AO not entitled to commence proceedings for reassessment based on change of opinion

DCW Limited Vs ACIT (Bombay High Court)

Bombay High Court held that AO is not entitled to commence proceedings for reassessment under section 147 of the Income Tax Act based on change of opinion as material facts are fully and truly disclosed.

Facts- Petitioner had filed its return of income for A.Y. 2014-15 on 29^th November 2014. It was processed and intimation u/s. 143(1) of the Income Tax Act, 1961 was issued. Subsequently, Petitioner’s case was selected for scrutiny assessment. Petitioner was called upon to file several details pertaining to Petitioner’s claim for deductions u/s. 32AC of the Act. These include details of the installation of the machinery with respect to which a claim for deduction was made. Details of money borrowed, interest paid, etc. was also called for. All details were made available along with Auditor’s Certification for the purpose of calculation of allowance u/s. 32AC of the Act. The assessment came to completed by an order dated 17^th November 2016 under 143(3) of the Act.

An audit objection came to be raised by a letter dated 16^th August 2018 on Petitioner’s claim of deduction u/s. 32AC of the Act. In reply, the concerned Assistant Commissioner of Income Tax vide a letter 14^th March 2021 stated that the audit objection/Observation was not acceptable. Notwithstanding that a notice u/s. 148 of the Act came to be issued on 30^th March 2021 alleging there was escapement of income within the meaning of Section 147 of the Act.

Conclusion- When the primary facts necessary for assessment are fully and truly disclosed, the Assessing Officer is not entitled on change of opinion to commence proceedings for reassessment. Even if the Assessing Officer, who passed the assessment order, may have raised too many legal inferences from the facts disclosed, on that account the Assessing Officer, who has decided to reopen assessment, is not competent to reopen assessment proceedings.

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