The Telangana High Court (HC), bench of Chief Justice Ujjal Bhuyan and Justice Baskar Reddy in its recent ruling held that the reopening of assessment cannot be made by mere change of opinion.
This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 against the order passed by the Income Tax Appellate Tribunal (ITAT) for the assessment year 2010-11.
The Division bench noted that by change of opinion holding that reduction of Rs.113,19,93,808.00 towards reversal on account of cancellation and price revision and deducting the same from the profit and loss account was irregular thereby having reason to believe that taxable income had escaped assessment, the concluded assessment could not have been reopened as the assessment was already completed.
The respondent is the assessee, Lanco Hills Technol Park Pvt Ltd., a private limited company engaged in the business of development and sale of office space, residential buildings, commercial complexes etc.
The assessee had filed return of income on 25.09.2010 admitting loss of Rs.29,24,79,084 after setting off long term capital gain of Rs.3,85,41,685.
Subsequently the respondent filed revised return of income on 27.09.2011 declaring higher loss of Rs.36,03,42,295.00 after setting off long term capital gain of Rs.3,85,41,685.00. Further, the Assessing officer (AO) passed the assessment order on 27.12.2012 under Section 143(3) of the Income Tax Act accepting the loss returned on 25.09.2010.
Later it was reopened / reassessment by the AO under Section 147 of the Income Tax Act by issuing notice under Section 148 on 31.03.2016 to the respondent that is after 4 years.
Further, the AO completed the assessment under Section 143(3) read with Section 147 of the Income Tax Act by disallowing the claim of Rs.113,19,93,808 towards debiting to the profit & loss account due to reversal on account of cancellation and price revision. The disallowed claim was added to the returned income.
The respondent filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)] and the decision was not in favour of action of the AO in reopening of assessment was bad in law and also the addition made on account of reversal of revenue due to price revision/cancellation. The CIT(A) directed to delete the additions.
Further, the revenue preferred appeal before the ITAT however it was rejected and upheld the decision of the CIT(A) that change of opinion cannot be a reason for reassessment.
The HC highlighted that the tribunal relied on the decision of the Bombay High Court on a landmark decision in Hindustan Lever Limited Vs. R.B. Wadekar (2014) 268 ITR 332 (Bom) that an Assessing Officer’s reopening reasons have to be read on standalone basis; as it is, without any scope of further improvement at a later stage by way of addition, deletion or substitution therein.
The bench also observed that in compliance to 147(1) first provision of the Act, It is evident that respondent had disclosed fully and truly all material facts to the AO during the assessment proceeding on the basis of which assessment order issued initially was passed under Section 143(3) of the Income Tax Act.
Further the HC dismissed the appeal of the revenue by stating that there is no substantial question of law for interference under Section 260A of the Income Tax Act.
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