2022 (9) TMI 55 - HC - Income Tax

Reopening of assessment u/s 147 - scope of reopening by issuance of notice under section 148 - reference to expressios reason to believe and change of opinion - As argued by petitioner that there was no additional material which was available before the Assessing Officer and notices issued prior to the assessment was duly replied with supporting documents - HELD THAT - As decided in Rajesh Jhaveri Stock Brokers P. Ltd. 2007 (5) TMI 197 - SUPREME COURT that expression reason to believe should not be read to mean that Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The expression reason to believe would mean cause or justification for reopening. If the Assessing Officer has cause or justification to know or suppose to know that income had escaped assessment, it can be said to have reason to believe that income had escaped assessment. Thus, the expression reason to believe would mean and include that there should be subjective satisfaction by objective assessment available with the Assessing Officer for issuance of notice. In the instant case, the said notices, which are issued to the petitioner, have been furnished to the petitioner and conclusion drawn by the AO for reopening of assessment is that the AO received insight portal information to the effect that the petitioner firm is in business of lucky draw networking scheme and that no other tangible assets were handled by the firm other than financial transactions. Though Mr.Darshan Patel has made valiant attempt to contend before this Court that information sought for while issuing notices under sections 143(2) and 142(1) of the Act, details have been produced. The fact remains that the Assessing Officer did not possess this insight portal information which has been relied upon for issuance of the notices under section 148 of the Act. As such, the contention raised by learned counsel appearing for the petitioner requires to be considered for the purpose of outright rejection and it stands rejected. Whether while giving approval under section 151 of the Act, there has been no due application of mind by the said authority? - The information which was secured by the Assessing Officer subsequent to the assessment proceedings or scrutiny proceedings has been referred to and this has been considered, examined and on objective assessment of the material on record available before the said authority, permission has been accorded under section 151 of the Act which cannot be said, held or construed as without due application of mind. As such, the said contention also stands rejected. Though several judgments on the said issue i.e. change of opinion and explaining the term or expression reason to believe have been relied upon, we are of the considered view that all these judgments are based on the facts and as such, without dwelving upon each of these judgments, we hold that there cannot be any second opinion with regard to proposition of law that mere change of opinion cannot form the basis for reopening of assessment. This Court in exercise of powers vested under Article 227 of the Constitution of India would not take over the decision making powers of the statutory authority. The Honourable Apex Court in the case of D.N. Jeevaraj 2015 (11) TMI 1798 - SUPREME COURT has held that the High Court cannot mandate beyond the course of action to be taken by the statutory authority by giving complete go-by to the procedural requirement and the Court itself taking over functions of the authority. Thus contentions of learned counsel appearing for the petitioner cannot be accepted and it stands rejected and the point formulated hereinabove is accordingly answered in the negative i.e. in favour of the respondent and against the petitioner assessee.

Summary

Issues Involved:
1. Validity of notices issued under section 148 of the Income Tax Act for reopening assessments for the years 2016-2017 and 2017-2018.
2. Whether the reopening of assessments was based on new material or merely a change of opinion.
3. Adequacy of the approval under section 151 of the Income Tax Act.

Detailed Analysis:

1. Validity of Notices Issued Under Section 148:
The primary issue was whether the respondent was justified in issuing notices under section 148 of the Income Tax Act for reopening the assessments for the years 2016-2017 and 2017-2018. The petitioner argued that there was no fresh material available to the Assessing Officer, and the reopening was based on a mere change of opinion. The court noted that the Assessing Officer received information from the "insight portal" indicating that the petitioner was involved in a lucky draw networking scheme, which was not available during the initial assessment. The court held that the expression "reason to believe" includes the subjective satisfaction of the Assessing Officer based on objective assessment, and the new information justified the reopening of the assessments.

2. New Material vs. Change of Opinion:
The petitioner contended that the reopening was based on a change of opinion since the same Assessing Officer had previously scrutinized the returns and issued the assessment orders. The court rejected this argument, stating that the new information from the insight portal constituted fresh material that was not available during the original assessment. The court emphasized that the term "reason to believe" should not be equated with the final conclusion of escapement of income but rather the cause or justification for reopening. The court cited the case of Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers P. Ltd., which clarified that the formation of belief by the Assessing Officer is within the realm of subjective satisfaction and does not require final ascertained facts at the initiation stage.

3. Adequacy of Approval Under Section 151:
The petitioner argued that the approval for reopening under section 151 of the Act lacked due application of mind. The court found this argument unconvincing, noting that the approval was based on the same insight portal information that led to the issuance of the notices. The court held that the material was examined and assessed objectively, and the approval could not be construed as lacking due application of mind. The court reiterated that the statutory authority's decision-making powers should not be taken over by the court, as established in D.N. Jeevaraj Vs. Chief Secretary, Government of Karnataka.

Conclusion:
The court dismissed the petitions, affirming the validity of the notices issued under section 148 and the consequential orders. The court held that the reopening of the assessments was justified based on new material (insight portal information) and not merely a change of opinion. The approval under section 151 was found to be adequate and based on an objective assessment of the new information. The court also deprecated the practice of relying on multiple repetitive judgments, emphasizing that a single relevant judgment suffices to support a legal argument.