2023 (1) TMI 575 - HC - Income Tax

Reopening of assessment u/s 147 - Reason to believe - change of opinion - reassessment proceedings after a period of 4 years - HELD THAT - Reasoning assigned by the ITO for reopening the proceedings on the ground that the material facts were not fully and truly disclosed by the petitioner and thus, his income escaped assessment, is absolutely unfounded. A clear perusal of the proviso to Section 147 makes it clear that reassessment proceedings after expiry of four years from the end of the relevant assessment year can only be initiated in case, there is tangible material with the AO to show that the assessee had failed to fully and truly disclose all material facts necessary for his assessment for that assessment year. This Court, after analysis of material facts available on record, is of a categoric opinion that the assessee disclosed all material facts truly and fully while furnishing the return for the Assessment Year 2013-14 and hence, there was no justification for invoking the proviso to Section 147 so as to initiate reassessment proceedings after a period of 4 years. Reassessment notice is definitely time barred. In addition thereto, the reassessment notice has been issued only on account of change of opinion , plain and simple, without any tangible fresh material being available to the ITO for reopening the assessment proceedings. Resultantly, the impugned notice is declared to time barred and cannot be saved by proviso to Section 147 of the Income Tax Act. In addition thereto, the reassessment is being resorted to only on account of change of opinion of the Assessment Officer without there being any fresh tangible evidence for reopening the assessment proceedings. Hence also, the impugned notice u/s 148 runs foul of the Kelvinator of India Limited 2010 (1) TMI 11 - SUPREME COURT and thus, the same cannot be sustained and is liable to be struck down. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reassessment notice under Section 148 of the Income Tax Act for Assessment Year 2013-14.
2. Legality of notice under Section 143(2) read with Section 147 of the Income Tax Act.
3. Alleged failure to disclose material facts fully and truly by the petitioner.
4. Time-barred nature of the reassessment notice.
5. Reassessment based on "change of opinion."

Issue-wise Detailed Analysis:

1. Validity of reassessment notice under Section 148 of the Income Tax Act for Assessment Year 2013-14:
The petitioner challenged the reassessment notice dated 30.03.2021 issued under Section 148 for the Assessment Year 2013-14. The petitioner contended that the notice was issued based on a "change of opinion," which is not permissible under the law, as established by the Supreme Court in the case of *Commissioner of Income Tax vs. Kelvinator of India Limited*. The court noted that the reasons provided for the reassessment in the letter dated 19.06.2021 were unfounded and self-contradictory, as all material facts were disclosed in the original assessment.

2. Legality of notice under Section 143(2) read with Section 147 of the Income Tax Act:
The petitioner received a notice dated 17.06.2021 under Section 143(2) read with Section 147, which did not disclose the reasons for reopening the assessment. The court observed that the reasons for reopening were not adequately communicated to the petitioner, and the reassessment was based on previously considered facts, thus amounting to a "change of opinion."

3. Alleged failure to disclose material facts fully and truly by the petitioner:
The respondents argued that the petitioner failed to disclose material facts regarding Long Term Capital Gain losses in the return filed for the Assessment Year 2013-14. However, the court found no evidence of untrue or incomplete disclosure by the petitioner. The court emphasized that the assessment order dated 26.04.2017 and the reassessment notice did not indicate any failure to disclose material facts fully and truly.

4. Time-barred nature of the reassessment notice:
The petitioner argued that the reassessment notice was time-barred as it was issued beyond the period of four years from the end of the relevant assessment year, which is impermissible under the proviso to Section 147. The court agreed, stating that reassessment proceedings after four years can only be initiated if there is tangible material showing the assessee failed to disclose all material facts. The court concluded that the reassessment notice was time-barred and could not be saved by the proviso to Section 147.

5. Reassessment based on "change of opinion":
The court concluded that the reassessment notice was issued solely based on a "change of opinion" without any fresh tangible evidence. This action violated the Supreme Court's ruling in *Commissioner of Income Tax vs. Kelvinator of India Limited*, which prohibits reassessment on mere change of opinion.

Conclusion:
The court declared the reassessment notice dated 30.03.2021 as time-barred and based on a change of opinion, thereby quashing the notice and all proceedings undertaken pursuant to it. The writ petition was allowed, and no order as to costs was made.