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Gujarat HC reaffirms that a mere change of opinion cannot be reason to reopen the completed assessment.


By filing this writ application under Article 226 of the Constitution of India before the Gujarat High Court, the writ applicant – assessee company seeks to challenge the Notice dated 31.03.2018 issued by the respondent under Section 148 of the Income Tax Act, 1961 (‘the Act’ for short) seeking to reopen the writ applicant’s income tax assessment for the A.Y 2013-14.

Question of law: whether the revenue is justified in reopening the assessment for the year under consideration?
Writ application filed before the Hon’ble HC of Gujrat challenging notice u/s 148 of the Income Tax Act, 1961 for reopening the assessment for AY 2013-14.
During the FY 2012-13, the assessee company had entered into various international transactions with its associated enterprises for which the company had duly furnished Form 3CEB as required under Section 92E of the Act determining the Arm’s Length Price (‘ALP’) of the international transactions entered with its associated enterprises.
During the assessment proceeding, the assessee company submitted all the details/information as required by the AO. After perusing various details/information, the AO passed an assessment order u/s.143(3) and assessed the income after disallowing the commission paid to non-resident. During the course of scrutiny proceedings, AO did not refer the matter to the TPO by relying on instructions No.3/2016 dated 10.03.2016.
Thereafter, the AO reopened the assessment for A.Y 2013-14 by issuing notice u/s 148 read with Placing reliance on the decision of the Apex Court in the case of CIT Vs. Kelvinator of India Ltd. [(2010) 2 SCC 723], it was submitted that, during the course of scrutiny assessment, all the necessary information with respect to international transactions were submitted by the assessee Company and all the materials like original Form No.3CEB, Transfer Pricing Study Report, revised Accountant’s Report and TPS report were available on record.

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However, the AO did not refer the issue to the Transfer Pricing Officer to determine the Arm’s Length Price and relying on the Circular consciously thought it fit not to determine the price or refer the matter to the Transfer Pricing Officer.

Section 147 of the Act. The reason recorded by the AO for reopening the assessment was delayed submission of the revised reports.
On the aforementioned reason for reopening the assessment, Hon’ble High Court, after considering facts and material available in record, opined that observations recorded by the AO are factually incorrect and contrary to the material evidence on record.
In the light of the judgement of Hon’ble Supreme Court in the case of CIT Vs. Kelvinator of India Ltd. [(2010) 2 SCC 723] and facts of the present case, Hon’ble HC held that the issuance of notice to reopen the assessment is nothing, but a change of opinion and mere a change of opinion cannot be the basis of reopening the completed assessment unless the AO found tangible material. Thus, Section 147 of the Act does not postulate conferment of power upon the AO to initiate reassessment proceedings on his change of opinion.
This judgement reaffirm the principle that mere a change of opinion cannot be the basis of reopening the completed assessment.