Del HC | Reopening of assessment based on a change of opinion by Assessing Officer held vitiated in law as it does not satisfy legal requirement of S. 147 ITA

Delhi High Court: A Division Bench of S. Muralidhar and Talwant Singh, JJ. dismissed an appeal filed by the Revenue against the order of the Income Tax Appellate Tribunal (ITAT) opining that no substantial question of law arises.

The issue sought to be urged by the Revenue was whether the ITAT was justified in quashing the reassessment proceedings under Section 147 of the Income Tax Act 1961 on the ground of change of opinion on the applicability of Section 40(a)(ia) of the Act even when the Assessing Officer had not expressed any opinion on the applicability of such provision during the original assessment proceedings under Section 143(3) of the Act?

Before the High Court, the Revenue was represented by Ajit Sharma, Senior Standing Counsel came along with Abida Mujahid and Priya Sarkar, Advocates. Whereas, Gagan Kumar and Amit Kaushik, Advocates appeared on behalf of the respondent-Assessee.

Perusing the record, the High Court noted that the entire exercise of the reopening of the assessment was triggered by objections raised by the audit party. From the correspondence between the Assessing Officer and the audit party, it was clear that there was no independent decision arrived at by the Assessing Officer to form “reasons to believe” for reopening of the assessment after being satisfied that there was no escapement of income. The correspondence also indicated that not once but on two separate occasions, the Assessing Officer clearly formed the opinion that this was not a case fit for reopening of the assessment and that the Assessing Officer was constrained, notwithstanding that opinion, to reopen the assessment on the express instructions issued to him vide letter of the Additional CIT (Audit).

The Court found that the Assessing Officer had in fact applied his mind to the audit party objection and formed a clear opinion that there is no justification for reopening of the assessment and yet it is only on the insistence of the Additional CIT (Audit) that the Assessing Officer changed his opinion and decided to reopen the assessment. Consequently, it was held that the reopening of the assessment, which was based on a change of opinion was vitiated in law as it did not satisfy the legal requirement of Section 147 of the Act. In these circumstances, the view taken by the ITAT called for no interference. It was held that no substantial question of law arose, and therefore, the appeal was dismissed. [CIT v. Lalit Bagai, 2019 SCC OnLine Del 9748, decided on 21-08-2019]

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