The Division Bench of the Bombay High Court consisting of Justices R.N. Laddha and K.R. Shriram while hearing a writ petition held that change of opinion does not constitute justification and/or reason to believe that income chargeable to tax has escaped assessment.
Facts
Petitioner was impugning a notice issued u/s 148 of the Income Tax Act, 1961 (the Act) seeking to re-open the assessment for A.Y. 2017-18 and the order dated 22nd June 2021 rejecting petitioner’s objections. The re-opening was proposed to be made within four years of the end of the relevant assessment year. In such a situation even though proviso to Section 147 of the Act would not apply, and the Assessing Officer must only make out availability of tangible material, it is settled law that if the reopening is based on mere change of opinion, the notice issued under Section 148 of the Act has to be set aside.
Observations of the Court
The Bench observed that:
“We have considered the reasons recorded and communicated to petitioner on 19th April 2021. The reasons indicate that the Jurisdictional Assessing Officer (JAO) has proceeded on incorrect facts and, he has proceeded on pure change of opinion. We say incorrect facts because the assessment order under Section 143(3) of the Act was passed on 21st December 2019 determining total income of Rs.1,20,89,790/-. The JAO however states
“Subsequently, an information was received on 20.01.2019 in this case from Investigation Directorate, Mumbai. During survey, it was found that assessee has taken interest bearing loan from various institutions in market and advanced part of loan so taken to group companies either at low interest rate or at NIL interest rate.”
Therefore, the information on which reliance has been placed was received before the assessment order dated 21st December 2019 was passed. On this ground alone, we can safely conclude that the conditions precedent to the exercise of the powers to re-assessment, i.e., existence of a reason to believe that income chargeable to tax has escaped assessment has not been met.”
“Mr. Suresh Kumar submits that these cannot be said to have been subject of consideration of the Assessing Officer because the assessment order does not contain reference and/or discussion. We will have to reject the submissions of Mr. Suresh Kumar since this court has time and again held that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It is also settled law that change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment.”
The Bench observed in the instant case that:
“There can be no doubt in the facts of the present case that the issue of loan being given to group companies either at low interest rate or no interest rate was a subject matter of consideration by the Assessing Officer during the original assessment proceedings. It would, therefore, follow that the re-opening of the assessment is merely on the basis of change of opinion of JAO from that held during the course of assessment proceedings leading to the assessment order dated 21st December 2019. This change of opinion does not constitute justification and/or reason to believe that income chargeable to tax has escaped assessment.”
Judgment
After referring to a catena of cases, the impugned notice issued u/s 148 of the Act and the order petitioner’s objections were quashed and set aside.
Case Name: Parinee Realty Pvt. Ltd. vs Assistant Commissioner of Income Tax & Anr.
Citation: WRIT PETITION NO.3638 OF 2021
Bench: Justice R.N. Laddha, Justice K.R. Shriram
Decided on:19th January 2022
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