2024 (3) TMI 1158 - HC - Income Tax

Reopening of assessment u/s 147 - Pro-Trade activity of Petitioner - reason to believe - as alleged Assessee had entered into sales/purchase of equity shares with or without actual delivery in recognized Stock Exchange and there are no details provided - mandation to have live link between the information received by AO and formation of his belief that income had escaped assessment HELD THAT - Queries were raised and replies were sent itself indicates as held in Aroni Commercials Limited 2014 (2) TMI 659 - BOMBAY HIGH COURT once a query is raised during the assessment proceedings and assessee has replied to it it follows that the query raised was a subject of consideration of the AO while completing the assessment. It is also not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. Therefore the reopening of the assessment in our view is merely on the basis of change of opinion of the AO from that held earlier during the course of assessment proceedings and this change of opinion does not constitute justification and/or reason to believe that income chargeable to tax has escaped assessment. AO in the reasons recorded does not even make an allegation that there was failure on the part of assessee to truly and fully disclose material facts. From the reasons as reproduced earlier we are unable to cull down the factum of failure to disclose. The reason in our view does not indicate anything cogent or clear that in fact there was failure on the part of Assessee to truly and fully disclose all material facts necessary for its assessment. There is no live link which is a sine qua non between the material before the AO in the present case and the belief which he has to form regarding escapement of income. We are satisfied that the jurisdictional conditions have not been met and the reassessment proceedings are nothing but a change of opinion . This change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961 for Assessment Year 2013-14.
2. Validity of the order rejecting the objections of the Petitioner.
3. Alleged failure to disclose material facts by the Petitioner.
4. Whether the reassessment is based on a change of opinion.

Summary:

1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961 for Assessment Year 2013-14:
The Petitioner, a member of BSE and NSE, challenged a notice dated 31st March 2021 issued under Section 148 of the Income Tax Act, 1961 for AY 2013-14. The notice was issued after the expiry of four years from the end of the relevant assessment year. The court noted that the proviso to Section 147 applies, which bars reassessment unless there has been a failure to truly and fully disclose material facts.

2. Validity of the order rejecting the objections of the Petitioner:
The Petitioner filed objections to the notice, which were rejected by an order dated 8th February 2022. The court found that the reasons for reopening the assessment did not indicate any cogent or clear failure on the part of the Petitioner to disclose material facts. The court emphasized that the reasons must have a live link with the formation of the belief that income had escaped assessment, which was missing in this case.

3. Alleged failure to disclose material facts by the Petitioner:
The court observed that there was no allegation in the reasons for reopening that the Petitioner failed to truly and fully disclose material facts. The court referred to the case of Crompton Greaves Ltd v. Assistant Commissioner of Income-Tax, where it was held that the factum of failure to disclose must be evident from the reasons. In this case, the reasons did not indicate any such failure.

4. Whether the reassessment is based on a change of opinion:
The court held that the reopening of the assessment was merely on the basis of a change of opinion of the Assessing Officer (AO) from that held earlier during the course of assessment proceedings. The court cited the case of Aroni Commercials Limited v. Deputy Commissioner of Income Tax, stating that once a query is raised and replied to during the assessment proceedings, it follows that the query was a subject of consideration. The court concluded that this change of opinion does not constitute justification or reason to believe that income chargeable to tax has escaped assessment.

Conclusion:
The court found that the jurisdictional conditions for reopening the assessment were not met and that the reassessment proceedings were based on a change of opinion, which does not justify the belief that income had escaped assessment. The petition was disposed of with no order as to costs.