Reopening The Assessment Based On Change Of Opinion, Not Valid: Gujarat High Court

The Gujarat High Court has held that the Assessing Officer cannot have any jurisdiction to issue the notice for reopening the assessment when the assessment is sought to be reopened beyond a period of four years.

The division bench of Justice N.V. Anjaria and Justice Bhargav D. Karia has observed that there was a change of opinion by the Assessing Officer to reopen the assessment for the assessment year 2013-2014, more particularly when the issues raised in the reopening assessment were already considered during the assessment proceedings under Section 143(3) of the Act, 1961.

The petitioner/assessee is in the business of manufacturing and trading yarn and fabric. The notice under Section 148 was issued in the name of the amalgamating company instead of the new company. The Assessing Officer noted the reasons that the assessee claimed a deduction of insurance premiums on account of Keyman Insurance Policies in the computation of total income, which was incorrectly allowed by the Assessing Officer because the policies on which the premium was paid were not Keyman Insurance Policies.

The assessee submitted that the notice under Section 148 can be issued only if an Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment. There is no new information or fresh evidence that has come into the possession of the department that was not already there when the original assessment was framed. As a result, reopening the assessment is simply a change of opinion, and thus notice is required to be quashed and set aside.

The department contended that the Assessing Officer found that the assessee had claimed payment of the total Keyman insurance premium; however, the amount was not debited to the profit and loss account but to the balance sheet under the heading Long Term Loan and Advances.

The court held that the notice under Section 148 of the Income Tax Act, 1961, was not tenable in law and was accordingly quashed.

Case Title: Shahlon Silk Industries Pvt. Ltd. Versus ACIT [R/Special Civil Application 20436 of 2018]

Case Citation: 2023 Livelaw (Guj) 9

Date: 06.01.2023

Counsel For Petitioner: Senior Advocate Tushar Hemani

Counsel For Respondent: Advocate Nikunt Raval

Click Here To Read The Order