2019 (10) TMI 553 - HC - Income Tax

Re-opening of assessment - escapement of assessment - change of opinion - On being satisfied that the transactions were genuine, the Assessing Officer in his order under Section 143(3) of the Act allowed the claim of the Petitioner even in respect of the earnings made on account of trading in shares of M/s. Banas Finance Ltd. - HELD THAT - Prima facie, the impugned notice seems to be founded on change of opinion and, therefore, without jurisdiction. Besides, as the impugned notice has been issued beyond a period of four years from the end of the relevant Assessment Year, the requirement of the Petitioner having failed to disclose all material facts truly and fully, prima facie, are not satisfied. Thus, the impugned order appears to be without jurisdiction also on the ground of true and full disclosure of all material facts during the regular Assessment Proceedings, leading to order under Section 143(3) of the Act. The impugned notice dated 27th March, 2019 is stayed till the final disposal of the Petition.

Summary

Issues involved: Challenge to notice under Section 148 of the Income Tax Act, 1961 for re-opening Assessment Year 2012-13 based on share transactions of a Penny Stock Company. Jurisdiction of the impugned notice due to change of opinion and failure to disclose all material facts during regular Assessment Proceedings.

Analysis:

1. Challenge to Notice under Section 148: The petition challenges a notice dated 28th March, 2019 issued under Section 148 of the Income Tax Act, 1961, seeking to re-open the Assessment for Assessment Year 2012-13. The notice alleges that the petitioner's dealings in shares of a Penny Stock Company were sham transactions resulting in an income of ?1.10 Crores that escaped assessment. The reasons for re-opening the assessment are based on the belief that tax has escaped assessment due to these transactions.

2. Jurisdiction of the Impugned Notice: The regular Assessment for the relevant year was completed under Section 143(3) of the Act, where the petitioner provided details of the share transactions, which were verified by the Assessing Officer and deemed genuine. The impugned notice seems to be based on a change of opinion, as the transactions were previously accepted in the regular assessment. Moreover, as the notice was issued beyond four years from the end of the relevant Assessment Year, the requirement of the petitioner failing to disclose all material facts during the regular assessment proceedings does not seem to be satisfied. This raises concerns about the jurisdiction of the impugned notice.

3. Comparison with Previous Case: It is highlighted that in a similar situation for the Assessment Year 2011-12, a notice under Section 148 was challenged in a previous writ petition, where the court admitted the petition and granted interim relief by staying the re-opening notice. This comparison adds weight to the argument against the jurisdiction of the impugned notice for the current assessment year.

4. Stay Order: Considering the arguments presented, the court stayed the impugned notice dated 27th March, 2019 until the final disposal of the petition. The case is also scheduled to be heard along with the previous writ petition related to a similar issue for the Assessment Year 2011-12.

In conclusion, the judgment delves into the legality and jurisdiction of the notice issued under Section 148 of the Income Tax Act, 1961, emphasizing the importance of full disclosure of material facts during assessment proceedings and the implications of a change of opinion in re-opening assessments. The stay order indicates the court's cautious approach towards re-opening assessments based on previously accepted transactions, pending a thorough examination of the petitioner's claims.