2023 (7) TMI 691 - HC - Income Tax

Reopening of assessment u/s 147 - Reopening beyond period of four years - reasons to believe - bogus shares capital/premium from bogus paper companies - HELD THAT - As Section 147 of the Act is very clear that no action shall be taken under the said Section after the expiry of 4 years from the end of the relevant assessment years unless any income chargeable to tax has escaped assessment by reason of the failure on the part of assessee to disclose fully and truly all material facts. First of all, it is not spelt out in the reasons to believe as to what was the material fact which was not truly and fully disclosed. Having considered the submissions of petitioner during the course of original assessment proceedings and the findings of CIT(A) as well as ITAT, we are also satisfied that there was no failure on the part of petitioner to disclose fully and truly any material fact. Even assuming, respondents case is petitioner should have disclosed that these were bogus or accommodation entries, still there is nothing on record to indicate that petitioner was aware that these were bogus shares capital/premium from bogus paper companies, viz., SHPL and SCPL and were accommodation entries. We hereby quash and set aside the notice issued u/s 148. Decided in favour of assessee.

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Alleged failure of the petitioner to disclose fully and truly all material facts necessary for assessment.
3. Whether the reopening of assessment was based on a change of opinion.
4. Examination of fresh information as tangible material for reopening the assessment.

Issue 1: Validity of the Notice Issued Under Section 148
The petitioner challenged the notice dated 19th March 2019 issued by respondent no. 3 under Section 148 of the Income Tax Act, 1961, arguing that the reopening of the assessment was not based on "reasonable grounds" but rather on mere suspicion and vague information. The court found that the reasons for reopening did not specify what material facts were not disclosed by the petitioner, thereby invalidating the notice.

Issue 2: Alleged Failure to Disclose Material Facts
The petitioner contended that all necessary details regarding share and premium money were furnished during the original assessment proceedings. The court noted that during the original assessment, the petitioner had provided detailed information and documents, including valuation reports and explanations for the share premium. The court concluded that there was no failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessment.

Issue 3: Change of Opinion
The petitioner argued that the reopening of the assessment was a clear case of change of opinion. The court observed that the original assessment order had already examined the issue of share capital and premium, and the addition made by the Assessing Officer (AO) was deleted by the Commissioner of Income Tax (Appeals) [CIT(A)] and upheld by the Income Tax Appellate Tribunal (ITAT). The court held that the reopening of the assessment on the same grounds constituted a change of opinion, which is not permissible.

Issue 4: Fresh Information as Tangible Material
The respondents claimed that fresh information received from the Deputy Commissioner of Income Tax, Central Circle-3(1), Kolkata, indicated that the petitioner had taken accommodation entries from shell companies. The court found that the reasons to believe did not provide any specific material fact that the petitioner failed to disclose. The court also noted that even if the reopening was within four years, the fresh information might have qualified as tangible material, but since it was beyond four years, the reopening was invalid.

Conclusion
The court quashed and set aside the notice dated 19th March 2019 issued under Section 148 of the Act, as well as the order on objections dated 14th August 2019 and the assessment order dated 7th September 2021. The court clarified that all rights and contentions of the parties are kept open to be raised in the pending appeal challenging the ITAT's findings.

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