2024 (3) TMI 1209 - HC - Income Tax

Validity of reopening of assessment - clandestine and unaccounted sales - Reason to believe - absence of power to review - report of the Directorate General of Goods and Service Tax Intelligence relied upon to conclude that there was a large-scale suppression of sale by the petitioner and therefore assessee had not offered sales to tax in its return of income, thus addition of gross profit at the rate of 1% to the income of the business and profession of the assessee - HELD THAT - Notice giving the reasons for reopening the assessment in the case of the petitioner does not indicate, that any new material has been found, but relies upon the same material and same set of facts as were prevailing, when the earlier order of assessment dated 28.12.2018 was made. The entire assessment order was based upon the report of the Directorate General of Goods and Services Tax Intelligence, based upon which respondent no. 2, had assessed the income of the petitioner as indicated above. The same report has been considered as a reason for re-opening the assessment in the impugned order, which clearly would indicate that it was not a case of mistake, but was a change of opinion, as the same material, which cannot be sustainable in law. Though reliance is also placed on the amended section 147 of the Income Tax Act, it does not assist her case for two reasons, (i) the amendment having been brought into effect from 1.4.2021, cannot be applied to the case of the petitioner and (ii) even otherwise, though the expression reason to believe has been deleted therefrom, what has been held in Kelvinator of India 2010 (1) TMI 11 - SUPREME COURT regarding the concept of change of opinion being treated as an in-built test to check abuse of power by the Assessment Officer, in absence of power to review, would continue to hold the field. Reopening notice set aside - Decided in favour of assessee.

Summary

Issues Involved:

1. Legality of the notice u/s 148 of the Income Tax Act.
2. Validity of reassessment based on change of opinion.

Summary:

Legality of the notice u/s 148 of the Income Tax Act:

The petition challenges the order dated 2.2.2022 by respondent no. 2, rejecting objections to the notice u/s 148 of the Income Tax Act and the subsequent notice dated 27.3.2021. The petitioner argued that the reassessment for the Assessment Year 2016-2017 was due to a change of opinion, which is impermissible in law. The petitioner had filed an E-return on 4.10.2016, and notices u/s 143(2), 129, and 142(1) were issued. A show cause notice on 26.11.2018 alleged unaccounted sales of Rs. 3,07,96,304/-. The petitioner denied these allegations. The Assessment Officer concluded clandestine sales and added Rs. 3,07,963/- to the income, issuing a demand and penalty notice u/s 274 read with section 271(1)(c). The petitioner withdrew the appeal against this order under the vivad se viswas scheme 2020. On 27.3.2021, a notice u/s 148 was issued to reassess the income for 2016-2017. The petitioner filed objections on 28.1.2022, arguing no new facts were available, which were rejected on 2.2.2022.

Validity of reassessment based on change of opinion:

The petitioner contended that the reassessment was based on the same material and facts as the original assessment, constituting a change of opinion, which is not a valid ground for reassessment. The petitioner relied on precedents such as M/s. Indian & Eastern Newspaper Society Vs Commissioner of Income Tax (1979)4 SCC 248, Commissioner of Income Tax Vs Kelvinator of India Ltd 2010(2) SCC 723, and Aroni Commercials Limited Vs Dy. Commissioner of Income Tax 2014 SCC online Bombay 221. Respondent no. 2 argued that the reassessment was due to a mistake in the original assessment, justifying the reopening. The court noted that the assessment order dated 28.12.2018 was based on the Directorate General of Goods and Service Tax Intelligence's report, indicating large-scale suppression of sales. The reasons for reopening in the notice dated 27.1.2022 relied on the same material, showing no new facts. The court held that the reassessment was a change of opinion, not a mistake, and thus not permissible under the law.

The court quashed the impugned order dated 2.2.2022 and the notice dated 27.3.2021, ruling that they were not sustainable in law. The rule was made absolute with no costs.