2016 (12) TMI 1283 - HC - Income Tax

Validity of reopening of assessment - Held that - Re-opening the assessment is permissible only when it (i) does not amount to change of opinion ; (ii) is based on tangible material/evidence but is not opposed to the existing record and (iii) points to suppression of material facts by the assessee in the original return. See Commissioner of Income Tax v. Kelvinator (2010 (1) TMI 11 - SUPREME COURT OF INDIA) In the present case there is none of these elements ex facie exists to justify the impugned notice. It is therefore quashed as well as all proceedings emanating from the impugned notice. - Decided in favour of assessee

Summary

Issues:
1. Validity of re-assessment notice under Section 148 of the Income Tax Act, 1961 for AY 2008-09.
2. Allegation of concealment of income and non-disclosure of material facts by the assessee.
3. Justifiability of re-assessment notice based on tangible material or change of opinion.
4. Compliance with the requirements of Section 147/148 of the Act for re-assessment proceedings.

Analysis:

1. The petitioner challenged a re-assessment notice issued under Section 148 of the Income Tax Act, 1961 for AY 2008-09, alleging that income of a significant amount had escaped assessment due to the assessee wrongly claiming it as agricultural income. The notice referred to a decision of the Karnataka High Court regarding a similar issue in a subsequent year. The petitioner contended that all relevant materials were furnished during the scrutiny assessment, and there was no concealment. The petitioner argued that the re-assessment notice was a change of opinion, not permissible under Section 147/148 without tangible material on escapement of income due to non-disclosure.

2. The revenue defended the re-assessment notice, citing grounds from a subsequent year's assessment and claiming valid reasons to believe under Section 147. The revenue argued that the completed scrutiny assessment for AY 2008-09 included inquiries into the nature of activities carried out by the petitioner. The revenue pointed to specific queries made by the AO during the scrutiny assessment, seeking detailed information on agricultural income and business income, which the assessee had duly responded to with documentary evidence.

3. The Court emphasized that a notice for re-opening an assessment is permissible only when it is not a "change of opinion," based on tangible material, and points to suppression of material facts by the assessee. In this case, the Court found that none of these elements existed to justify the re-assessment notice. Consequently, the Court quashed the notice and all proceedings stemming from it, ruling in favor of the petitioner and allowing the writ petition in the above terms.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Court's reasoning behind its decision to quash the re-assessment notice.