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2023 (2) TMI 429 - HC - Income Tax


Issues Involved:
1. Legality of the reassessment proceedings initiated under section 148 of the Income Tax Act, 1961.
2. Validity of the demand notices and penalty notice issued pursuant to the reassessment order.
3. Alleged failure of the petitioner to disclose material facts fully and truly during the original assessment proceedings.
4. Justification for reopening the assessment based on the information from the Insight Portal and the Annual Information Report.

Detailed Analysis:

1. Legality of the reassessment proceedings initiated under section 148 of the Income Tax Act, 1961:
The petitioner challenged the reassessment proceedings initiated via notice dated 31st March 2022 under section 148 of the Income Tax Act, 1961, leading to the final reassessment order dated 26th March 2022 for the assessment year 2013-14. The petitioner argued that there was no failure on their part to disclose any material fact fully and truly, which is a condition precedent for exercising jurisdiction beyond the period of four years as per the first proviso to section 147 of the Act. The court concluded that the reassessment proceedings were initiated without jurisdiction, as there was no failure on the part of the petitioner to disclose material facts fully and truly during the original assessment proceedings.

2. Validity of the demand notices and penalty notice issued pursuant to the reassessment order:
The demand notices and penalty notice, both dated 26th March 2022, issued pursuant to the reassessment order, were also challenged. The court held that since the reassessment proceedings were without jurisdiction, all consequential orders and notices, including the demand and penalty notices, were quashed and set aside.

3. Alleged failure of the petitioner to disclose material facts fully and truly during the original assessment proceedings:
The petitioner contended that all transactions referred to in the reasons recorded for reopening the assessment had been furnished during the original scrutiny assessment proceedings. The petitioner had provided all requisite details, including certified copies of the auditor's report, balance-sheet, profit and loss account, Form 10DB, and scrip-wise details of opening stock, purchases, sales, and closing stock. The court found that the petitioner had indeed disclosed all material facts fully and truly during the original assessment proceedings. The court noted that the Assessing Officer had called for and received all necessary documents and details during the original assessment proceedings.

4. Justification for reopening the assessment based on the information from the Insight Portal and the Annual Information Report:
The reassessment was based on information derived from the Insight Portal and the Annual Information Report, which flagged certain transactions of purchase and sale of equity and trading in derivatives. The court observed that the reasons for reopening the assessment were erroneous and contrary to the record, as the petitioner had disclosed all transactions during the original assessment proceedings. The court held that the reassessment proceedings were nothing but a change of opinion, which is not permissible under the law.

Conclusion:
The court quashed and set aside the impugned notice and the order of reassessment, along with all consequential orders and notices, including the demand and penalty notices. The petition was disposed of accordingly.

 

 

 

 

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