By TIOL News Service

BANGALORE, MAR 13, 2018: THE issue is - Whether issuance of reopening notice for the second time, once earlier reopening notice is dropped after being satisfied with the objections of assessee, can be termed as "change of opinion". NO IS THE ANSWER.

The Assessee company, engaged in Real Estate business, had filed its return for A.Y 2008-09 declaring loss of Rs.6,84,051, which was subsequently revised to loss of Rs.5,23,751. Consequent to the same, the return was processed u/s 143(1). However, after some time, on receipt of certain information, the AO initiated proceedings u/s 147 and after recording of reasons in this regard, the AO issued notice u/s 148. After receipt of the notice, the assessee filed its response thereto and on receipt of the same, the AO dropped the proceedings initiated u/s 147 and this was communicated to the assessee. But, this was not the end. The proceedings u/s 147 were once again initiated in the case on hand and after recording reasons, notice u/s 148 was issued along with copy of reasons recorded. The assessee again submitted that since none of its income had escaped assessment, therefore the notice issued u/s 148 was illegal without jurisdiction, void ab-initio and consequently proceedings initiated u/s 147 be dropped. The assessment was however completed u/s 143(3) r.w.s. 147, wherein the assessee's income was determined at Rs.49,44,76,249/-.

Tribunal held that,

++ as far as reasons for reopening is concerned, it emerges from the record that the AO has recorded that he has "reasons to believe" that income of assessee liable to tax has escaped assessment. It is settled principle that at the time of issue of notice u/s 148, it is sufficient if there is belief that income liable to tax had escaped assessment. It is sufficient if there was relevant material to form a requisite belief. This Tribunal is unable to agree with the contention put forth by the assessee that the issue of notice u/s 148 as a result of mere change of opinion. In the case on hand, the return of income was only processed u/s 143(1). It is not the case of assessee that the assessment was completed u/s 143(3). Therefore, the issue of notice u/s 148 is for assessment of income and not reassessment, as is normally understood. Since no assessment had taken place and no opinion has been formed on the issue on which the AO had reason to believe that the assessee's income liable to tax had escaped assessment, it cannot be said that there has been a change of opinion. Since no opinion had been formed earlier, the question of change of opinion does not arise;

++ the first notice issued u/s 148 was dropped and thereafter, a second notice u/s 148 was issued. This, in itself, does not constitute "Change of Opinion." This fact comes out clearly from the AO's letter, wherein he has mentioned that the proceedings initiated by issue of the earlier notice u/s 148 was dropped as the reasons have not been properly recorded. As pointed out by the DR, the Allahabad High Court in the case of Sukhlal Ice and Storge Co, has upheld the issue of second notice when the first notice was found to be illegal and found wanting in jurisdiction. Also, since substantive issue in question was never examined under the proceedings in the first notice, the question of change of opinion does not arise;

(See 2018-TIOL-372-ITAT-BANG)