2024 (5) TMI 225 - HC - Income Tax

Reopening of assessment u/s 147 - Reasons to believe - reopening on the basis of the audit party objections - claim made towards the notional guarantee commission - HELD THAT - The notice u/s 142(1) clearly indicates the break-up of any other amount allowable as deduction, in which in reply the petitioner has submitted that the claim made towards the notional guarantee commission and the same is deemed to have been considered by the AO while framing the assessment. Moreover, it is settled legal position that the reopening on the basis of the audit party objections is invalid and on bare perusal of the reasons recorded, it is apparent that there was no material available with the respondent - AO to form a reason to believe that the income has escaped assessment. In such circumstances, the impugned notice issued u/s 148 of the Act is held to be without jurisdiction and accordingly, the same is quashed and set aside. Rule is made absolute to the aforesaid extent.

Issues Involved:
1. Validity of the notice issued u/s 148 of the Income-Tax Act, 1961 for reopening the assessment.
2. Whether the reopening of assessment was based on new tangible material or a change of opinion.
3. Consideration of reassessment based on audit party objections.
4. Availability of alternative remedy for the petitioner.

Summary:

1. Validity of the notice issued u/s 148 of the Income-Tax Act, 1961 for reopening the assessment:
The petitioner challenged the notice issued u/s 148 of the Income-Tax Act, 1961 dated 21.3.2021 for reopening the Assessment Year 2017-18. The petitioner argued that the reopening was not based on any fresh tangible material but on a change of opinion by the Assessing Officer. The notice was issued within four years from the end of the relevant assessment year.

2. Whether the reopening of assessment was based on new tangible material or a change of opinion:
The petitioner contended that the main reason for reopening the assessment was already considered during the original assessment proceedings u/s 142(1) of the Act. The petitioner cited various legal precedents to argue that the reopening based on a change of opinion is invalid. The court observed that the notice u/s 142(1) dated 5.7.2019 indicated the break-up of any other amount allowable as deduction, including the notional guarantee commission of Rs. 99,72,603/-, which was deemed to have been considered by the Assessing Officer during the original assessment.

3. Consideration of reassessment based on audit party objections:
The petitioner argued that the impugned notice was issued based on audit party objections, which is not valid. The court noted that it is a settled legal position that reopening based on audit party objections is invalid. The court found that there was no material available with the Assessing Officer to form a reason to believe that the income had escaped assessment.

4. Availability of alternative remedy for the petitioner:
The respondent argued that the petitioner had an alternative efficacious remedy to challenge the assessment order by preferring an appeal before the CIT (Appeals). However, the court held that the impugned notice issued u/s 148 of the Act was without jurisdiction and quashed the same.

Conclusion:
The court concluded that the notice issued u/s 148 of the Income-Tax Act, 1961 for reopening the assessment was without jurisdiction as it was based on a change of opinion and audit party objections. The notice was quashed and set aside, and the rule was made absolute to the aforesaid extent.

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