2016 (7) TMI 1044 - HC - Income Tax

Reopening of assessment - Held that - Having regard to the fact that the assessment under section 143(3) read with section 147 of the Act came to be framed by the very same officer who has recorded the reasons for reopening the assessment, it has been contended by the learned advocate for the petitioner that the concerned officer during the course of assessment proceedings under section 143(3) read with section 147 of the Act, was well aware of the order under section 263 of the Act and hence, this is a case of mere change of opinion on the part of the Assessing Officer and therefore, the reopening of assessment is bad in law. - Decided in favour of assessee.

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Whether the reopening of the assessment is based on a change of opinion.
3. Sufficiency and relevance of the reasons recorded for reopening the assessment.
4. Whether the Assessing Officer had prima facie material to form the belief that income chargeable to tax has escaped assessment.

Detailed Analysis:

1. Validity of the Notice Issued under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice dated 31.03.2015 issued under Section 148 of the Income Tax Act, 1961, which sought to reopen the assessment for the assessment year 2010-11. The petitioner argued that the notice was issued merely on the basis of a change of opinion and lacked new material. The court examined the reasons recorded by the Assessing Officer for reopening the assessment and found that the reasons did not indicate any specific material establishing that the transactions in question were not genuine. The court concluded that the notice was issued without authority of law and quashed it.

2. Whether the Reopening of the Assessment is Based on a Change of Opinion:
The petitioner contended that the reopening was based on a mere change of opinion as the same Assessing Officer had previously accepted the total income declared by the petitioner in the assessment order dated 17.02.2015. The court noted that the issue of issuance of exorbitant share premium was not a subject matter of the earlier assessment. The court held that the issue of change of opinion could not be stretched to an extent where it would require examining what was in the mind of the Assessing Officer at the time of framing the assessment, without any material on record to show that he had examined such an issue. Therefore, the contention of change of opinion was not accepted.

3. Sufficiency and Relevance of the Reasons Recorded for Reopening the Assessment:
The court emphasized that the grounds or reasons for the formation of belief under Section 147 of the Act must have a material bearing on the question of escapement of income. The reasons recorded by the Assessing Officer included information from the I & CI that certain corporate entities issued shares at a premium, and the petitioner had issued shares at a premium in the previous assessment year as well. However, the court found that the reasons did not indicate that the amount received by way of share premium was the undisclosed income of the petitioner or in the nature of undisclosed cash credit. The court held that the reasons recorded did not have a rational connection or relevant bearing on the formation of the belief that income chargeable to tax had escaped assessment.

4. Whether the Assessing Officer Had Prima Facie Material to Form the Belief That Income Chargeable to Tax Has Escaped Assessment:
The court examined whether the Assessing Officer had prima facie material to form the belief that income chargeable to tax had escaped assessment. The court noted that the reasons recorded by the Assessing Officer were based on the I & CI information and the assessment order of the previous year, without any inquiry to form a belief that excess premium amount had been received by the petitioner. The court held that the material relied upon by the Assessing Officer was not sufficient to form the requisite belief that income chargeable to tax had escaped assessment. Consequently, the court found that the assumption of jurisdiction by the Assessing Officer was without authority of law.

Conclusion:
The court allowed the petition and quashed the impugned notice dated 31.03.2015 issued under Section 148 of the Income Tax Act, 1961, holding that the reopening of the assessment was not justified based on the reasons recorded and the material available. The court made the rule absolute with no order as to costs.

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