2023 (10) TMI 304 - HC - Income Tax

Validity of reopening of assessment - notice beyond the period of four years - Reason to believe - HELD THAT - The reassessment has been done for the year 2013-14. The notice for such reassessment is dated 6.3.2020 i.e. beyond a period of four years. The law prescribes that in such cases, unless and until it is found that there was no full and true disclosure of material facts, the assessment cannot be reopened. On the facts of the present case, it has been found that the very same material and the assessment records are sought to be revisited and therefore it is not the case of the authority that there was a failure to fully and truly disclose all facts that led to the escapement of income so as to warrant an exercise of reassessment under Section 148 of the Act. In the case of Jivraj Tea 2020 (2) TMI 95 - GUJARAT HIGH COURT this Court has held that in absence of any tangible material available, reopening beyond the period of four years is bad in law. - Therefore what is evident is that the notice dated 6.3.2020 and the order disposing off objections dated 31.08.2021 are bad in law and deserve to be quashed and set aside.

Summary

Issues Involved:

1. Validity of the notice under Section 148 of the Income Tax Act, 1961.
2. Procedural irregularities in disposing of objections.
3. Alleged change of opinion by the Assessing Officer.
4. Lack of tangible material for reopening the assessment.
5. Violation of principles of natural justice.

Summary:

1. Validity of the notice under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice dated 06.03.2020 issued under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the Assessment Year 2013-14. The petitioner argued that the reopening was based on a "change of opinion" since all relevant details had already been examined by the Assessing Officer during the original assessment proceedings. The court found that the notice and the reasons for reopening were based on the same records considered during the original assessment, thus constituting a change of opinion, which is impermissible under the law.

2. Procedural irregularities in disposing of objections:
The petitioner contended that the objections raised against the reasons for reopening were not disposed of in a timely manner, violating the guidelines laid down in the case of GKN Driveshafts (India) Ltd vs. ITO. The court noted that the objections were disposed of after a delay of over a year, indicating clear procedural violations.

3. Alleged change of opinion by the Assessing Officer:
The petitioner argued that the reopening of the assessment was merely a change of opinion, as the same issues had already been examined and addressed during the original assessment proceedings. The court agreed, citing the Supreme Court's decision in Principal Commissioner of Income Tax vs Fibres and Fabrics International (P) Ltd, which held that reassessment based on the same set of facts without any new tangible material is not permissible.

4. Lack of tangible material for reopening the assessment:
The petitioner claimed that there was no new tangible material to justify the reopening of the assessment. The court found that the reasons for reopening were based on the same assessment records and that no fresh material was available to warrant the reassessment. The court referred to the case of Jivraj Tea vs Assistant Commissioner Of Income-Tax, which held that reopening beyond four years without tangible material is bad in law.

5. Violation of principles of natural justice:
The petitioner argued that the assessment order dated 19.09.2021 was passed in violation of principles of natural justice, as the petitioner was not given a reasonable opportunity to respond to the show cause notice. The court found that the notice fixing the date for submission was received late, and the petitioner's request for an adjournment was not considered, leading to a violation of natural justice.

Conclusion:
The court quashed and set aside the notice dated 06.03.2020, the order disposing of objections dated 31.08.2021, and the Assessment Order dated 19.09.2021, allowing the petition with no order as to costs.