2024 (8) TMI 131 - HC - Income Tax

Reopening of assessment u/s 147 - reasons to believe - difference between the total cash sales and the cash sales reflected in the books - HELD THAT - Reopening is made only on the basis of the discrepancy noticed from the impounded material relevant to the year under consideration. From the material placed on record it is not in dispute that the AO during the course of the regular assessment has verified the very same impounded material and issued the notice u/s 142 (1) calling upon the petitioner to show as to how the transaction appearing in the impounded documents have been reflected in the books of accounts and thereafter, during the course of the assessment proceedings further details was also called for with regard to the impounded material found during the course of survey which took place on 09.02.2016 relevant to AY 2016-17 explaining in detail regarding total difference in sum total in day wise and amount as mentioned. Hence, during the course of regular assessment, the very issue of totaling difference in the impounded material was considered. Therefore, it cannot be said that the impugned notice is issued on the basis of any new tangible material having live nexus with the escaped income. AO during the course of the regular assessment was having access to the impounded material and once the same is processed by accepting revised return filed by the petitioner subsequently, on the same issue, impugned notice for reopening is not tenable as it would amount that to change of opinion on the part of the respondent AO. Also as the impugned notice is issued beyond the period of four years on 04.05.2020 and therefore, there is no failure on part of the petitioner to make fully and true disclosure of all material facts as the petitioner has made disclosure of Rs. 78.94 Lakhs on the basis of the impounded material and later on, when the respondent has found that there was a total difference of the impounded material, the same cannot be considered as failure on the part of the petitioner to make full and true disclosure. Decided in favour of assessee.

Issues Involved:
1. Legality of the notice under section 148 of the Income Tax Act, 1961.
2. Alleged failure of the petitioner to disclose full and true material facts.
3. Whether the reopening of assessment amounts to a change of opinion.
4. Validity of reopening based on audit objection.
5. Compliance with procedural requirements under section 151 of the Act.

Detailed Analysis:

1. Legality of the Notice under Section 148:
The petitioner challenged the notice under section 148 of the Income Tax Act, 1961, dated 04.05.2020, for the Assessment Year 2015-2016. The petitioner argued that the notice was issued beyond the period of four years and there was no failure on their part to make full and true disclosure of all material facts relevant for the assessment. The respondent contended that the notice was issued based on information found in impounded documents during a survey under section 133A of the Act and was within the extended period due to Covid-19 as per TOLA-2020.

2. Alleged Failure to Disclose Full and True Material Facts:
The petitioner had revised their return of income on 27.03.2016, including the disclosure of Rs. 78,94,214/- in unaccounted cash sales. The respondent argued that the petitioner did not disclose the complete figures of unaccounted cash sales, resulting in underassessment. The court found that during the regular assessment, the Assessing Officer had verified the impounded material and issued notices under section 142 (1) of the Act, calling upon the petitioner to explain the transactions. Therefore, it could not be said that the petitioner failed to disclose fully and truly all material facts.

3. Change of Opinion:
The petitioner argued that the reopening was based on the same material already available on record, which amounted to a change of opinion. The court agreed, noting that the Assessing Officer had already examined the impounded material during the regular assessment and accepted the revised return filed by the petitioner. The Hon'ble Apex Court in Commissioner of Income tax v. Kelvinator of India Ltd. held that a mere change of opinion cannot justify reopening an assessment.

4. Validity of Reopening Based on Audit Objection:
The petitioner contended that the reopening was based on an audit objection, which is not permissible in law. The court did not specifically address this issue, but the overall finding was that the reopening was not justified as it was based on the same set of facts already considered during the original assessment.

5. Compliance with Procedural Requirements:
The respondent argued that the notice was issued after obtaining approval from the competent authority under section 151 of the Act. The court found that even if the reopening was considered to be beyond four years, there was no failure on the part of the petitioner to disclose material facts fully and truly. The reopening was based on the same impounded material already examined during the original assessment.

Conclusion:
The court quashed the notice dated 04.05.2020 issued under section 148 of the Act and the consequent order disposing of the objections. The court held that the reopening of the assessment was not tenable as it amounted to a change of opinion and there was no new tangible material. The rule was made absolute, and no order as to costs was issued.

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