Change of Opinion does not Constitute Justification to Believe Escapement of Income: Bombay HC quashes Assessment Order against Knight Riders Sports [Read Order]

The Bombay High Court quashed assessment order against Knight Riders Sports Pvt. Ltd, the petitioner and noted that the change of opinion does not constitute justification to believe escapement of income.

The petitioner is impugning a notice received under Section 148A(b) of the Income Tax Act, 1961, the order passed under Section 148A(d) of the Income Tax Act and the reassessment notice issued under Section 148 of the Income Tax Act.

The counsel for the petitioner, JD Mistri, Senior Advocate, submitted that the subject matter of the information, i.e., payment to Insignia and non deduction of TDS was a subject of the consideration during the assessment proceedings. It was submitted that once a query is raised during the assessment proceeding and assessee has replied to it, it follows that the query raised was a subject of consideration of AO while completing the assessment and it is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised.

The counsel relied on the judgment in Siemens Financial Services Pvt Ltd. vs. Deputy Commissioner of Income Tax Circle-8(2)(1) & Ors., wherein it was held that the AO does not have any power to review his own assessment because it is settled law that proceedings under Section 148 of the Income Tax Act cannot be initiated to review the earlier stand adopted by the AO.

Vipul Bajpayee relied upon the affidavit in reply filed through one Amit Kumar affirmed on 14th July 2023 submitted that the AO who passed the assessment order dated 25th December 2018 never applied his mind to the information that TDS were not deducted and that should result in dis-allowance of the expenses incurred.

It was also submitted that an audit objection has also been raised that as per the provisions of Section 40(a)(1) of the Act non deduction of TDS would make the amount of Rs.1.90 crores paid to Insignia ineligible for deduction and the tax effect on that would work out to approximately Rs. 66 lakhs.

A Division Bench comprising Justice Kamal Khata and Justice KR Shriram observed that “In our view, therefore, it would follow that the reopening of the assessment by the impugned notice is merely on the basis of change of opinion from that held earlier during the course of assessment proceedings that led to the passing of the assessment order dated 25th December 2018. In our view, this change of opinion does not constitute justification to believe that income chargeable to tax has escaped assessment.”

To Read the full text of the Order CLICK HERE

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