If AO examines a claim and not reject it then it can’t be said that AO not formed any opinion  

If AO examines a claim and not reject it then it can’t be said that AO had not formed any opinion so as reopen the case without any new or additional material-SC dismisses SLP of ITD 

ABCAUS Case Law Citation:
ABCAUS 3055 (2019) (07) SC

Important Case Laws Cited/relied upon by the parties:
CIT V/s Autokast Ltd. (2001) 248 ITR 110 (SC) 
N.J. Pharmaceuticals Ltd. Vs. Dy. CIT, (2008) 297 ITR 119
Gujarat Power Corporation Ltd. Vs. Asst. CIT, (2013) 350 ITR 266, 
Tuticorin Alkali Chemicals and Fertilizers Ltd. v/s CIT 227 ITR 172 
CIT Vs. Kelvinator India Ltd. 320 ITR 561

The respondent company was engaged in the business of development of real estate projects. For the relevant Assessment Year, its return was selected for scrutiny. Subsequently the Assessing Officer (AO) passed an order of assessment u/s 143(3) of the Income Tax Act, 1961 (“the Act”) accepting the  declared income.

Later, the AO in order to reopen the said assessment issued notice u/s 148 of the Act by recording the reasons which was basically with respect to the correctness of the claim of interest expenditure. Upon being supplied with  the reasons recorded by the Assessing Officer, the petitioner raised objections to the reopening of the assessment.  The said objections were however rejected by the Assessing Officer.

The company approached the Hon’ble High Court and argued that the entire issue was examined by the Assessing Officer during the original  scrutiny assessment and in the absence of any new material, the reopening of the assessment was based on mere change of opinion.   

However the Revenue opposed the petition contending that during the original assessment, the question of correctness of the petitioner’s claim of interest expenditure was not examined. It was also contended that the notice of reopening had been issued within a period of 4 years from the end of the relevant assessment year.  The concept of true and full disclosure, therefore, would not apply.

The Hon’ble High Court from the material which was part of the original proceedings noted that It can thus be seen that during the original scrutiny assessment, the AO had asked the assessee to clarify the issue and had called upon the assessee to furnish various details. In response to such queries the assessee, in the reply had explained and elaborated  the issue in detail.

The Hon’ble High Court opined that Indisputably, the entire issue was minutely scrutinized by the AO during the original assessment proceedings.  Therefore, in the absence of any new material, the reopening of the assessment would be based on mere change of opinion.

The Hon’ble High Court pointed out that The Supreme Court had held that even after the amendment in Section 147 w.e.f. 01.04.1989, the concept of change of opinion would continue to apply.

The Hon’ble High Court observed that though it was true that in the final order of assessment, the AO had not elaborated the issue in question but had not made any disallowance or addition in the hands of the assessee.   

The Hon’ble High Court opined that merely because the order of assessment was silent on a particular claim of the assessee, would not by itself mean that the same was not scrutinized or that the AO had not formed an opinion with respect to the same. 

The Hon’ble High Court opined that if after detailed scrutiny during the assessment, the AO examines a claim but does not reject the claim of the assessee which had come up for scrutiny, would not enable the Revenue to argue that the Assessing Officer had not formed any opinion on such issue and, therefore, reopening of the assessment would be permissible without there being any new or additional material available to the Assessing Office. 

Accordingly, the Hon’ble High Court had set aside the the impugned  notice issued u/s 148 if the Act.

The said order of the Hon’ble High Court, was challenged by the Income tax Department/Revenue before the Hon’ble Supreme Court by way of filing a special leave petition (SLP).

However, the Hon’ble Supreme Court dismissed the said SLP by observing that no reason could be seen to entertain the petition.  

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