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Judgment
The Court :- The short question which is sought to be raised herein is whether the reassessment under Section 147 of the Income Tax Act, 1961 was
permissible upon an audit objection been taken in the department itself.
It is now well settled by judicial pronouncements that a reassessment cannot be made under Section 147 of the Act upon a change of opinion. There
has to be some material on the basis of which the assessing officer may have reason to believe that some amount of income had escaped assessment.
A mere change of mind would not do.
The matter in this case pertains to a loan of Rs.50 lakh that was obtained by the respondent-assessee from a company by the name of Asam
Company Limited. In course of the assessment for the relevant financial year and pursuant to a notice issued under Section 133(6) of the Act, the
Asam Company issued a reply. Such reply indicated that the loan was obtained by the assessee several years back and had not been repaid which
prompted Asam Company Limited to write off the loan in a subsequent balance-sheet and not consider it as good for repayment any further.
This information was available to the assessing officer prior to the assessment being completed for the relevant financial year. Notwithstanding such
information, the assessing officer allowed the payment allegedly made by the assessee to Asam Company Limited to be treated as a deduction.
In course of the audit of the assessment order, it came to light that the assessing officer had failed to take into account the letter issued by Asam
Company Limited that it had already written off the loan as bad debt. It was an act of dereliction or failure on the part of the assessing officer. But
such discovery by the internal audit department was not based on any material that was not available before the assessing officer while making the
assessment in the first place.
As such, there was no new material or other factor which could have led the assessing officer to believe that some quantum of income had escaped
assessment during the course of the assessment. The facts which were before the assessing officer at the time of assessment were re-looked into by
the audit department and following an objection of the audit department, the reassessment under Section 147 was purported to be made.
The Tribunal was completely justified in holding that the order for reassessment amounted to a change of opinion when there was no other factor to
trigger off the expression “reason to believe†in Section 147 of the Act. Since no substantial question of law arises and the Tribunal appears to
have dealt with the matter on facts in the appropriate perspective, ITAT No.
295 of 2016 and GA No. 2149 of 2016 are dismissed. There will be no order as to costs.