Primary Facts Necessary For Assessment Fully & Truly Disclosed, AO Not Entitled To Change Opinion For Reassessment: Bombay High Court

The Bombay High Court has held that the primary facts necessary for assessment are fully and truly disclosed, and the Assessing Officer is not entitled, on change of opinion, to commence proceedings for reassessment.

The bench of Justice K. R. Shriram and Justice Neela Gokhale has observed that even if the Assessing Officer, who passed the assessment order, may have raised too many legal inferences from the facts disclosed, on that account, the Assessing Officer, who has decided to reopen assessment proceedings, is not competent to reopen assessment proceedings.

The petitioner/assessee filed its return of income for Assessment Year 2014–15 on November 29, 2014. It was processed, and an intimation under Section 143(1) of the Income Tax Act, 1961, was issued. Subsequently, the petitioner's case was selected for scrutiny. The petitioner was called upon to file several details pertaining to the petitioner's claim for deductions under Section 32AC. These include details of the installation of the machinery with respect to which a claim for deduction was made. Details of money borrowed, interest paid, etc. were also called for. All details were made available along with the auditor's certification for the purpose of calculating the allowance under Section 32AC.

The assessment was completed by an order dated November 17, 2016, under 143(3) of the Income Tax Act.

An audit objection was raised by a letter dated August 16, 2018, on the petitioner's claim of deduction under Section 32AC. In reply, the concerned Assistant Commissioner of Income Tax stated that the audit objection or observation was not acceptable. Notwithstanding that a notice under Section 148 of the Income Tax Act came to be issued on March 30, 2021, alleging there was escapement of income within the meaning of Section 147,

The petitioner filed its objections, and the objections were rejected. In the order rejecting objections, the stand taken is that a mere change of opinion cannot be a basis for reopening a completed assessment because it would be applicable only to situations where the Assessing Officer has applied his mind and taken a conscious decision on a particular matter in issue. Since the assessment order does not discuss the claim of deduction under Section 32AC, the defence of change of opinion available to the petitioner was not available to the petitioner.

The assessee contended that an audit query was raised and there was a misapplication of the provisions of Section 32AC of the Act. However, the Assessing Officer himself has replied to the audit objection raised, denying that there was any escapement of income.

The court held that a change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment.

Counsel For Petitioner: Sukhsagar Syal

Counsel For Respondent: Akhileshwar Sharma

Case Title: DCW Limited Versus Assistant Commissioner of Income Tax

Case No.: Writ Petition No. 1250 Of 2022

Click Here To Read The Order