2014 (8) TMI 602 - HC - Income Tax

Reopening of assessment u/s 148 Change of opinion - Held that - Unless and until it is suggested and / or alleged that the income chargeable to tax as escaped assessment for the reasons that the assessee failing to disclose fully or truly all material facts , reopening of assessment is not permissible - the assessee claimed the income from sale of shares, mutual funds etc. as income from capital gain and to that the petitioner was called upon to furnish the necessary details etc. and thereafter after due consideration the AO framed the assessment order and treated the income from sale of shares, mutual funds etc. as income from capital gain the attempt on the part of the AO now to tax the receipt as a business income would be a mere change of opinion - on mere change of opinion by the AO, the reopening of the assessment beyond the period of four years from the relevant assessment year is not permissible - Relying upon MAPS ENZYMES LTD. Versus DEPUTY COMMISSIONER OF INCOME TAX 2014 (3) TMI 28 - GUJARAT HIGH COURT - on mere change of opinion by the AO subsequently, initiation of reassessment proceedings is not valid - The notice for reopening the assessment issued u/s 148 of the Act and the order disposing of the objection are set aside Decided in favour of Assessee.

Issues:
Challenging impugned notice for reopening of assessment under Section 148 of the Income Tax Act issued beyond four years from the assessment year.

Analysis:
1. The petitioner challenged the notice for reopening assessment issued beyond four years from the assessment year under Article 226 of the Constitution of India. The petitioner filed the return of income for the assessment year 2006-07, responded to notices under Section 143(2), and provided details as requested. The Assessing Officer passed a scrutiny assessment order under Section 143(3) in 2008. However, in 2012, the petitioner received a notice under Section 148 for reassessment, alleging income had escaped assessment. The petitioner objected to the reopening, citing that the original assessment was framed after scrutiny and any change in assessing income from capital gains to business income would be a mere change of opinion.

2. The petitioner's advocate argued that the initiation of reassessment proceedings beyond four years is illegal unless there is an allegation of failure to disclose all material facts. The advocate contended that in this case, there was no suggestion that income escaped assessment due to the petitioner's failure to disclose all material facts. The advocate heavily relied on a court decision to support the argument that reopening the assessment beyond four years on a mere change of opinion is impermissible.

3. On the other hand, the revenue's advocate opposed the petitioner's application, stating that the notice for reopening was justified as income had escaped assessment due to the petitioner's failure to disclose all material facts. The advocate argued that the petitioner did not produce the power of attorney for transactions during the original assessment, and the income from share sales should be considered business income, not capital gains. The revenue's advocate emphasized that the petitioner had ample opportunity to prove their case during the proceedings.

4. The court noted that the original assessment was done after scrutiny and that the impugned notice for reopening was issued beyond four years from the relevant assessment year. The court observed that the reassessment was based on a change of opinion by the Assessing Officer regarding the nature of income from share sales. Citing legal precedents, the court held that reopening the assessment beyond four years on a mere change of opinion is impermissible. Consequently, the court quashed and set aside the notice for reopening and the order disposing of objections.

5. The court ruled in favor of the petitioner, quashing the notice for reopening the assessment and the order disposing of objections. The court clarified that the reopening of assessment proceedings was deemed unlawful solely on the grounds of being a mere change of opinion by the Assessing Officer, without delving into the merits of whether the income from share sales should be classified as capital gains or business income. The court made no order as to costs in the case.

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