2019 (8) TMI 737 - HC - Income Tax

Reopening of assessment u/s 147 - the notice u/s 148 on the basis of on verification of records is nothing but a chance of opinion - capital gain on property sold - inquiry was carried out during the original assessment - HELD THAT - The AO has power to reopen the assessment, provided there is tangible material to come to the conclusion that there is escapement of income from assessment and the reasons must have a live link with the formation of belief. In the present case, there is no tangible material. The issuance of the impugned notice u/s.148 is nothing but mere change of opinion. In absence of any new tangible material available with the A.O., it is not open to the A.O. to change his opinion by issuing the notice of reassessment. From the reasons recorded it can be said that the original assessment is sought to be reopened in exercise of powers u/s 147/148 on change of opinion by the AO, which is not permissible more particularly when the original assessment is sought to be reopened after a period of four years from the end of the assessment year. Under the circumstances, the conditions stipulated under first proviso to section 147 are not satisfied and therefore, on the aforesaid ground alone, the impugned notice deserves to be quashed and set aside. In view of the above and applying the ratio laid down in the decisions referred and for the reasons stated above, present petition succeeds and the impugned notice dated 27/3/2018 issued by the respondent u/s 148 is held to be illegal, without jurisdiction, bad in law and deserves to be quashed and set aside

Issues Involved:
1. Legality of the notice issued under section 148 of the Income Tax Act, 1961.
2. Concept of "change of opinion" in the context of reopening assessments.
3. Requirement of "tangible material" for reopening assessments.
4. Validity of reopening assessments based on the absence of new material.
5. Jurisdiction and procedural correctness of the Assessing Officer (AO) in issuing the notice.

Detailed Analysis:

1. Legality of the Notice Issued Under Section 148:
The petitioner challenged the notice dated 27/03/2018 issued under section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the A.Y. 2013-14. The petitioner argued that the assessment was already completed under section 143(3) on 13/07/2015, and hence, the notice for reopening was not justified. The petitioner contended that all relevant facts, including the sale of property and the computation of capital gains, were already disclosed during the original assessment proceedings.

2. Concept of "Change of Opinion":
The court examined whether the concept of "change of opinion" stands obliterated after the substitution of Section 147 of the Income Tax Act by the Direct Tax Laws (Amendment) Act, 1987. The court referred to the Supreme Court's decision in the case of Kelvinator of India Ltd., which held that the power to reopen assessments is much wider post-1st April 1989, but the concept of "change of opinion" remains an inbuilt check against arbitrary reopening. The court emphasized that reassessment must be based on "tangible material" and not merely a change of opinion.

3. Requirement of "Tangible Material":
The court reiterated that the AO has the power to reopen assessments provided there is "tangible material" indicating that income has escaped assessment. The reasons for reopening must have a live link with the formation of the belief. In this case, the court found no new tangible material justifying the reopening of the assessment. The original assessment was sought to be reopened based on the same set of facts already considered, which amounted to a mere change of opinion.

4. Validity of Reopening Based on Absence of New Material:
The court held that reopening of completed assessments without any new tangible material is impermissible. It reiterated that the AO cannot change his opinion by issuing a notice of reassessment in the absence of new material. The court referred to its own decision in the case of Giriraj Steel, which held that reopening based on a mere change of opinion lacks validity.

5. Jurisdiction and Procedural Correctness:
The court examined whether the AO followed the correct procedure and had the jurisdiction to issue the notice under section 148. The court found that the conditions stipulated under the first proviso to section 147 were not satisfied, particularly since the original assessment was sought to be reopened after a period of four years from the end of the assessment year. Consequently, the court held that the impugned notice was illegal, without jurisdiction, and bad in law.

Conclusion:
The court quashed and set aside the notice dated 27/03/2018 issued under section 148 of the Income Tax Act, 1961, as well as the order dated 10/07/2018 disposing of the objections. The court ruled that the reopening of the assessment was based on a mere change of opinion and lacked new tangible material, making it illegal and without jurisdiction. The Rule was made absolute, and no order as to costs was issued.

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