Reopening assessment notice invalid when revenue changes opinion on previously disclosed facts under Section 148

The Kerala HC held that the revenue's notice under Section 148 for reopening assessment was invalid. The department had raised queries about fund accumulation and utilization during original assessment proceedings in 2011, which the assessee had responded to through detailed submissions. Since the assessing officer did not address this issue in the original assessment order despite receiving responses, it was deemed accepted. The HC ruled that issuing a reopening notice in 2016 based on the same grounds constituted a mere change of opinion, which is impermissible. The extended limitation period of six years was not applicable as the assessee had fully disclosed all material facts. The petition was allowed.

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Issues Involved:
1. Barred by Limitation
2. Change of Opinion

Detailed Analysis:

1. Barred by Limitation:

The primary issue is whether the notice issued by the department (Ext.P5) and the subsequent order (Ext.P10) are barred by limitation. The assessment year in question is 2009-10, and the notice under Section 148 of the Income Tax Act was issued on 30.03.2016. According to Section 149 of the Act, the notice must be issued within four years from the end of the relevant assessment year unless it falls under Clause (b), which extends the period to six years if certain conditions are met. These conditions include the officer having a "reason to believe" that income has escaped assessment and that the escape was due to the assessee's failure to disclose fully and truly all material facts necessary for the assessment.

The petitioner argued that all relevant details regarding the accumulation and utilization of Rs.50 lakhs were disclosed to the department as early as 2011, evidenced by Ext.P2 notice and Ext.P3 reply. The department's scrutiny notice (Ext.P2) and the petitioner's detailed response (Ext.P3) indicate that the department was aware of the discrepancy in the utilization of funds. The court concluded that since the department had this information well before the extended six-year period, the notice issued in 2016 was barred by limitation.

2. Change of Opinion:

The second issue is whether the notice issued (Ext.P5) constitutes a "mere change of opinion" by the assessing authority. The court referred to the Supreme Court's judgment in Commissioner of Income Tax v. Kelvinator of India, which emphasized that reassessment based on a mere change of opinion is not permissible. The court noted that the department had already scrutinized the issue of fund utilization during the original assessment proceedings, as evidenced by Ext.P2 notice and Ext.P3 reply. The petitioner had provided explanations, and the assessment was finalized without any adverse findings on this issue.

The court also referred to several precedents, including Marico Limited v. Assistant Commissioner of Income Tax and G K N Sinter Metals Ltd. v. Ramapriya Raghav, which held that once a query is raised and answered during the original assessment, the assessing officer's failure to make any addition or rejection implies acceptance of the assessee's explanation. Thus, any subsequent reassessment on the same issue would amount to a change of opinion.

The court concluded that the reasons for reassessment stated in Ext.P7 were the same as those considered during the original assessment proceedings. Therefore, the reassessment proceedings initiated by Ext.P5 were based on a mere change of opinion, rendering them invalid.

Conclusion:

The writ petition was allowed, and the order issued by the 3rd respondent (Ext.P10) was quashed. The court found that the reassessment proceedings were both barred by limitation and constituted a mere change of opinion by the assessing authority.

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