Case Note & Summary
The petitioner, M/s. NDT Systems, a partnership firm engaged in non-destructive testing business, filed its return of income for assessment year 2007-08 declaring total income of Rs.7.06 lacs. The Assessing Officer issued a notice under Section 143(3) of the Income Tax Act, 1961 and during the assessment proceedings, specifically examined the radiography and labour charges debited as expenses. The officer found that these payments had not suffered tax deduction at source and called upon the petitioner to explain why they should not be disallowed under Section 40(a)(ia) of the Act. After considering the petitioner's explanation, the Assessing Officer completed the assessment under Section 143(3) without making any disallowance under Section 40(a)(ia). Subsequently, on 20/3/2012, the Assessing Officer issued a notice under Section 148 of the Act seeking to reopen the assessment for AY 2007-08 on the ground that income chargeable to tax had escaped assessment because the radiography and labour charges ought to have been disallowed under Section 40(a)(ia). The petitioner challenged this notice by way of a writ petition under Article 226 of the Constitution of India before the Bombay High Court. The court examined whether the reopening was valid. The court noted that the very issue of disallowance under Section 40(a)(ia) was raised and considered during the original assessment proceedings under Section 143(3). The Assessing Officer had applied his mind to the issue and decided not to disallow the expenses. Therefore, the subsequent notice under Section 148 based on the same issue, without any fresh tangible material, amounted to a mere change of opinion. The court held that the power to reopen under Section 147 is not a power to review or reconsider the earlier assessment. Relying on the settled legal position, the court quashed the impugned notice dated 20/3/2012. The petition was allowed with no order as to costs.
Headnote
A) Income Tax - Reassessment - Section 147, 148 Income Tax Act, 1961 - Reopening of Assessment - The Assessing Officer issued a notice under Section 148 to reopen the assessment for AY 2007-08 on the ground that expenses debited as radiography and labour charges should have been disallowed under Section 40(a)(ia) for non-deduction of tax at source. The original assessment under Section 143(3) had already examined this issue and allowed the expenses. The court held that reopening based on the same issue without any fresh tangible material amounts to a mere change of opinion, which is not permissible under Section 147. The notice was quashed. (Paras 1-6) B) Income Tax - Change of Opinion - Section 147 Income Tax Act, 1961 - Validity of Reassessment - The court reiterated the settled legal position that once an assessment is completed under Section 143(3), the Assessing Officer cannot reopen the assessment on the same set of facts and issues merely because he later forms a different opinion. The power to reopen is not a power to review or reconsider the earlier assessment. (Paras 5-6)
Issue of Consideration
Whether a notice under Section 148 of the Income Tax Act, 1961 to reopen an assessment is valid when based on the same issue already considered during the original assessment under Section 143(3), without any fresh tangible material.
Final Decision
The petition is allowed. The impugned notice dated 20/3/2012 issued under Section 148 of the Income Tax Act, 1961 is quashed. No order as to costs.
Law Points
- Reassessment under Section 147 requires fresh tangible material
- mere change of opinion is not permissible
- Section 40(a)(ia) disallowance cannot be basis for reopening if already examined in original assessment
