Bombay High Court Dismisses Revenue's Appeal in Income Tax Reassessment Case Due to Change of Opinion. Queries During Original Assessment and Assessee's Response Amount to Formation of Opinion Barring Reopening Under Sections 143 and 147 of Income Tax Act, 1961, Lacking Tangible Material.

Appeal under Section 268A of Income Tax Act, 1961 challenging the Income Tax Appellate Tribunal order setting aside reassessment for Assessment Year 2007-2008 as based on mere change of opinion.

The Revenue/Appellant sought quashing of the ITAT order dated 10 February 2017 and restoration of the reassessment order dated 22 March 2013 adding Rs.30,07,71,569 under Sections 41(1) and 28(iv).

The Revenue appealed because it believed the ITAT erred in holding the reopening invalid despite absence of discussion in the original assessment order and presence of new information in the form of audit objection.

Original assessment completed on 30 November 2009 under Section 143(3); notice for reopening issued on 29 March 2012; objections rejected on 8 January 2013; reassessment completed on 22 March 2013; CIT(A) dismissed assessee's appeal on 29 February 2016; ITAT allowed assessee's appeal on 10 February 2017.

Whether the ITAT was right in holding that reassessment under Section 143 read with Section 147 was bad in law and reopening was only on account of mere change of opinion when there was no discussion on the issue in the original assessment order. Whether the ITAT was right in holding reopening invalid despite new information in the form of audit objection in light of Larsen & Toubro Ltd. v. State of Jharkhand. Whether the ITAT was right in holding reopening invalid without deciding the issue on merits.

The Revenue submitted that the issue of deduction of waiver of loan by banks as One Time Settlement found no mention in the original assessment order, so no opinion was formed and reopening was permissible. The Revenue argued that there was new information in the form of audit objection in light of the principles laid down by the Supreme Court in Larsen & Toubro Ltd. v. State of Jharkhand. The assessee submitted that all information was furnished during original assessment, there was no escapement of income, and reopening was merely a change of opinion without tangible material.

Reopening of assessment under Section 147 is not permissible on mere change of opinion; it must be based on tangible material. Where the Assessing Officer raised a query during original assessment and the assessee furnished a detailed response, the non-discussion or non-rejection of that response in the assessment order necessarily means the Assessing Officer formed an opinion accepting the assessee's view, thereby barring reopening on the same material. The reason to believe that income escaped assessment must arise from tangible material, not from the same facts already disclosed.

It is now well settled that the power of Assessing Officer to reopen the assessment is not subject to the limitation provided in Section 147 of the Act viz., failure on the part of assessee to truly and fully disclose all material facts necessary for assessment. However, this reason to believe that any income chargeable to tax had escaped assessment within 4 years from the end of the relevant Assessment-Year has to arise not on account of mere change of opinion but on the basis of some tangible material. Once there was query raised with regard to a particular issue during regular assessment proceedings it must follow that the Assessing Officer had applied his mind and taken a view in the matter as reflected in the assessment order. Therefore, it must follow that where queries have been raised during the assessment proceedings and the assessee has responded to the same, then the non- discussion of the same or non-rejection of the response of the assessee, would necessarily mean that the Assessing Officer has formed an opinion accepting the view of the Assessee, Thus an opinion is formed during the regular Assessment proceedings, bars the Assessing Officer to reopen the same only on account of a different view. Appeal is therefore dismissed.

Return filed on 31/10/2007 declaring nil income; original assessment under Section 143(3) completed on 30/11/2009 determining nil income after set off of brought forward losses; notice for reopening issued on 29/3/2012; assessee submitted objections on 1/1/2013; Assessing Officer rejected objections on 8/1/2013; reassessment completed on 22/3/2013 under Section 143(3) read with Section 147 adding Rs.30,07,71,569 as income; CIT(A) dismissed assessee's appeal on 29/2/2016; ITAT allowed assessee's appeal on 10/2/2017; present appeal under Section 268A dismissed on 26/10/2021.

• Income Tax Act, 1961: 268A, 143, 147, 41(1), 28(iv)