In a recent decision the Bombay High Court ruled that the change of opinion is not reason to believe that income chargeable to tax has escaped assessment under Section 143(3) of the Income Tax Act, 1961. The petitioner is engaged in the business of real estate development and construction. For Assessment Year 2018-2019 petitioner filed its return of income on 30th October 2017, which was revised on 1st June 2018, declaring a total loss of Rs.1,41,16,482/-.
The Petitioner’s case was selected for scrutiny assessment and notices were issued under Section 142(1) read with Section 129 of the Income Tax Act. Petitioner responded to the notices and also filed documents. An assessment order dated 20th December 2019 came to be passed in which petitioner’s loss was assessed at Rs.1,05,42,877/-. Subsequently petitioner received a notice under Section 148 of the Income Tax Act that there are reasons to believe that petitioner’s income chargeable to tax for Assessment Year 2017-2018 has escaped assessment. Petitioner was also provided reasons for reopening of assessment. The Petitioner’s case is the issue of petitioner’s short term/long term borrowings and non-commencement of project, the financial cost, etc. came up for discussion during the assessment proceedings.
The counsel for the petitioner submitted that the entire basis of reopening could be change of opinion because once the Assessing Officer has raised query and petitioner has responded that would mean that it was under consideration of the Assessing Officer during the proceedings and, therefore, on the same basis there cannot be reopening of assessment. A Division Bench comprising Dr Justice Neela Gokhale and Justice KR Shriram observed that “It is obvious that the reopening of the assessment by impugned notice is merely on the basis of change of opinion of the Assessing Officer from that held earlier during the course of assessment proceeding leading to the assessment order. This change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment.”