2023 (5) TMI 280 - HC - Income Tax

Reopning of assessment u/s 147 - bogus LTCG - assessee claimed to have purchased shares of the penny stock scrips which was sold and LTCG was claimed which was denied it will be treated as unexplained investment/income from other sources and not a capital gain - HELD THAT - We find nothing to indicate failure to disclose any material fact. Upon examining the order u/s 143(3) we find that the AO has considered these very transactions and added to the total income on which the Petitioner has already paid the tax. We find no substance in the AO s reason to believe that income chargeable to tax has escaped assessment in as much as there is no mention of any tangible material that led to his conclusion. The entire process is triggered on a change of opinion as to the calculation of tax payable by the assessee. As stated hereinabove, it is evident that bald assertions of the transaction being an accommodation entry made in collusion connivance with the entry provider are used to re-open the assessment. It is well settled judicial principal that, the true test of income chargeable to tax escaping assessment is whether there exists fresh tangible material on the basis of which appropriate conclusion is reached. In the absence of such material the reassessment proceedings would be invalid. This principle has been upheld by the Apex Court as well as the jurisdictional High Courts in various rulings. Furthermore, this Court has held that reconsideration of the material available at the time of original assessment proceedings tantamount to change of opinion and therefore invalid. Decided in favour of assessee.

Summary

Issues:
The judgment involves the legality of a notice issued under section 148 of the Income Tax Act, 1961 for the Assessment Year 2014-15, questioning the reopening of assessment due to alleged income chargeable to tax having escaped assessment.

Brief Facts:
The petitioner filed their income tax return for the AY 2014-15 on a specific date. Subsequently, the Assessing Officer passed an order adding a certain amount to the total income based on the withdrawal of claimed exemptions. The petitioner paid the tax and was granted a waiver of penalty. After a notice issued in 2021, the petitioner filed responses to subsequent notices objecting to reassessment, which ultimately led to the filing of the present petition.

Analysis:
The court examined the reasons recorded for the reassessment and found that they were based on transactions related to the purchase and sale of shares. The AO concluded that the transactions represented unexplained income rather than capital gains. However, the court observed that there was no failure to disclose material facts, as the transactions were already considered in the original assessment, and the tax was paid accordingly. The court emphasized the need for fresh tangible material to justify reassessment, highlighting that a mere change of opinion is not sufficient.

Decision:
Based on the legal principles and the specific facts of the case, the court quashed the impugned notice issued for the AY 2014-15, prohibiting any further action in that regard. The court held that the reassessment proceedings were invalid due to the lack of new material and the reliance on a change of opinion rather than fresh evidence. The court's decision was in line with established legal precedents and the requirement for tangible material to support the reopening of assessments.