Assessing Officer Has No Jurisdiction To Re-Open Assessment In Clear Case Of Change Of Opinion: Bombay HC

While considering a petition challenging the legality and validity of notice issued by the Dy Commissioner of Income Tax (second respondent) under Section 148 of the Income Tax Act, 1961, the Bombay High Court quashed the said notice while stating that not only material facts were disclosed by petitioner truly and fully but they were carefully scrutinized and the figures of income, as well as deductions, were worked out carefully by the Assessing Officer.

The Division Bench of Justice K.R Shriram and Justice Firdosh P. Ponniwalla observed that “the Assessing Officer in the assessment order under Section 143(3) of the Act passed on 16th November 2009 has considered and discussed this issue under the head “profits and gains of business or profession”. Therefore, in our view, it is nothing but a clear case of change of opinion and the Assessing Officer has no jurisdiction to re-open the assessment”.

Advocate Jas Sanghavi appeared for the Petitioner, whereas Advocate Akhileshwar Sharma appeared for the Respondent.

The brief facts of the case were that the petitioner (taxpayer) had filed a return declaring total income at Nil after claiming a set-off of brought forward unabsorbed depreciation against the long-term capital gains and business income. This was accepted by the AO during the assessment. Later, the petitioner received notice under section 148 alleging that brought forward unabsorbed depreciation cannot be adjusted against income from capital gains, and therefore, the capital gains had escaped assessment in the hands of the petitioner. Although the petitioner filed its objections vide its Chartered Accountants, the same was rejected. Hence, the petitioner has approached the High Court challenging the reopening notice.

After considering the submission, the Bench found that the reason for re-opening is because of judicial pronouncement after the assessment under Section 143(3) of the Act made by the Mumbai Bench of the ITAT in the case of Deputy Commissioner of Income Tax V/s. Times Guaranty Limited [(2010) 4 ITR 210].

The Bench, therefore, noted that said decision in Times Guaranty was the only basis on which an allegation is made that there is reason to believe that income of Rs.80,36,05,717/- has escaped assessment.

“This cannot take the respondents’ case any further because more than four years have expired since the end of the relevant assessment year and the only basis on which it can be re-opened was if there was a failure to disclose fully and truly all material facts. There is not even such an allegation in the reasons to believe”, added the Bench.

The Bench referred to the decision of Apex Court in Gemini Leather Stores V/s. Income Tax Officer [(1975) 100 ITR 1 (SC)], wherein it was held that the Assessing Officer cannot take recourse to re-open to remedy the error.

Finding that the petitioner had filed all details and the subject of brought forward unabsorbed depreciation was also considered while passing the assessment order under Section 143(3), the High Court observed that the Assessing Officer had in his possession all primary facts and it was for him to draw a proper inference as to whether the brought forward unabsorbed depreciation should be adjusted against capital gains or profit and gains from business or profession.

There was nothing more to disclose and a person cannot be said to have omitted or failed to disclose something when, of such thing, he had no knowledge, added the Court.

Cause Title: Mukund Limited v. Union of India and Anr.

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