2022 (4) TMI 1535 - HC - Income Tax

Reopening of assessment u/s 147 - Reason to believe - genuineness of claim of assessee company about compensation payable not proved - HELD THAT - It is a clear case of change of opinion. It is settled law that reopening can not be based on change of opinion. Change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. Admittedly in this case there was even survey operation u/s 133-A and in the survey report it was specifically commented to examine in detail genuineness of claim of assessee company about compensation payable - It is also admitted that the Assessing Officer in his order dated 31.12.2010 has accepted submissions of petitioner and allowed expenditure. According to Respondent No.2 the AO who passed the original assessment order should not have accepted the payment as expenditure but should have treated it as capital payment . It is clear case of change of opinion - quash and set aside notice u/s 148 - Decided in favour of assessee.

Summary

Issues: Impugning notice under Section 148 of the Income Tax Act for Assessment Year 2008-2009 based on alleged escapement of income.

1. The judgment addresses the challenge to a notice issued under Section 148 of the Income Tax Act, 1961, alleging that the petitioner's income for Assessment Year 2008-2009 had escaped assessment. The petitioner contended that the reasons provided for reopening the assessment indicated a change of opinion, which is not a valid ground for reopening. The court examined the reasons recorded and concluded that it indeed amounted to a change of opinion, which cannot justify reopening. The Assessing Officer had previously processed the petitioner's return of income under Section 143(3) of the Act, indicating acceptance of the submissions made. The dispute arose from a financial agreement dated 5.3.1994 between the petitioner and the promoters of a company for a development project. Subsequent agreements led to the transfer of development rights to the petitioner, resulting in the cancellation of allotments with 7 parties and a refund of deposits. The Respondent argued that the amount refunded should have been treated as a capital payment instead of an expenditure, leading to an alleged escapement of income amounting to Rs. 18,31,55,710.

2. The court noted that a survey operation had been conducted under Section 133-A, specifically questioning the genuineness of the claim regarding the compensation payable. Despite this, the Assessing Officer had accepted the expenditure of Rs. 18,31,55,710 in the original assessment order dated 31.12.2010. The Respondent contended that this amount should have been treated as a capital payment rather than an expenditure. The Assessing Officer's reasons for reopening the assessment highlighted the refund of deposits to prospective buyers as constituting a capital payment, contrary to the treatment of the expenditure in the original assessment order. The court found this to be a clear case of change of opinion, leading to the allowance of the petition seeking to quash the notice issued under Section 148 dated 30th March, 2013.

3. The judgment ultimately allowed the petition in favor of the petitioner, granting the requested relief to quash the notice under Section 148. The court emphasized that the reasons provided for reopening the assessment reflected a change of opinion, which did not justify the reopening process. The petition was disposed of with no order as to costs, concluding the legal proceedings on this matter.