Reassessment u/s147(b) invalid when AO consciously allows accounting method change, later merely changes opinion

SC held that reassessment under s.147(b) was invalid where the Assessing Officer had consciously permitted a change in the assessee's method of accounting after considering all relevant facts. As there was no subsequent "information" from an external source and the record showed only a mere change of opinion, the statutory precondition for invoking s.147(b) was not satisfied. The principles from earlier precedent on "information" could not justify reopening in such circumstances. The appeals were allowed, the HC judgment was set aside, and the reference was answered in favour of the assessee and against the Revenue.

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Issues: Validity of reopening assessments under section 147(b) of the Income-tax Act, 1961 based on change in accounting method.

Analysis:
The judgment pertains to appeals against the Andhra Pradesh High Court's decision regarding the validity of reopening assessments for the years 1960-61 to 1962-63 under section 147(b) of the Income-tax Act, 1961. The appellant, a bank, had changed its method of accounting for transactions in securities starting from the assessment year 1959-60. The Income-tax Officer had accepted this change in accounting method until the assessment year 1962-63. However, during the assessment proceedings for the year 1963-64, the Officer objected to this change, considering the excess amount from securities transactions as a revenue receipt. Consequently, the Officer sought to reopen assessments for the earlier years. The Tribunal had a difference of opinion, leading to the matter being referred to the President of the Tribunal, who sided with the Accountant Member. The High Court favored the Revenue, relying on a previous court ruling. However, the Supreme Court disagreed with the High Court's decision.

The Supreme Court noted that the change in the accounting method was knowingly allowed by the Income-tax Officer for the relevant assessment years and was not a result of inadvertent mistake or oversight. The Court emphasized that once a change in accounting method is knowingly accepted, it cannot be a ground for reopening assessments later unless new information from an external source emerges. The Court found no such information available to justify reopening the assessments under section 147(b) in this case. The Court concluded that the Officer's attempt to reopen the assessments seemed to be based on a mere change of opinion rather than new information. The Court also held that the principles from a previous court case cited by the High Court were not applicable in this scenario.

In light of the above analysis, the Supreme Court allowed the appeals, setting aside the High Court's judgment. The Court answered the question in the negative, favoring the assessee and ruling against the Revenue. The Court did not award any costs in this matter.

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