2024 (4) TMI 201 - HC - Income Tax

Validity of Reopening of assessment based on order passed u/s 263 - reason to believe - scope of change of opinion - HELD THAT - No notice can be issued u/s 148 of the Act unless there is information with the AO that income chargeable to tax has escaped assessment. The only information forming the origin of reason to believe escapement of income from assessment is contents of the order passed by the CIT. In the light of the aforesaid admitted position as on date the order passed by the CIT does not survive as being set aside by the ITAT the very basis of the AO to reopen assessment and assume jurisdiction is misplaced and unjustifiable. Attempt to reopen assessment is based on a change of opinion or not? - Petitioner provided all the details as sought vide its reply dated 6th August 2018 which followed another letter by the AO seeking further information. Petitioner by its letter dated 26th September 2018 furnished further information as additionally sought by the AO. Thus it is evident that Petitioner had disclosed completely and fully all relevant information to the satisfaction of the AO and the assessment order was passed. Be that as it may the impugned notice is in any case based on the contents and findings of the CIT (International) Mumbai in his revision order which order is already set aside by the ITAT. That the order passed by ITAT is subjected to a challenge before this Court does not aid the Department since there is no order passed by this Court staying the effect of the order. On the contrary the AO himself has given effect to the ITAT order and passed an Order Giving Effect ( OGE ) to the ITAT order. In this view of the matter the impugned notice is nothing but a change of opinion by the AO and as held in Aroni Commercials Limited 2014 (2) TMI 659 - BOMBAY HIGH COURT a reopening based upon change of opinion is impermissible in law. We agree with the submissions that if change of opinion concept is given a go by that will result in giving arbitrary powers to the AO to reopen assessments. It would in effect sanctify powers to review which he does not possess. We have no hesitation in holding that the notices issued u/s 148A(b) order passed u/s 148A(d) and notice issued under Section 148 of the Act to reopen the assessment for AY 2016 17 cannot be sustained. Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of notices and orders issued u/s 148A(b) and 148 of the Income Tax Act, 1961.
2. Validity of reopening assessment based on "change of opinion."
3. Jurisdictional pre-conditions for reassessment.
4. Prematurity of the petition and alternative remedies.

Summary:

Legality of Notices and Orders Issued u/s 148A(b) and 148:
The Petitioner challenged notices dated 27th March 2023, 30th March 2023, and 13th April 2023, issued u/s 148A(b) of the Income Tax Act, 1961, and the order dated 25th April 2023 passed u/s 148A(d) of the Act, along with the notice dated 25th April 2023 issued u/s 148 of the Act to reopen the assessment for AY 2016-17. The Petitioner argued that these notices and orders are illegal, untenable, and contrary to the provisions of the Act. The Court found that the basis for reopening the assessment was an order passed u/s 263 of the Act for AY 2017-18, which had been set aside by the ITAT. As the order under Section 263 did not survive, the AO's jurisdiction to reopen the assessment was unjustifiable.

Validity of Reopening Assessment Based on "Change of Opinion":
The Petitioner contended that the reopening of the assessment was based on a "change of opinion," which is impermissible under tax jurisprudence. The Court agreed, noting that all relevant information had been provided during the original assessment proceedings, and the AO had accepted the income returned by the Petitioner. The Court cited the decision in Aroni Commercials Limited v. Deputy Commissioner of Income Tax, emphasizing that reopening based on a change of opinion is not permissible.

Jurisdictional Pre-conditions for Reassessment:
The Court examined whether the AO had satisfied the jurisdictional pre-conditions for reassessment. It was found that the AO had relied solely on the order passed by the CIT, which had been set aside by the ITAT. Therefore, the AO's basis for reopening the assessment was misplaced, and the notices and orders issued were without jurisdiction.

Prematurity of the Petition and Alternative Remedies:
The Revenue argued that the petition was premature as the reassessment was still pending and that the Petitioner had alternative remedies under the Act. The Court, however, found that the AO had issued the impugned notices and orders without satisfying the jurisdictional pre-conditions, making the reassessment proceedings invalid. The Court refrained from examining the merits of the reassessment proceedings, focusing instead on the jurisdictional issues.

Conclusion:
The Court held that the notices dated 27th March 2023, 30th March 2023, and 13th April 2023, issued u/s 148A(b) of the Act, the order dated 25th April 2023 passed u/s 148A(d) of the Act, and the notice dated 25th April 2023 issued u/s 148 of the Act to reopen the assessment for AY 2016-17 could not be sustained. The Rule was made absolute in terms of prayer clause (a) of the petition, and there was no order as to costs.