Manner and contents of assessment order framed not determinative whether or not reopening is a case of change of opinion – Supreme Court
ABCAUS Case Law Citation
ABCAUS 3653 (2023) (02) SC
Important Case Laws covered:
Commissioner of Income Tax v. Kelvinator India Limited reported in 320 ITR 561 SC
Commissioner of Income Tax v. Techspan India Pvt. Ltd. (2018) (302 CTR 74)
Sahkari Khand Udyog Mandal Limited v. Assistant Commissioner of Income Tax [370 ITR 107]
GKN Driveshafts (India) Limited v. Income-Tax Officer reported in (2003) 259 ITR 19 (SC)
In the instant case, the Income Tax Department (Revenue) had challenged the order and judgment of the Division Bench of the Hon’ble High Court in quashing the reopening proceedings u/s 148 of the Income Tax Act, 1961 (the Act).
The assessment for the year under consideration was completed under Section 143(3) read with Section 92CA of the Act. Subsequently a notice under Section 148 was issued proposing to reopen the assessment.
The assessee sought for the reasons to believe as recorded for reopening, which were furnished after four months. The assessee submitted their objections which were dismissed of by the Assessing Officer.
The order dismissing the reasons for reopening was impugned by the assessee in a writ petition to Hon’ble High Court. However, the Single Bench of Hon’ble High Court dismissed the writ petition on the ground that the Assessing Officer, if he is able to trace out a new information, material or dimension in consonance with the provisions of the Act, which was omitted by the Original Assessing Authority, it is a good ground for reopening the assessment.
Further, the Single Bench held that, mere comparison of subject or issues with reference to the original Assessment Order and disposal of objections cannot be a ground for the purpose of setting aside the reopening proceedings and if the reasons furnished for reopening of assessment provide any new information or material or based on different dimension under the provisions of the Act, which was not considered by the Original Authority, then the reopening of assessment is permissible.
However the above findings of the Hon’ble High Court did not find allowed the appeal in favour of the assessee with the Division Bench of the Hon’ble High Court which observed that the Hon’ble Supreme Court had held that, one needs to give a schematic interpretation to the words “reason to believe”, failing which, Section 147 of the Act would give arbitrary powers to the Assessing Officer to reopen the assessment on the basis of mere “change of opinion”, which cannot be per se reason to reopen. Further, it was pointed out that the conceptual difference between the power to review and power to re-assess has to be kept in mind; the Assessing Officer has no power to review, he has power to re-assess, but reassessment is to be based on fulfillment of certain pre-conditions and if the concept of “change of opinion” is removed, then, in the garb of reopening the assessment, review would take place and one must treat the concept of “change of opinion” as an in-built test to check abuse of power by the Assessing Officer.
Thus, the reassessment proceedings cannot be initiated on the basis of same facts as was available during the regular assessment and in the absence of any new material coming to the light of the Assessing Authority.
The Division Bench of the Hon’ble High Court observed that the legal position that can be culled out from various decisions is that “reason to believe” shall be supported by new material facts, which come to the attention of the Assessing Officer, and shall not be a re-appreciation of the facts already available at the time of passing the original Assessment Order.
The Division Bench observed in detail that in respect of all the issues, they were duly scrutinized, taken into consideration and accepted while completing the assessment under Section 143(3) of the Act.
The Division Bench of Hon’ble High Court further observed that the Assessing Officer, while disposing of the objections did not examine any of these aspects, but merely observed that his predecessor Assessing Officer nowhere left the traces for verification of the issues, therefore, it did not tantamount to change of opinion.
The Hon’ble High Court opined that such finding of the AO was wholly unsustainable. In other words, the Assessing Officer, while disposing of the objections had accepted the fact that the grounds on which the assessment was reopened were verified by his predecessor, while completing the assessment under Section 143(3) of the Act. Therefore, the reopening was a clear case of change of opinion which has been clarified by CBDT vide Circular No. 549 dated 31.10.1989.
The Hon’ble High Court opined that in the absence of new facts coming to the knowledge of the Assessing Officer subsequent to the original assessment proceedings, the reopening could not have been done on the same materials. In fact, from the reasons recorded for reopening, it was evidently clear that all the materials have been culled out from the return of income filed by the assessee and the Annexure thereto.
Accordingly, the Division Bench held that the impugned reassessment proceedings, having been done with the same set of facts which were available during the regular assessment, was a clear case of change of opinion.
With respect assesses’s grievance of non-furnishing of reasons within reasonable time, the Hon’ble High Court noted that the assessee had placed reliance on a decision of the High Court. In the said decision it has been held that the Assessing Officer has to provide reasons recorded for initiating reopening proceedings within 30 days of the filing of the return of income by the taxpayer and without waiting for the taxpayer to demand such reasons. However, the Assessing Officer brushed aside the said decision, stating that the decision will not bind him as it is not a decision of the jurisdictional High Court.
The Division Bench observed that it may be true that no time limit has been prescribed for furnishing the reasons, but the Hon’ble Supreme Court has held that the reasons shall be furnished within a reasonable time.
As a result of the above findings, the Division Bench of Hon’ble High Court allowed the Writ and the order passed by the Single Judge was set aside. Consequently, the reopening proceedings were quashed.
However, the Revenue was not satisfied with the judgment of the Division Bench and filed a Petition(s) for Special Leav before the Hon’ble Supreme Court.
The Hon’ble Supreme Court in view of the findings recorded by the High Court in reference to questions raised and answers given, before, the assessment order under Section 143(3) of the Act was passed, declined entertain the SLP.
However, the Hon’ble Supreme Court observed that the assessee has no role to play and is not the author of the assessment order and hence the manner and contents of the assessment order as framed is not determinative whether or not itis a case of change of opinion.
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