The division bench of the Delhi High Court while dismissing an appeal by the income tax department, held that mere “change of opinion” cannot be a “reason to believe” that the income is escaped in order to initiate re-assessment under section 147/148 of the Income Tax Act, 1961.
During original assessment proceedings against the assessee, M/S. Central Cottage Industries Corporation of India Ltd, the Assessing Officer had issued notices to the assessee seeking reasons for decline in the gross profit. The Respondent/assessee vide replies dated 22 April, 1989, the Assessing Officer has power to reopen, provided there is tangible material to come to the conclusion that there is escapement of income from assessment.
Subsequently, the Assessing Officer had issued notice under Section 154 of the Act on the issue of ‘Other Provisions’. The assessee, in response to said notice had submitted a break-up of ‘Other Provisions’, which included the rent of ‘A Barracks’ of Rs. 4.19 Crores.
After considering the facts and arguments of the case, Justice Manmohan and Justice Dinesh Kumar Sharma observed that the issue of rent of ‘A Barracks’ was within the knowledge of the Assessing Officer when he had passed the original assessment order as well as the subsequent order under Section 154 of the Act.
“Consequently, this Court is in agreement with the opinion of the ITAT that reassessment proceeding in the present case was based on a change of opinion and the same, therefore, cannot be sustained,” the Court said.
Ms.Vibhooti Malhotra, senior standing counsel with Mr.Shailendra Singh, Advocate appeared for the department.
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