Reopening assessment under Section 147 based on balance sheet differences constitutes impermissible change of opinion

Gujarat HC held that reopening assessment u/s 147 based on differential amounts between balance-sheet and profit-loss account constituted mere change of opinion. The AO had originally conducted scrutiny assessment u/s 143(3) with full access to all relevant documents including balance-sheet and profit-loss account. Since petitioner had fully disclosed all material facts during original assessment and no new tangible material emerged, issuing notice u/s 148 beyond four years was impermissible. The court emphasized that change of opinion without fresh evidence cannot justify reopening. Assessee's appeal was allowed.

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Issues Involved:
1. Reopening of assessment under Section 148 of the Income Tax Act, 1961.
2. Alleged failure to disclose full and true material facts.
3. Permissibility of reopening beyond the period of four years.
4. Whether the reopening constitutes a mere change of opinion.

Detailed Analysis of the Judgment:

1. Reopening of assessment under Section 148 of the Income Tax Act, 1961:

The petitioner challenged the notice dated 18.03.2020 issued under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the Assessment Year 2013-14. The petitioner had filed the return of income on 29.11.2013 declaring a total income of Rs. 6,38,41,415/-. The case was selected for scrutiny, and the assessment was completed under Section 143(3) on 21.03.2016 without any changes to the declared income. The reopening notice was issued based on the belief that certain income had escaped assessment.

2. Alleged failure to disclose full and true material facts:

The petitioner argued that there was no failure on their part to disclose full and true material facts necessary for the assessment. During the original assessment proceedings, all relevant details, including export sales, duty drawbacks, and interest income, were furnished to the Assessing Officer. The petitioner contended that the reopening was based on the same material already available during the original assessment, and thus, it constituted a mere change of opinion.

3. Permissibility of reopening beyond the period of four years:

The petitioner argued that the reopening of the assessment was beyond the period of four years from the end of the relevant assessment year. According to Section 147 of the Income Tax Act, reopening beyond four years is permissible only if there is a failure on the part of the assessee to disclose fully and truly all material facts. The petitioner maintained that all necessary disclosures were made during the original assessment, and therefore, the reopening beyond four years was not justified.

4. Whether the reopening constitutes a mere change of opinion:

The court examined whether the reopening of the assessment was based on a mere change of opinion. It was noted that during the original assessment under Section 143(3), all relevant details were provided by the petitioner, and the Assessing Officer had considered these details while framing the assessment order. The court observed that the reasons recorded for reopening did not indicate any new or tangible material that was not available during the original assessment. The court concluded that the reopening was based on the same set of facts and materials, and thus, it constituted a mere change of opinion, which is not permissible under the law.

Conclusion:

The court held that the reopening of the assessment was not justified as it was based on a mere change of opinion and was beyond the period of four years without any failure on the part of the petitioner to disclose fully and truly all material facts. The impugned notice dated 18.03.2020 issued under Section 148 was quashed and set aside. The petition was allowed in favor of the petitioner.

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