Assessment Order Need Not Discuss Every Claim; Reopening Same Issue Is 'Change Of Opinion': Bombay High Court
The Bombay High Court has ruled that an income tax assessment cannot be reopened where the record shows that an issue was examined during scrutiny and the assessee's claim was accepted, even if the original assessment order did not expressly discuss the issue.
The bench of Justice B.P. Colabawalla and Justice Farhan P. Dubash observed that “it is not necessary for an Assessing Officer to discuss each and every issue elaborately to disclose his satisfaction” when accepting an assessee's claim.
The court held that reopening the same issue on the same set of facts would amount to a “change of opinion”.
The case concerned Prayas Goel, who sold 345 shares of Concord Enviro Systems Pvt. Ltd. to AF Holdings, Mauritius. The sale resulted in capital gains of about ₹2.96 crore. Goel invested the gains in a residential property and claimed exemption under Section 54F of the Income Tax Act.
Goel's return was selected for limited scrutiny. During the scrutiny, the assessing officer examined the share transaction, including its valuation, the identity and creditworthiness of the purchaser, and the genuineness of the transaction. The exemption claim was also examined.
The assessing officer ultimately accepted Goel's claim and completed the assessment without making any addition. The assessment order did not separately discuss these issues.
Nearly six years later, the tax department sought to reopen the assessment. It questioned the valuation of the shares and alleged that the transaction was a “make-believe” arrangement used to route Goel's own unaccounted money.
The court rejected the reopening on the ground that the same issues had already been examined during the original scrutiny. It found that the share pricing, valuation, identity, and creditworthiness of AF Holdings and the genuineness of the transaction had been examined before the claim was accepted.
The court also found that the Section 54F exemption claim had been examined and accepted. It held that the absence of detailed discussion in the original assessment order did not mean that the assessing officer had not formed an opinion.
Relying on its earlier decision in Knight Riders Sports Pvt. Ltd., the court observed that once a query is raised during assessment, answered by the assessee and accepted by the assessing officer, the issue has been considered. This remains so even if the assessment order does not specifically discuss it.
The court also rejected the department's attempt to rely on its affidavit to introduce grounds concerning the Section 54F exemption. The reasons recorded for reopening could not subsequently be improved or supplemented in this manner.
The court therefore quashed and set aside the show-cause notice issued under Section 148A(b), the order under Section 148A(d), and the consequential notice under Section 148.
The court made clear that it was allowing the petition on the ground of change of opinion.
It did not express any opinion on Goel's separate argument that the reopening was time-barred, leaving that issue open.
For the Petitioner/Assessee: Advocates Sham V. Walve, along with Tejveer Singh, Bhavik Chheda, Arnav Karhad,
For the Respondents/Income Tax Department: Advocate Akhileshwar Sharma (through VC).