2024 (4) TMI 1214 - HC - Income Tax

Validity of Reopening of assessment - case of the petitioner is not selected for scrutiny for the year under consideration - scope of amended provisions of the Income Tax Act - difference in the account statement and remittance sheet of the bank treated as an escapement of the income. HELD THAT - In view of the orders of the even date passed in the earlier A.Ys. for 2016-17 and 2017-18 2024 (5) TMI 227 - GUJARAT HIGH COURT , we are of the opinion that on same material only because the year under consideration being A.Y. 2018-19 no scrutiny assessment is undertaken by the respondent Assessing Officer and this being a new regime of reassessment after 1st April, 2021, no different treatment can be given for reopening only because the scope is enlarged by the amended provisions for reopening. In our opinion, when the earlier assessment years which are subjected to reopening for which the notice is already quashed on the same material, there cannot be a reopening for the year under consideration and therefore, the impugned order, as well as, the notice is also required to be quashed and set aside. Petition allowed.

Summary

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1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the order passed under Section 148A(d) of the Income Tax Act, 1961, and the notice issued under Section 148 for the Assessment Year (A.Y.) 2018-19 were valid.
• Whether the difference between the remittance-sheet and the account statement of the petitioner with Jammu & Kashmir Bank constitutes an escapement of income.
• Whether the absence of scrutiny assessment for A.Y. 2018-19 justifies the reopening of the assessment under the amended provisions of the Income Tax Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the Order and Notice under Sections 148A(d) and 148

• Relevant legal framework and precedents: The provisions of Sections 148A(d) and 148 of the Income Tax Act, 1961, govern the issuance of notices for reopening assessments. The court also referenced prior decisions in Special Civil Application no.4383 of 2022 and Special Civil Application no.4986 of 2022.
• Court's interpretation and reasoning: The court noted that the reopening of assessments for earlier years on similar grounds had been quashed. It emphasized that the mere absence of scrutiny assessment does not automatically justify reopening under the new regime post-April 1, 2021.
• Key evidence and findings: The court found that the Assessing Officer did not adequately consider the petitioner's explanations regarding the alleged differences in bank statements.
• Application of law to facts: The court applied the principles from previous cases to determine that the reopening was unjustified, as the same material could not be used to reopen assessments for different years without new evidence.
• Treatment of competing arguments: The court acknowledged the respondent's argument about the need for further inquiry due to the lack of scrutiny assessment but found it insufficient to support the reopening.
• Conclusions: The court concluded that the order and notice were invalid and required to be quashed.

Issue 2: Alleged Escapement of Income

• Relevant legal framework and precedents: The concept of escapement of income is addressed under Section 147 of the Income Tax Act, which deals with income that has not been assessed.
• Court's interpretation and reasoning: The court reasoned that the alleged differences in bank statements did not constitute escapement of income, as they were due to foreign exchange fluctuations, which were already accounted for in the petitioner's books.
• Key evidence and findings: The petitioner provided bank statements and explanations, which the court found credible and consistent with proper accounting practices.
• Application of law to facts: The court applied the legal framework to conclude that the differences in bank statements did not amount to escapement of income.
• Treatment of competing arguments: The court dismissed the respondent's claims about the differences, noting the lack of specific details in the notice and order.
• Conclusions: The court held that there was no escapement of income, and thus, the basis for reopening was flawed.

3. SIGNIFICANT HOLDINGS

• Preserve verbatim quotes of crucial legal reasoning: "In our opinion, when the earlier assessment years which are subjected to reopening for which the notice is already quashed on the same material, there cannot be a reopening for the year under consideration and therefore, the impugned order, as well as, the notice is also required to be quashed and set aside."
• Core principles established: The judgment reinforced the principle that reopening of assessments must be based on new evidence or material, not merely on the absence of prior scrutiny. It also clarified that discrepancies due to foreign exchange fluctuations do not necessarily indicate escapement of income.
• Final determinations on each issue: The court quashed the order and notice under Sections 148A(d) and 148 for A.Y. 2018-19, finding them invalid and unsupported by sufficient grounds.