2024 (3) TMI 1409 - HC - Income Tax

Notice to Reopen 2010-11 Assessment Quashed; Change of Opinion Not Grounds for Reassessment Under Section 147.

The HC determined that the notice to reopen the assessment for A.Y. 2010-11, based on the provision for warranty, was unjustified as it was solely due to ... Validity of Reopening of assessment u/s 147 - change of opinion or reasons to believe - provision for warranty made by the petitioner was not made on a scientific basis and reliance was placed upon the provisions made in the earlier assessment years - HELD THAT:- The issue of provision of warranty for the subject assessment year was under consideration AO while passing the assessment order dated 29th March, 2014. As held by this Court in Aroni Commercials Limited [2014 (2) TMI 659 - BOMBAY HIGH COURT] once a query is raised during the assessment proceedings and Assessee has replied to it, it follows that the query raised was a subject of consideration of the AO while completing the assessment. It is also not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. Therefore, the reopening of the assessment, in our view, is merely on the basis of change of opinion of the AO from that held earlier during the course of assessment proceedings and this change of opinion does not constitute justification and/or reason to believe that income chargeable to tax has escaped assessment. Having considered the documents over the pleadings with the assistance of the counsels, the notice has been issued purely on the basis of ‘change of opinion’, which cannot be sustained. ISSUES PRESENTED and CONSIDERED:- Whether the notice seeking to reopen the assessment for A.Y. 2010-11 based on the provision for warranty made by the petitioner is justifiedRs.- Whether the assessment can be reopened solely on the basis of a change of opinion by the Assessing OfficerRs.ISSUE-WISE DETAILED ANALYSIS:1. The Court considered the Assessing Officer's decision to issue a notice under Section 148 of the Act to reopen the assessment for A.Y. 2010-11 based on the provision for warranty made by the petitioner. The petitioner had provided information in response to the Assessing Officer's queries during the assessment proceedings, and the Assessing Officer had not raised any further concerns regarding the provision for warranty. The Court referred to the principle that a notice for reopening assessment cannot be solely based on a change of opinion by the Assessing Officer.2. The Court relied on the decision in Aroni Commercials Limited v. Deputy Commissioner of Income Tax, which held that once a query is raised during assessment proceedings and the Assessee responds to it, it is considered as a subject of consideration by the Assessing Officer. The Court concluded that the reopening of the assessment in this case was merely due to a change of opinion by the Assessing Officer, which does not justify the belief that income chargeable to tax has escaped assessment.3. The Court noted that the notice to reopen the assessment was issued purely on the basis of a change of opinion, which the Court deemed unsustainable. Consequently, the Court granted the petitioner's prayer to quash and set aside the impugned notice and order.SIGNIFICANT HOLDINGS:- The Court held that a notice to reopen assessment cannot be justified solely on the basis of a change of opinion by the Assessing Officer.- The Court established that once an issue is raised during assessment proceedings and the Assessee responds, it is considered as a subject of consideration by the Assessing Officer, and a change of opinion does not warrant reopening of assessment.- The final determination was to grant the petitioner's prayer and quash the notice and order seeking to reopen the assessment.