2016 (8) TMI 217 - HC - Income Tax

Reopening of assessment - Held that - As in the present case on hand, it is quite clear from the record that as and when required, the petitioner assessee has truly and fully supplied all material before the authority and scrutiny assessment has already been undertaken and even during the course of hearing also in details annexures were furnished indicating that the issue pertaining to brokerage as well as commission was forming part of the record and the same has been examined. Therefore, in the background of these facts, the decision relied by the learned counsel for the revenue is of no avail. In the background of aforesaid facts, in the case of hand, we have examined all material facts. The reasons recorded have also been examined by this Court and on the basis thereof, this Court is of the opinion that the impugned action on the part of the respondent authority to issue notice under section 148of the Act initiating reopening of assessment is without authority of law and therefore, requires to be quashed and set aside. - Decided in favour of assessee

Issues Involved:
1. Validity of notice under section 148 of the Income Tax Act, 1961 after four years.
2. Full and true disclosure of income by the assessee.
3. Reassessment based on audit objection.
4. Change of opinion by the assessing authority.

Detailed Analysis:

1. Validity of Notice under Section 148 after Four Years:
The petitioner contested the issuance of a notice under section 148 of the Income Tax Act, 1961, dated 28.3.2012, arguing that it was issued after more than four years from the original assessment. The petitioner emphasized that the original return was filed on 28.10.2005, and the assessment was completed on 27.12.2007. The petitioner contended that the reopening of the assessment was impermissible as it was beyond the statutory period of four years and without any new material evidence.

2. Full and True Disclosure of Income by the Assessee:
The petitioner argued that all necessary documents and particulars were furnished during the original assessment, including details about brokerage and commission. The petitioner maintained that there was full and true disclosure of income, and the assessing authority had considered all relevant materials before passing the original assessment order. The petitioner highlighted that the reopening notice was based on the same materials already available during the original assessment, which would amount to a change of opinion.

3. Reassessment Based on Audit Objection:
The petitioner asserted that the reassessment proceedings were initiated based on an audit objection raised by the audit wing of the department, which is impermissible. The petitioner argued that the reasons supplied for the issuance of the reopening notice were based on the verification of records already available, and thus, the power to reopen could not be exercised merely to review or reform an opinion.

4. Change of Opinion by the Assessing Authority:
The petitioner relied on judicial precedents, including the decision in the case of Vodafone West Ltd. vs. Assistant Commissioner of Income Tax, to argue that reopening an assessment based on a change of opinion is not permissible. The petitioner emphasized that the same materials were considered during the original assessment, and the reopening notice was issued merely because the authority had a different opinion, which is not allowed after a period of four years.

Court's Analysis and Judgment:
The court examined the reasons for reopening the assessment, which stated that the assessee had paid commission/brokerage to foreign companies without deducting tax at source under section 195(1) of the Act. The court noted that the attempt to reopen the assessment was after more than four years from the original scrutiny assessment. The court held that in the absence of any non-disclosure of true and full material by the assessee, reopening the assessment was not permitted.

The court referred to the decisions in Vodafone West Ltd. and Prasad Koch Technic Pvt. Ltd., which emphasized that reassessment based on a change of opinion is not permissible. The court concluded that the petitioner had disclosed all material facts truly and fully during the original assessment, and there was no new evidence to justify the reopening of the assessment.

The court found that the reasons recorded for reopening the assessment did not establish a live link between the reasons and the belief formed by the assessing officer. The court held that the impugned notice under section 148 was without jurisdiction and required to be quashed.

Conclusion:
The court allowed the petition, quashing and setting aside the impugned notice under section 148 of the Income Tax Act. The court ruled that the reopening of the assessment was not justified as it was based on a change of opinion and there was no non-disclosure of material facts by the assessee. The court made the rule absolute accordingly.

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