Change Of Assessing Officer's Opinion Not Ground To Reopen Assessment U/S 147 Income Tax Act, Tangible Material Required: Bombay High Court

The Court further held that assessment can be reopened under Section 148 only on the reasonable belief that income had escaped assessment on account of failure of the assessee to disclose truly and fully all material facts that were necessary for computation of income but not in a case wherein the assessment is sought to be reopened on account of change of opinion of the Assessing Officer.

Background

The petitioner had filed return of income on 30.11.2013 for the period 2013-2014 and the assessment was completed on 30th December 2016. petitioner received notice dated 2nd August 2019 under Section 148 of the Act saying that there are reasons to believe that petitioner's income chargeable to tax for A.Y.-2013-2014 has escaped assessment within the meaning of Section 147 of the Act.

Section 147 of the Income Tax Act, 1961 provides for the reopening of proceedings. This section gives discretion to the Assessing Officer to reopen assessment proceedings when he/she has reason to believe that some of the income has escaped assessment.

Explaining the import of Section 147, the Bombay High Court notes that while Section 147 imposes a duty on the assessee to disclose all material facts, the duty does not extend beyond the full and truthful disclosure of all primary facts. It notes:

"Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else-far less the assessee to tell the assessing authority what inferences, whether of facts or law, should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences - whether of facts or law - he would draw from the primary facts….. Therefore, it can be concluded that while the duty of the assessee is to disclose fully and truly all primary relevant facts, it does not extend beyond this." (Para 3)

The judgement refers to the Apex Court judgment in Commissioner of Income Tax c Kelvinator of India Ltd (2010) 320 ITR 561, where the Supreme Court had held that Section 147 cannot be used to confer arbitrary powers on the Assessing Officer to reopen assessments on the basis of mere change of opinion which cannot be per se reason to reopen.

The judgement further relies on Sesa Goa Limited v Joint Commissioner of Income Tax & Ors to note that:

"the Assessing Officer has no power to review and he has power to reopen provided there is tangible material to come to the conclusions that there is escapement of income from assessment and there was failure on the part of assessee to truly and fully disclose material facts. The Assessing Officer cannot simply say that he has reasons to believe that income which was chargeable to tax has escaped reassessment by reasons of failure on the part of assessee to disclose fully and truly all material facts necessary to take the case out of the restrictions imposed by proviso to Section 147 of the Act." (Para 4)

In the present case the Court observes that the entire basis for reopening/reassessing is on the same documents and submissions which were available before the Assessing Officer before passing of the original assessment order. This, the Court notes, shows that is not a case where the assessment is sought to be reopened on the reasonable belief that income had escaped assessment on account of failure of the assessee to disclose truly and fully all material facts that were necessary for computation of income but this is a case wherein the assessment is sought to be reopened on account of change of opinion of the Assessing Officer. It notes:

"Where on consideration of material on record, one view is conclusively taken by the Assessing Officer, it would not be open to reopen the assessment based on the very same material with a view to take another view. We are satisfied that petitioner had truly and fully disclosed all material facts necessary for the purpose of assessment."

The Court further notes that when notice to reopen the assessment is founded entirely on the assessment records and the entire basis for reopening the assessment is the disclosure which has been made by the assessee in the course of the assessment proceedings and where no material to which a reference is to be found, there is no case for reassessing under Section 147.

Accordingly, the judgement quashed the notice dated 2.08.2019 for the reassessment of tax and disposed off the petition with no order as to costs.

Case Title: Vodafone Idea Ltd v Assistant Commissioner of Income Tax

Coram: Justice K.R.Shriram, Justice R.N.Laddha

Citation: 2022 LiveLaw (Bom) 17

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