2024 (11) TMI 1443 - HC - Income Tax

Validity of reopening of assessment - reasons to believe - HELD THAT - Prima facie it appears that the reopening of the assessment was justified. It is noticed that the reasons stated in the letter dated 19.08.2021 also brings out the same. Therefore there is no merits in challenge to impugned notice dated 30.03.2021 or the speaking order dated 24.01.2022 as the petitioner has not given the true and full disclosure of all material information before the assessment was passed on 29.01.2018. Therefore the Writ Petition is liable to be dismissed.

Summary

ISSUES PRESENTED and CONSIDERED

The primary issue considered was whether the notice dated 30.03.2021 issued under Section 148 of the Income Tax Act, 1961, for reopening the assessment for the year 2014-15 was valid. The core legal questions included:

• Whether the reopening of the assessment was justified given that the notice was issued beyond four years but within six years from the relevant date.
• Whether there was any suppression of material information by the petitioner that would justify the reopening of the assessment.
• Whether the reasons provided for reopening, such as amortization of expenses and deductions under Section 35D, were previously scrutinized and thus constituted a change of opinion.
• Whether the petitioner failed to provide true and full disclosure of material facts necessary for the assessment.

ISSUE-WISE DETAILED ANALYSIS

1. Justification for Reopening the Assessment

The legal framework for reopening assessments under Section 148 of the Income Tax Act requires the presence of tangible material that indicates income has escaped assessment. This provision allows reopening within six years if the income escaping assessment exceeds one lakh rupees. The petitioner argued that there was no new material evidence justifying the reopening, as the issues were already scrutinized in the original assessment completed on 29.01.2018.

The Court examined the reasons for reopening, which included amortization of expenses and deductions under Section 35D. The petitioner contended these were already addressed in the previous assessment. However, the Court found that the Assessing Officer had not formed an opinion on these matters during the original assessment, negating the argument of a mere change of opinion.

2. Suppression of Material Information

The Court considered whether the petitioner had suppressed material information necessary for the assessment. The respondent argued that the petitioner did not provide full disclosure regarding project abandonment and depreciation claims. The Court noted that the petitioner's responses to notices under Section 143(2) did not include comprehensive disclosures, supporting the respondent's claim of incomplete information.

3. Change of Opinion

The petitioner argued that the reopening was based on a change of opinion, which is not permissible under the law. The Court, however, held that since the Assessing Officer had not formed any opinion on the specific issues during the original assessment, the reopening did not constitute a change of opinion. The Court referenced the reasons recorded in the notice dated 19.08.2021, which indicated that the Assessing Officer possessed information about project abandonment and incorrect depreciation claims, justifying the reopening.

4. Full and True Disclosure

The requirement for a full and true disclosure of all material facts by the assessee is crucial for the validity of an original assessment. The Court found that the petitioner failed to meet this requirement, as evidenced by the lack of detailed disclosures in response to the notices issued during the original assessment process. This failure justified the reopening of the assessment under Section 148.

SIGNIFICANT HOLDINGS

The Court held that the reopening of the assessment was justified due to the petitioner's failure to provide full and true disclosure of material facts necessary for the original assessment. The Court emphasized that the absence of an opinion formed by the Assessing Officer on the specific issues during the original assessment allowed for the reopening without constituting a change of opinion.

The Court concluded that the impugned notice dated 30.03.2021 and the subsequent speaking order dated 24.01.2022 were valid, as the petitioner did not fulfill the disclosure requirements. Consequently, the Writ Petition was dismissed, and the connected miscellaneous petitions were closed without costs.