I-T - Reassessment notice u/s 148, on ground that original assessment order was not preceded by any queries with regard to subject claim of assessee, is change of opinion: HC
By TIOL News Service
MUMBAI, JUNE 25, 2018: THE ISSUE BEFORE THE BENCH IS - Whether when computation of income duly explained the basis of claim being made to the satisfaction of AO, there is still some necessity for him to ask any queries in respect of such claim of the assessee, which is being allowed. VERDICT IS NO.
Facts of the case
The assessee-bank filed return for the relevant AYs and claimed deductions in the value of its advances on account of change in the contractual terms consequent to the restructuring of the assets. Accordingly, the AO completed the assessment. However, after completion of such assessment, the AO observed that such restructuring of the assets were of a contingent nature and did not qualify to be allowed as a loss or deductible expenditure. However,the assessee objected to the reasons for reopening notices contending that the AO had no reason to believe that the income chargeable to tax has escaped assessment and the reasons in support of the such notice indicate a change of opinion. The AO rejected the contentions of the assessee.
Therefore, the assessee filed instant writ petition contending that restructuring of its loans or advances was made in its computation of income and the notes annexed thereto and the provision for diminution on account of restructured Advances of Rs.710.81 crores (AY 2013-14) and Rs.495.11 crores (AY 2014-15) was claimed in accordance with RBI guidelines. The assessee further contended that the claim for such provision as a deduction was considered during the assessment proceedings and accepted.
The High Court held that,
++ the Apex Court in Income-Tax Officer V/s. Techspan India Private Limited and Another reiterated the settled principle of law laid down by the Supreme Court in CIT V/s. Kelvinator of India Ltd. that the Assessing Officer has a power only to reassess and has no power to review the assessment order. Thus, it held that no re-opening notice can be issued which is premised on a change of opinion. It further goes on to hold that before interference with a proposed reopening of the assessment, the Court should verify whether the assessment order made earlier has expressly or by necessary implication expressed an opinion on a matter which is the basis of the alleged escapement of income that was taxable;
++ the assessment orders passed in regular assessment proceedings do refer to examining the computation of income filed alongwith the Return of Income. Moreover, the Assessment order in regular assessment proceedings in terms disallowed some of the claims made for deduction under Section 143(3) of the Act. Therefore, in the present facts, the Assessing Officer has by necessary implication allowed the claim. Moreover, the basic document for completing the assessment under Section 143(3) of the Act is the computation of income. Therefore, to the extent the claims made for deduction in the computation of income, were disallowed by the Assessing Officer, discussion on the same is found in the assessment order;
++ it is an accepted position that the assessment orders would necessarily deal only with the claims being disallowed and not with the claims being allowed. This is for the reason as observed by the Gujarat High Court in CIT Vs. Nirma Chemicals, that if the Assessing Officer was to deal with all the claims which were to be allowed in the assessment order, the result would be an epictome. This is so, as it would cast an impossible burden upon the Assessing Officer considering his workload and the period of limitation. There was also no reason in the present facts for the Assessing Officer to ask any queries in respect of this claim of the assessee, as the basic document viz. computation of income at note 21 (Assessment Year 2013-14) and note 22 (Assessment Year 2014-15) thereof explained the basis of the claim being made to the satisfaction of the Assessing Officer;
++ it must necessarily be inferred that the Assessing Officer has applied his mind at the time of passing an assessment order to this particular claim made in the basic document viz. computation of the income by not disallowing it in proceedings under Section 143(3) of the Act as he was satisfied with the basis of the claim as indicated in that very document. Therefore, where he accepts the claim made, the occasion to ask questions on it will not arise nor does it have to be indicated in the order passed in the regular assessment proceedings. Thus, issuing the notices on such ground would, prima-facie, amount to a change of opinion.
(See 2018-TIOL-1171-HC-MUM-IT)
