2021 (12) TMI 997 - HC - Income Tax

Reopening of assessment u/s 147 - Eligibility of reasons to believe - HELD THAT - All material facts had been disclosed by petitioner in the course of the regular assessment proceedings and the reasons recorded for initiation of reassessment too give reference only to the details already submitted by petitioner in the course of the original assessment proceedings and nothing more. It is a well settled judicial principle that the true test of income chargeable to tax escaping assessment is whether there exists fresh tangible material on the basis of which an appropriate conclusion can be reached. In the absence of such fresh material, the reassessment proceedings would be invalid. This Court has held that reassessment based on a reconsideration of material already available on record at the time of the original assessment proceedings tantamounts to a change of opinion and would be invalid. Since the relevant facts, which were already on record at the time of the original assessment proceedings, also form the basis for the initiation of the subject reassessment proceedings, it is amply clear that there was no fresh material that could have come to the notice of respondent no.1 to warrant reopening of assessment. Information received from DDIT (Inv.) regarding petitioner indulging in illegitimate activity of booking bogus profit/loss on scrip of M/s. Divine Multimedia (India) Ltd. would not by itself constitute any fresh material for reopening assessment. Information received from DDIT (Inv.) has already been examined and inquired into by respondent no.1 in the original assessment proceedings where after submitting various details with regard to details of investments, details of short term capital gains and long term capital gains the same had been satisfactorily explained and accepted by respondent no.1. The notice issued under Section 148 is issued without jurisdiction and requires to be set aside. - Decided in favour of assessee.

Summary

Issues:
Impugning notice under Section 148 of the Income Tax Act, 1961 and rejection of objections for Assessment Year 2012-2013.

Analysis:
1. The petitioner challenged a notice issued under Section 148 of the Income Tax Act, 1961 for the Assessment Year 2012-2013 and the subsequent order rejecting objections. The notice was issued after the expiry of four years, invoking the proviso to Section 147. The reasons provided did not indicate any failure on the petitioner's part to disclose material facts, and no reply was filed despite the opportunity granted.

2. The reasons for the notice highlighted the alleged illegitimate activities of the petitioner in creating fictitious gains on penny stocks, specifically mentioning a company involved and the amount of profit in question. However, during the original assessment proceedings, the petitioner had provided detailed information regarding investments, stock transactions, and gains made, which were considered by the Assessing Officer in passing the assessment order.

3. The respondent relied on a previous judgment to argue that lack of specific mention of failure to disclose all material facts in the reasons for reopening does not invalidate the jurisdiction under Sections 147 and 148. However, it was emphasized that there must be a clear indication of such failure in the reasons provided. The court reiterated that if no failure to disclose is evident from the reasons, the assumption of jurisdiction under Sections 147 and 148 would exceed the statutory constraints.

4. It was established that all material facts necessary for assessment were disclosed by the petitioner during the original assessment proceedings. The court emphasized that the Assessing Officer cannot initiate reassessment based solely on a change of opinion, especially when the primary facts were already disclosed. Reassessment without fresh tangible material or solely based on a reconsideration of existing records from the original assessment was deemed invalid.

5. Consequently, the court held that the notice issued under Section 148 was without jurisdiction and ordered it to be set aside, along with the subsequent order rejecting objections. The lack of fresh material warranting reassessment and the absence of any failure to disclose fully and truly all material facts during the original assessment proceedings were key factors in quashing the notice and order.

6. In conclusion, the court quashed and set aside the notice dated 30th March 2019 and the order dated 15th October 2019, disposing of the petition in favor of the petitioner.