2023 (2) TMI 466 - HC - Income Tax

Reopening of assessment u/s 147 - Reopening beyond the period of four years - Reasons to believe - loans/advances made to a sister concern(s)(Form 3CD) - HELD THAT - The Supreme Court in Commissioner of Income-tax, Delhi Vs. Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT held that there was a difference between power to review and power to reassess under section 147 and that the AO had no power to review and that, if the concept of change of opinion was removed, then, in the garb of reopening of the assessment, a review would take place. The issue of Large Loans/Advances , was not only raised during the scrutiny assessment, but the same was responded to specifically by the assessee, as seen from the clarifications dated 5 June 2017 and 16 August 2017, which finally led to passing of the Order under Section 143(3) In the present case from the record, and specifically from the reasons recorded, it is not justifiable as to what information was received by the assessing Officer and what was that issue or material that had not been considered by the assessing Officer during the scrutiny assessment proceedings. As between the date of Order of assessment, which is sought to be reopened and the date of forming of the opinion, in the present case, nothing new had happened. It is clear that there is neither a new information received nor has reference been made to any new material on record. It is an absence of an agreement between the Petitioner, Goel Ganga Developers Pvt Ltd and M/s Nancy Builders and Developers Ltd that the assessing Officer formed a basis for reopening the assessment. It is nobody s case that there existed any such agreement, which ought to have been produced but was not produced. Rather AO intends to imply that in the absence of any such agreement, the benefit ought not to have been granted to the Petitioner in the scrutiny assessment. There cannot be any failure to disclose fully and truly, if there was no such document as such. This, in our opinion, is nothing but a change of opinion, which does not satisfy the jurisdictional foundation under Section 147 of the Act. - Decided in favour of assessee.

Issues Involved:
1. Validity of the notice under Section 148 of the Income Tax Act, 1961 for reopening the assessment.
2. Whether there was a failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment.
3. Whether the reassessment proceedings constitute a mere change of opinion.

Detailed Analysis:

1. Validity of the Notice under Section 148:
The Petitioner challenged the notice dated 30th March 2021, issued under Section 148 of the Income Tax Act, 1961, for reopening the assessment for the year 2015-16. The notice was based on the Assessing Officer's (A.O.) belief that the Petitioner had not fully disclosed an advance payment of Rs. 17,76,08,505/- to M/s Nancy Builders and Developers Pvt. Ltd. The A.O. considered this transaction as an unexplained investment under Section 69, necessitating reassessment.

2. Failure to Fully and Truly Disclose Material Facts:
The Petitioner argued that there was no omission in disclosing material facts. During the original assessment, the Petitioner had provided details of the advance payment through various communications and submissions, including the audited balance sheet and replies to notices under Section 142(1). The A.O. had considered these details before passing the assessment order on 29th December 2017.

The Respondents contended that the Petitioner had not properly disclosed the material facts, specifically highlighting that M/s Goel Ganga Developers (India) Pvt. Ltd. was not a party to the MOU between the Petitioner and M/s Nancy Builders, and had not consented to the transfer of development rights. This, according to the Respondents, justified treating the transaction as unexplained investment.

3. Reassessment Proceedings as a Change of Opinion:
The Court referred to the Supreme Court's decision in Commissioner of Income-tax, Delhi Vs. Kelvinator of India Ltd., which distinguished between the 'power to review' and 'power to reassess.' The Court emphasized that reassessment should be based on tangible material and not a mere change of opinion. The Court also cited the Full Bench decision of the Delhi High Court in Commissioner of Income-tax Vs. Kelvinator of India Ltd., which upheld that an assessment order passed under Section 143(3) implies application of mind by the A.O.

In the present case, the Court noted that the issue of 'Large Loans/Advances' was raised and addressed during the original scrutiny assessment. The Petitioner had provided specific responses and clarifications, which were considered by the A.O. before passing the order under Section 143(3). The Court found no new information or material that had come to light between the original assessment order and the notice for reassessment. The absence of an agreement between the Petitioner, Goel Ganga Developers Pvt. Ltd., and M/s Nancy Builders was not new information but was known during the original assessment.

The Court concluded that the reassessment proceedings were based on a mere change of opinion, which does not satisfy the jurisdictional foundation under Section 147 of the Act.

Conclusion:
The Court held that the notice dated 30th March 2021, issued under Section 148, and all connected proceedings were unsustainable. The Petition was allowed, and the impugned notice and proceedings were set aside. No costs were awarded.

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