INCOME TAX ACT, 1961

--Reassessment--Reason to believe Change of opinion--The assessee was a company registered under the Companies Act, 1956 and is regularly assessed to tax. For the assessment year 2002-03, the petitioner filed its return of income declaring a total income of Rs. 2,81,60,753 under section 115JB. The return of the assessee was selected for scrutiny. It is the case of the assessee that during such assessment, number of queries were raised by the assessing officer and replies were also given by the assessee to all such queries. Eventually, the assessment under section 143(3) was framed on 18-3-2005 for a total income of Rs. 2,81,71,453 under section 115JB. Thereafter, the assessing officer, i.e., revenue herein issued the impugned notice dated 14-11-2006 under section 148 of the Act seeking to reopen such assessment which was previously framed after scrutiny. In response to such notice, the assessee under its communication dated 27-11-2006 conveyed that the original return filed by the assessee be treated as one filed in response to notice under section 148 of the Act. At the request of the petitioner, the respondent also supplied along with communication dated 13-11-2007 a copy of the reasons recorded for reopening the assessment. The assessee raised objections against reopening of the assessment under letter dated 21-11-2007. Such objections were, however, rejected by the assessing officer vide order. The assessee has, therefore, filed the present petition challenging the notice for reopening the assessment. The assessing officer in absence of any stay granted by this Court, finalized the assessment pursuant to the impugned notice. This Court, on 25-8-2008, noted that the assessment order is served on the petitioner and the petitioner has also filed appeal against such fresh order of assessment. By way of interim relief, the court stayed the demand raised by the assessing officer pursuant to such fresh order of assessment Court is informed that subsequently, the appeal was disposed of by the Commissioner (Appeals) and the petitioner had thereupon preferred further appeal before the Tribunal and such appeal on merits was allowed on 30-11-2010. Both the sides submitted that the issue would not rest at the level of the Tribunal and this Court, therefore, may decide the question of the validity of the notice for reopening the assessment. In fact, we are informed that appeal against the said judgement of the Tribunal dated 30-11-2010 has been preferred by revenue before this Court and such appeal is pending. It is not in dispute that during the assessment proceedings, the assessing officer raised several queries and called for explanation of the petitioner on various issues. One such set of queries was raised by the assessing officer under his communication dated 31-1-2005. In this letter, besides other questions, the assessing officer asked the assessee to substantiate the claim of exemption under section 10(23G), both for the capital gain on sale of shares as well as on the interest income earned from SSNNL and GPICL bonds. In response to such letter, the petitioner replied under communication dated 11.2.2005. Regarding queries of exemption under section 10(23G) with respect to capital gain as well as interest income. In the assessment order dated 18-3-2005, the assessing officer noted that the assessee had made several investments which included the debentures of GIPCL and bonds of SSNNL. He also noted that out of total return on such investments, the assessee had offered interest income to the tune of Rs. 5,68,03,174 to tax. He noticed that interest received on SSNNL bonds of Rs. 3,73,880 and interest received from GIPCL of Rs. 96,81,893 were not offered to tax as the assessee had claimed exemption on such income under section 10(23G). The assessing officer thereupon proceeded to disallow expenditure incurred by the assessee in earning such tax free interest. He, however, did not disallow the exemption on the interest per se. Court, however, note that in the assessment order, there was no discussion with respect to such exemption claimed by the petitioner under section 10(23G). Held: </b<> In a situation where the assessing officer during scrutiny assessment, notices a claim of exemption, deduction or such like made by the assessee, having some prima facie doubt raises queries, asking the assessee to satisfy him with respect to such a claim and thereafter, does not make any addition in the final order of assessment, he can be stated to have formed an opinion whether or not in the final order he gives his reasons for not making the addition. Any such reopening would be based on a mere change of opinion. In the reasons, the assessing officer started with the words, from the records, it can be seen that ..... ”. Entire information and the material that the assessing officer, therefore, had at his command was reflected from the record itself. This coupled with the fact that in the original assessment, the assessing officer examined such claims in detail, would convince that any reopening of the assessment of same claims on the basis of same material, amounts to a mere change of opinion. The fact that the assessing officer did not record reasons for making no disallowance on such claim of exemption, would be of no consequence. [Para 51]