Income Tax Act, 1961

--Reassessment--Assessment under section 143(3) Change of opinion--Reopening of assessment was initiated by issuing notice and reasons for reopening were made inter alia making addition, being bad debts. As original assessment was made under section 143(3) and a specific query was raised by assessing officer in respect of bad debts. Assessee contended that addition for bad-debts was change of opinion. Held: Was acceptable. Assessing officer had raised only 4 issues, one of them being issue of bad debt/advances written off. Therefore, it is not as if the assessing officer had lost sight of issue of bad debts/advances written off. In fact, he had specifically raised queries in this regard towards fag end of assessment proceedings and therefore, it must be presumed that he was very much alive to issue. Notice under section 148 and all proceedings pursuant thereto are invalid and they are set aside.

In the present case, the assessing officer had, clearly raised a specific query with regard to bad debts/ advances written off and the petitioner/assessee had given details in respect thereof. It is obvious that since no such addition was made on that count, the assessing officer had considered and examined the position and held in favour of the petitioner/assessee. Assessing officer had, indeed, examined the issue at the time of the original assessment proceedings and had formed an opinion by not making any addition in respect thereof. Thus, the reopening of the assessment which had been concluded would be nothing but a mere change of opinion. [Para 10] Revenue had also submitted that the point of bad debts written off may have been missed by the assessing officer inasmuch as the present case was a complicated matter and even the assessment order framed on 13-3-2006 ran into 34 pages. He submitted that there was every possibility of some aspects being missed out by the assessing officer. And, such aspects which had been inadvertently missed by the assessing officer cannot be regarded as those on which the assessing officer had formed an opinion. For this proposition, revenue relied on the decision of the Supreme Court in the case of A.L.A. Firm. However, this court does not agree with this submission because in the present case, the factual position is different. Whether it was a complicated matter or not is not what is relevant here. In the present matter the assessing officer had finally raised only 4 issues, one of them being the issue of bad debt/advances written off. Therefore, it is not as if the assessing officer had lost sight of the issue of bad debts/advances. In fact, he had specifically raised queries in this regard towards the fag end of the assessment proceedings and therefore, it must be presumed that he was very much alive to the issue. In the reasons recorded for reopening of the assessment, the assessing officer does not says that he missed it. The reasons recorded reveal that the assessing officer, in the second round was of the view that the addition should have been made in respect of bad debts/advances amounting to Rs. 40 lakhs because of the fact that it was on the capital account. Had the assessing officer felt that this point had been missed out in the first round he would have been (sic-would have) stated so. The reasons as recorded also belie the contention raised by the counsel for the respondent. [Para 11] Notice dated 18-4-2007 under section 148 and all proceedings pursuant thereto are invalid and they are set aside. [Para 12]

Income Tax Act, 1961, Section 147

Income Tax Act, 1961, Section 148

In the Delhi High Court

Badar Durrez Ahmed & Vibhu Bakhru