Assessment Re-Opened By Dept. Based On 'Change Of Opinion'; Himachal Pradesh High Court Quashes Reassessment

The Himachal High Court quashed the reassessment order on the grounds that the assessment was re-opened by the department based on 'change of opinion'.

The bench of Justice Tarlok Singh Chauhan and Justice Sushil Kukreja has observed that as per the record the objections were raised only by the Audit Party and, therefore, reasons have been recorded on borrowed satisfaction of the Audit Party and not that of the respondent-department. A perusal of the reasons for reopening the case would make it evidently clear that all the material has been culled out from the assessment record submitted by the petitioner. Therefore, in absence of new facts coming to the knowledge of the Assessing Officer subsequent to the original assessment proceedings, the reopening of the case cannot be done on the basis of the same material.

The petitioner/assessee is a private limited company registered under the Companies Act and is engaged in the business of manufacturing of perfumery compound and room fresheners etc.

The petitioner filed a return declaring its net taxable income after claiming deductions under Section 80IC.

The case of the petitioner-company was selected for scrutiny and it was assessed after making an addition to the taxable income of the petitioner-company. The petitioner-company was issued notice under Section 148 requiring it to file return of income within a period of 30 days.

The petitioner-company after filing return of income applied for the copy of reasons so recorded and accordingly the same was supplied to the petitioner-company. It led to filing of detailed objections by the petitioner-company regarding reopening of the case on both legal and factual aspects.

The department contended that the petitioner-company had derived income from damaged goods claim amounting to Rs.2,01,884/-, discount received of Rs.13,50,871/- and rounded off amounting to Rs.3,564/-. The incomes had no nexus and were not derived by the petitioner-company from manufacturing activities. Hence, the income of Rs.4,66,896/- (30% of 15,56,320/-) could not have been allowed while computing eligible profits for claim of deduction under Section 80IC. Since, an income had been escaped during the year under consideration and the Assessing Officer had reasons to believe and had rightly assumed jurisdiction over the case by recording reasons for reopening the case under Section 147 beyond the period of four years but within six years after taking appropriate approval as envisaged under the Act. The notice was issued after fulfilling all statutory requirements of the Act.

The assessee contended that that the department had not placed anything on record to show that it had concealed or did not disclose true and correct particulars, as were required under Sections 147 and 148. The rejection of the objections and reopening of the case by the department are amenable to the writ jurisdiction of the Court.

The court while allowing the petition noted that while framing initial assessment of the petitioner-company, the Assessing Officer had made independent analysis of the books of accounts and other relevant material. As a matter of fact, a detailed notice had been issued to the petitioner- company on 28.03.2021 qua this very aspect of the matter to which detailed written submissions along with cogent and corroborative documentary evidence in the form of invoices etc. had been duly supplied by the petitioner-company.

The court held that once, there is a conscious application of mind after taking into consideration the relevant facts and material available and existing at the relevant point of time while making assessment, a different and divergent view cannot again be taken as this would amount to “change of opinion”. If the assessing authority forms an opinion during the original assessment proceedings on the basis of the material facts and subsequently finds it to be erroneous, then “it is not a valid reason under the law for re-assessment”.

The court quashed the reassessment order and held that the department has sought to resurrect a stale issue which has already been examined during the course of regular assessment pursuant to which the assessment order was passed on 28.03.2016.

Counsel For Petitioner: Vishal Mohan

Counsel For Respondent: Neeraj Sharma

Case Title: J.B.J. Perfumes Private Limited Versus Principal Commissioner of Income Tax and another

Citation: 2024 Livelaw (HP) 32

Case No.: CWP No. 772 of 2022

Click Here To Read The Order