Revenue department cannot reopen assessment without new facts after examining all records and forming independent views

The HC quashed reassessment proceedings initiated by the revenue department against a company. The court held that the AO had already examined all books of accounts, bills and vouchers during original assessment proceedings dated 28.03.2016 and formed independent views on treating perfume pump imports as revenue expenditure and allowing deduction for damaged goods under section 80IC. The reassessment was based on borrowed satisfaction from the Audit Party rather than independent application of mind by the AO, using the same material previously considered. The court ruled that reopening cannot be done without new facts coming to the AO's knowledge post-original assessment, as this would constitute mere change of opinion, which is impermissible under law.

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Issues Involved:

1. Validity of notice issued under Section 148 of the Income Tax Act, 1961.
2. Legality of the rejection of objections filed by the petitioner against the reopening of the case.
3. Applicability of the doctrine of "change of opinion".
4. Compliance with the requirements of "full and true disclosure" under Section 147 of the Act.
5. Maintainability of the writ petition.

Issue-Wise Detailed Analysis:

1. Validity of Notice Issued Under Section 148:

The petitioner challenged the notice dated 30.03.2021 issued under Section 148 for the assessment year 2013-14, seeking its quashing. The petitioner argued that the notice was issued after the expiry of four years from the end of the relevant assessment year, and there was no failure on their part to disclose fully and truly all material facts necessary for assessment. The court observed that the reasons for reopening the case were based on the audit party's objections, which revealed that certain incomes were not derived from manufacturing activities and that certain expenditures were of a capital nature. However, the court found that these reasons were not new facts but were already part of the original assessment record, thus reopening the case on the same material was not permissible.

2. Legality of the Rejection of Objections:

The petitioner's objections to the reopening were rejected by the respondents, who contended that the petitioner had failed to disclose fully and truly all material facts necessary for assessment. The court noted that the objections were rejected mechanically without considering the detailed submissions made by the petitioner. The court emphasized that the rejection of objections must be done with a proper application of mind and not in a perfunctory manner. The court found that the respondents' rejection of the objections was not justified and thus quashed the order rejecting the objections.

3. Applicability of the Doctrine of "Change of Opinion":

The court reiterated that the concept of "change of opinion" is an in-built test to check the abuse of power by the Assessing Officer. It was noted that the original assessment was completed after a thorough examination of the books of accounts, bills, and vouchers. The court held that reopening the assessment on the same facts amounted to a change of opinion, which is not permissible under the law. The court referred to various judgments, including the Hon'ble Supreme Court's decision in M/s Mangalam Publications, to emphasize that reassessment cannot be based on a mere change of opinion.

4. Compliance with Requirements of "Full and True Disclosure":

The court examined the scope and extent of "full and true disclosure" under Section 147 of the Act. It was observed that the petitioner had disclosed all primary facts during the original assessment proceedings, and the Assessing Officer had formed an opinion based on these facts. The court referred to the Hon'ble Supreme Court's decision in Calcutta Discount Co. Ltd. and other relevant judgments to highlight that the duty of the assessee is to disclose all primary facts necessary for assessment, and once this is done, it is for the Assessing Officer to draw inferences. The court concluded that there was no failure on the part of the petitioner to disclose fully and truly all material facts.

5. Maintainability of the Writ Petition:

The respondents argued that the writ petition was premature and not maintainable. However, the court referred to the Constitution Bench judgment in Calcutta Discount Co. Ltd., which held that the High Courts have the power to issue orders prohibiting an executive authority from acting without jurisdiction. The court found that the petitioner had approached the court at the earliest opportunity and there was no reason to refuse relief. The court held that the writ petition was maintainable and allowed it.

Conclusion:

The court allowed the writ petition, quashing the notice issued under Section 148 for the assessment year 2013-14 and the order rejecting the objections filed by the petitioner. The court emphasized that the reopening of the case was based on a change of opinion and not on any new facts, and thus was not permissible. The court also reiterated the importance of full and true disclosure and the maintainability of the writ petition in such cases.

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