2023 (9) TMI 1624 - HC - Income Tax

Validity of reopening of assessment - notice beyond a period of four years - case of borrowed satisfaction - assessee had received a contract from one SEPCL - HELD THAT - The reopening of the assessment in the present case is for the assessment year 2012-13. The reasons to believe reproduced as Sr. No. 3 6 in 2023 (1) TMI 181 - GUJARAT HIGH COURT when compared to the reasons to believe namely reasons no. 1 2 of the present case, except for the figures, the company being SECL in the present case and the intimation letter only being one of a different date i.e. 13.03.2018, the reasons to believe in the present petition are completely identical to the reasons no. 3 6 in the aforesaid petition. The court therefore had extensively considered these very reasons held that reopening was not justified due to the lack of independent reasons and the impermissible reliance on borrowed satisfaction. The court made the rule absolute, thereby granting the petition in favor of the petitioner.

Issues Involved:

1. Legality and 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 the assessment.
3. Whether the reopening of assessment was based on borrowed satisfaction or a change of opinion.
4. The applicability of previous judgments and principles to the present case.

Detailed Analysis:

1. Legality and Validity of the Notice under Section 148:

The petitioner challenged the notice dated 26.03.2019 issued under Section 148 of the Income Tax Act, 1961, arguing it was beyond the permissible period of four years. The petitioner contended that there was no failure on its part to fully and truly disclose its income, as the issues raised in the notice had already been addressed during the original scrutiny assessment. The reopening was alleged to be a change of opinion, which is impermissible under the law. The court examined the reasons for reopening and found them identical to those in a previous case (Special Civil Application No. 16916 of 2018) where the court had quashed the notice. The court held that the notice under Section 148 was not justified and quashed it.

2. Alleged Failure to Disclose Material Facts:

The petitioner argued that it had disclosed all necessary information during the original assessment proceedings. The court noted that the petitioner had provided adequate disclosures and that there was no suppression or withholding of information. The court emphasized that for a valid reopening, there must be a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment, which was not the case here. The court found that the reopening was not based on any new material facts but rather on a change of opinion.

3. Borrowed Satisfaction and Change of Opinion:

The petitioner claimed that the reopening was based on borrowed satisfaction, as the Assessing Officer relied on information from the DDIT-I, Faridabad, without applying an independent mind. The court agreed with this contention, stating that the reasons for reopening were not independently formed by the Assessing Officer but rather borrowed from another authority's findings. The court reiterated that reopening based on borrowed satisfaction or a mere change of opinion is impermissible. The court cited previous judgments establishing that the Assessing Officer must have independent reasons to believe that income has escaped assessment.

4. Applicability of Previous Judgments:

The petitioner relied on a previous judgment by the same court in its own case, where similar reasons for reopening were quashed. The court found the reasons in the present case to be identical to those in the previous case and adopted the same reasoning to quash the notice. Additionally, the petitioner cited a decision from the Bombay High Court in the case of Patel Engineering Ltd., where reopening was found unjustified due to full disclosure by the assessee. The court agreed with the principles laid down in these judgments, emphasizing the need for independent and relevant reasons for reopening an assessment.

In conclusion, the court quashed the notice under Section 148, ruling that the reopening was not justified due to the lack of independent reasons and the impermissible reliance on borrowed satisfaction. The court made the rule absolute, thereby granting the petition in favor of the petitioner.

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