Orissa High Court
Kalinga Institute Of Industrial vs Asst. Commissioner Of Income Tax on 21 July, 2022
IN THE HIGH COURT OF ORISSA AT CUTTACK
W.P. (C) No.4440 of 2022
Kalinga Institute of Industrial .... Petitioner
Technology (KIIT, Bhubaneswar
Mr.Sidhartha Ray, Advocate
-versus-
Asst. Commissioner of Income Tax .... Opposite Parties
Exemption Circle, Bhubaneswar &
Others
Mr. R.S. Chimanka, Sr. Standing Counsel
along with Mr.A.Kedia, Jr.Standing Counsel
for IT Department.
CORAM:
THE CHIEF JUSTICE
JUSTICE R.K. PATTANAIK
ORDER
Order No. 21.07.2022
Dr. S. Muralidhar, CJ.
02. 1. The challenge is the present petition is to a notice issued to the
Petitioner under Section 148 of the Income Tax Act 1961(Act)
dated 31st March, 2021 and the subsequent order dated 28th January,
2022 of the National Faceless Assessment Centre, (NAFAC), New
Delhi rejecting the objections filed by the Petitioner to the
reopening of the assessment.
2. The reopening was sought to be made of an assessment which
was completed on scrutiny for the Assessment Year (AY) 2014-15
by the assessment order dated 30th December, 2016.
3. It must be noticed at this stage that in the course of this said
assessment order a notice was issued to the Petitioner under Section
143(2) of the Income Tax Act not by the authorized officer i.e. the
Commissioner of Income Tax(OSD)(Exemption) but by the
Assistant Commissioner of Income Tax, Corporate Circle-1(2),
(ACIT). When the Petitioner challenged both the assessment order
dated 30th December, 2016 as well as the aforementioned notice
under Section 143(2) of the Act in a Writ Petition (Civil) No.898 of
2017 in this Court, the said writ petition was disposed of by this
Court by an order dated 6th March, 2019 setting aside the
aforementioned notice under Section 143(2) of the Act on the
ground that it was issued by an authority i.e. the ACIT who did not
have jurisdiction to do so. However, this Court did not interfere
with the assessment order on the ground that it was an appealable
order.
4. Today, Mr. Sidhartha Ray learned counsel appearing for the
Petitioner confirms to the Court that as of date the Assessee has not
challenged by way of appeal, the said assessment order dated 30 th
December, 2016 for AY 2014-15.
5. After receipt of the reasons for reopening provided by the
Department on 13th May 2021, the Petitioner filed an objection on
26th May, 2021 to the impugned notice dated 31st May, 2021pointed
out that the reopening was based merely on a change of opinion and
not on any new material. The NFAC has by the further order dated
28st January, 2022 rejected the objections.
6. This Court has heard the submissions of Mr.Ray, learned counsel
appearing for the Petitioner as well as Mr. R.S. Chimanka, Sr.
Standing Counsel for the Department.
7. A perusal of the reasons provided by the Department by letter
dated 13th May, 2021 to the reopening of the assessment for the
aforementioned AY 2014-15 reveals that, it refers to the tax audit
report and the information available in the books of accounts of the
Petitioner. It then proceeds to say "from the above details, it is
revealed that the trust was selling medicines with huge margin of
profit....." Interestingly, the original assessment order dated 30th
December, 2016 was on identical terms. The Assessing Officer
(AO) therein stated "on perusal of the tax audit report it is revealed
that... that the trust is selling the medicine on huge margin of
profit..." Further the original assessment order in a tabular form
sets out the cost of medicines and the selling price of the medicines
as was done in identical terms in the reasons for reopening the
assessment. This is a text book example of reopening of assessment
being made on exactly the same materials that were available to the
AO in the first instance.
8. This is precisely what has been disapproved by the Supreme
Court of India in its decision in Commissioner of Income Tax v.
Kelvinator of India Ltd.(2010) 320 ITR 561(SC) where it observed
as under:
".....post-1st April, 1989, power to reopen is much
wider. However, one needs to give a schematic
interpretation to the words "reason to believe" failing
which, we are afraid, section 147 would give arbitrary
powers to the Assessing Officer to reopen assessments
on the basis of "mere change of opinion", which cannot
be per se reason to reopen. We must also keep in mind
the conceptual difference between power to review and
power to reassess. The Assessing Officer has no power
to review; he has the power to reassess. But
reassessment has to be based on fulfillment of certain
preconditions and if the concept of "change of opinion"
is removed, as contended on behalf of the Department,
then, in the grab of reopening the assessment, review
would take place. One must treat the concept of
"change of opinion" as an in-built test to check abuse of
power by the Assessing Officer."
9. This Court too has in similar circumstances, where there was a
mere change of opinion on the same materials, set aside the
reassessment notice and the consequential assessment order by its
judgment dated 15th February, 2022 in Writ Petition (Civil) No.
25229 of 2017 (M/s. Tuff Tubes (Orissa) Pvt. Ltd. v. The Deputy
Commissioner of Income Tax, Corporate Circle-1(2),
Bhubaneswar).
10. For the aforementioned reasons, this Court quashes the notice
dated 31st March, 2021 issued to the Petitioner under Section 148 of
the Act and the consequential order dated 26th May, 2021 of the
NAFAC rejecting the objections of the Petitioner to the reopening of
the assessment.
11. The writ petition is allowed in the above terms, but in the
circumstances with no order as to costs. An urgent certified copy be
issued as per Rules.
(Dr. S. Muralidhar)
Chief Justice
( R.K.Pattanaik )
Judge
Kabita
