 1546 - HC - Income Tax

Calcutta HC Upholds ITAT: Reassessment u/s 147 Invalid, No New Info, Just a Change of Opinion.

The HC of Calcutta dismissed the revenue's appeal, affirming the ITAT's decision that reassessment proceedings under Section 147 of the Income Tax Act, ... Validity of reassessment proceedings - whether the reopening of the assessment was valid and the tribunal was correct in setting aside the order passed by the CIT(Appeals) by which he affirmed the ex parte order of assessment passed by the AO u/s 147, 144 and 143(3)? - HELD THAT:- The tribunal after considering the facts which were placed before it has recorded a finding that the assessing officer does not spell out that escapement of income was due to the assessee not fully and truly disclosing all material facts necessary for completion of the assessment. On perusal of the reasons mentioned by the AO, the tribunal found that there is no specific finding to the effect that there was failure on the part of the assessee to fully and truly disclose all material facts. The tribunal also noted that even during the original proceedings before the assessing officer, at the first instance, increase in freight charges vis-à-vis purchases were very much available before the assessing officer. Tribunal took note of the decision in CIT vs. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT] and applied the said decision to the facts of the case and held that the assessing officer does not refer to any new material that came into his possession based on which he entertained to believe that income of the assessee chargeable to tax has escaped assessment. The nature of activities done by the assessee was taken note of and that it was a Government of West Bengal company. After examining the facts, the tribunal has concluded that the initiation of reassessment proceeding was merely on the basis of change of opinion. Thus, we find that the factual position having been taken note of by the tribunal, relief was granted to the assessee. Issues:1. Validity of reopening assessment under Section 147 of the Income Tax Act, 1961.2. Consideration of whether the reassessment proceedings were initiated legally.3. Determination of whether the reassessment proceedings were based on a change of opinion.Analysis:The High Court of Calcutta addressed the appeal filed by the revenue challenging the order of the Income Tax Appellate Tribunal related to the assessment years 2005-06. The primary issue revolved around the legality of reopening the assessment under Section 147 of the Income Tax Act, 1961. The Court considered whether the reassessment was valid and if the tribunal was correct in setting aside the order passed by the Commissioner of Income Tax (Appeals). The Court noted that for the power under Section 147 to be invoked, income chargeable to tax must have escaped assessment due to the assessee's failure to disclose all material facts. The tribunal found that the assessing officer did not establish that there was a failure on the part of the assessee to fully and truly disclose all material facts necessary for the assessment. The tribunal also highlighted that the assessing officer did not present any new material to believe that income had escaped assessment. The tribunal concluded that the reassessment was initiated based on a change of opinion rather than new facts, granting relief to the assessee.The Court further emphasized that the factual position considered by the tribunal supported the conclusion that the initiation of reassessment proceedings was merely a result of a change of opinion. The tribunal's analysis included the nature of activities conducted by the assessee, who was a government company in West Bengal. The Court referenced the decision in CIT vs. Kelvinator of India Ltd. and applied it to the case, noting the absence of any new material justifying the reassessment. Ultimately, the Court found no substantial question of law arising for consideration in the appeal and dismissed the appeal. Consequently, the connected application for stay was also closed.In summary, the High Court of Calcutta determined that the reassessment proceedings were not legally initiated under Section 147 of the Income Tax Act, 1961. The Court found that the assessing officer did not establish that the assessee failed to disclose all material facts, leading to the conclusion that the reassessment was based on a change of opinion rather than new information. As a result, the appeal by the revenue was dismissed, and the application for stay was closed.