Change Of Opinion Does Not Constitute Justification To Believe That Income Chargeable To Tax Has Escaped Assessment: Bombay HC

While quashing the reassessment proceedings initiated against Knight Riders Sports Pvt. Ltd. (Assessee), the Bombay High Court held that change of opinion does not constitute justification to believe that income chargeable to tax has escaped assessment.

Relying on the co-ordinate bench ruling in Siemens Financial Services Pvt Ltd. vs. Deputy Commissioner of Income Tax [Writ Petition No. 4888 of 2022], the Division Bench comprising of Justice K. R. Shriram and Justice Kamal Khata observed that “the reopening of the assessment by the impugned notice is merely on the basis of change of opinion from that held earlier during the course of assessment proceedings that led to the passing of the assessment order dated 25th December 2018. In our view, this change of opinion does not constitute justification to believe that income chargeable to tax has escaped assessment”.

Senior Advocate J.D. Mistri appeared for the Assessee while the Revenue was represented by Advocate Vipul Bajpayee.

The brief facts of the case were that the Assessee operates and runs IPL Team Kolkata Knight Riders. For the Assessment year 2016-17, the Assessee declared income of Rs.11.18 Crore and paid Rs.1.90 Crore as consultancy fees to Insignia Sports International without deducting TDS. In response to notice under Section 142(1), Assessee submitted details of consultancy fees of Rs.3.04 Crore paid and its breakup included the amount paid to Insignia Sports International and also the fact that no tax was deducted at source on such amount. Subsequently, another notice under Section 142(1) was issued which inquired about non-deduction of tax at source on payment made to Adrain Le. Roure and Jacques Kallis. Thereafter, the assessment order was passed wherein the notices issued to the Assessee were referred to, however, the payment to Insignia or non-deduction of tax at source were not discussed. Consequently, Assessee was subjected to reassessment proceedings on the grounds that income escaped assessment against which the Assessee objected that payment to Insignia and non-deduction of tax at source was a subject of consideration during the assessment proceedings and it’s a mere change of opinion.

After considering the submission, the Bench relied on the co-ordinate bench ruling in Aroni Commercials Ltd vs. Assistant Commissioner of Income-tax [44 taxmann.com 304 (Bombay)] to underscore that it is not necessary that an assessment order should contain reference and/or discussion on AO’s satisfaction in respect of the query raised.

The Bench further elaborated that reopening of assessment is not permissible based on change of opinions as the AO does not have any power to review his own assessment when during the original assessment, the assessee has provided all the relevant information which was considered by the AO before passing the assessment order.

This would be their position even if there is an audit objection, added the Bench.

Therefore, while concurring with Assessee’s submission and observing that once a query has been raised during the assessment and query has been answered and accepted by the AO while passing the assessment order, it follows that the query raised was a subject of consideration of the AO, and thus, the High Court sets aside reassessment on ground of change of opinion.

Cause Title: Knight Riders Sports Pvt. Ltd v. Assistant Commissioner of Income Tax [Neutral Citation: 2023: BHC-OS: 11029-DB]

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