Case Details:

Jagannath Promoters & Builders vs. DCIT

Appeal No.:

W.P. (C) No. 14603 of 2014

Order pronounced by:

Orissa High Court

Date of Order:

26-10-2021

The Petitioner is a partnership firm in whose case the scrutiny assessment was completed by the A.O. based on replies filed by the petitioner in response to detailed questionnaires issued by the A.O. In the assessment order, the A.O. disallowed Rs. 3,13,600/- on account of sundry creditors which was subsequently allowed in appeal by the CIT(A). Later, the A.O. issued a notice u/s 148 proposing to reopen the assessment on the alleged ground of income escapement. The Petitioner challenged the reopening of the case.

The Petitioner contended that the reasons for reopening the assessment do not point to any new material that was available with the Department. What appears to have happened is that the same material viz. the accounts produced by the assessee were re-examined and a fresh opinion was arrived at by the Department regarding the claim of deduction of Rs. 48,183/- on account of the loss on the sale of assets. This has already been disclosed in the detailed accounts filed by the assessee. In fact, a questionnaire had been issued by the A.O. during the original assessment proceedings to the assessee which was responded to by the assessee. In other words, there was a conscious application of mind by the A.O. to the said materials.

The short question, therefore, to be determined in the present case is whether the reopening of the assessment was based on mere “change of opinion” as contended by the assessee or was there new material which could not have been examined earlier and which justified the reopening of the assessment.

Jindal Photo Films Ltd. vs. DCIT (1998) 234 ITR 170 (Del)

In the instant case, the Hon’ble Delhi High Court observed that:

“Following the settled trend of judicial opinion and the law laid down by their Lordships of the Supreme Court time and again different High Courts of the country have taken the view that if an expenditure or a deduction was wrongly allowed while computing the taxable income of the assessees, the same could not be brought to tax by reopening the assessment merely on account of subsequently the assessing officer forming an opinion that earlier he had erred in allowing the expenditure or the deduction.”

“Though he has used the phrase ‘reason to believe' in his order, admittedly, between the date of orders of assessment sought to be reopened and the date of forming of opinion by the ITO nothing new has happened. There is no change of law. No new material has come on record. No information has been received. It is merely a fresh application of mind by the same A.O. to the same set of facts.”

ICICI Securities Ltd. vs. ACIT in Writ Petition No. 1919 of 2006:

“In the facts of the present case, there is nothing new which has come to the notice of the revenue. The accounts had been furnished by the Petitioner when called upon. Thereafter the assessment was completed u/s 143(3) of the Income Tax Act. Now, on a mere relook, the officer has come to the conclusion that the income has escaped assessment and he is of course justified in his analysis. In our view, this is not something which is permissible under the proviso to section 147 of the Income Tax Act.”

It may also be mentioned that the Civil Appeal No. 5960 of 2012 filed by the Department against the above judgment of the Bombay High Court was dismissed by the Supreme Court in CIT Mumbai and Ors. Vs. ICICI Securities Primary Dealership Ltd. where it was observed as under:

“The assessee had disclosed full details in the Return of Income in the matter of its dealing in stocks and shares. According to the assessee, the loss incurred was a business loss, whereas, according to the Revenue, the loss incurred was a speculative loss. Rejection of the objections of the assessee to the re-opening of the assessment by the A.O. is clearly a change of opinion. In the circumstances, we are of the view that the order reopening the assessment was not maintainable.”