2024 (9) TMI 1276 - HC - Income Tax

Validity of reassessment proceedings - reason to believe - scope of change of opinion - whether the impugned notice u/s 148 based on reasons recorded can be said to be the change of opinion? - petitioner has not fulfilled the conditions prescribed for claiming deduction u/s 54B and 54F - HELD THAT - It cannot be said that the respondent authorities have come into possession of any information and/or any tangible material which suggests escapement of income. On the contrary, the reopening sought by the revenue authorities broadly based on the material already available on record and thereby, it cannot be said that the petitioner failed to disclose fully and truly all the material in respect to his assessment. Thus, the reopening based on the material already on record, is nothing but, in our considered, a mere change of opinion. The same is, therefore, not permissible in eye of law. The revenue authorities at the time of framing assessment order under Section 143 (3) of the Act has already considered the aspect of allowability of claim of deduction under Sections 54B and 54F of the Act. Thus, the respondent authorities cannot reopen the reassessment on the ground that the then Assessing Officer has not inquired properly and/or adopted casual approach. In our view, issuance of notice under Section 148 of the Act should be based on the reasons to believe which should have direct nexus with any new information and/ or tangible material which has come to the knowledge of the respondent authorities based on assessment proceedings. The revenue authorities, cannot under the guise of reasons to believe permit to reopen the case on the ground that the then AO has not properly inquired in the proceedings. Decided in favour of assessee.

Issues Involved:
1. Legality of the notice under Section 148 of the Income-Tax Act, 1961.
2. Whether the reopening of the assessment is based on a mere change of opinion.
3. Compliance with the statutory conditions for reopening beyond four years.
4. Validity of the sanction under Section 151 of the Act.

Detailed Analysis:

1. Legality of the Notice under Section 148 of the Income-Tax Act, 1961:
The petitioner challenged the notice dated 31.3.2021 issued under Section 148 of the Income-Tax Act, 1961, seeking to reopen the assessment for the Assessment Year 2015-16. The petitioner argued that the notice is patently illegal and contrary to law, as it sought to reopen the assessment beyond the period of four years from the end of the relevant assessment year without fulfilling the necessary conditions under the Act.

2. Whether the Reopening of the Assessment is Based on a Mere Change of Opinion:
The petitioner contended that the reopening was based on a mere change of opinion. The Assessing Officer had already scrutinized the deductions claimed under Sections 54B and 54F of the Act during the original assessment proceedings. The petitioner had provided all necessary details and evidence, and the assessment was framed under Section 143(3) of the Act without any disturbance to the return of income. The court noted that the reasons for reopening were based on the material already available on record, indicating a mere change of opinion, which is not permissible in law.

3. Compliance with the Statutory Conditions for Reopening Beyond Four Years:
The petitioner argued that the reopening was beyond the period of four years and did not meet the conditions stipulated under the Act. The court observed that the reopening was not justified as the petitioner had fully and truly disclosed all material facts necessary for the assessment. The revenue authorities did not come into possession of any new information or tangible material suggesting escapement of income. The reopening was based on the same material already scrutinized during the original assessment, thereby constituting a change of opinion.

4. Validity of the Sanction Under Section 151 of the Act:
The petitioner also challenged the validity of the sanction for issuance of the notice under Section 148 of the Act, arguing that it was granted without application of mind and in a mechanical manner. The court did not find it necessary to delve deeply into this issue, as the reopening itself was found to be based on a change of opinion and hence not permissible.

Conclusion:
The court concluded that the reopening of the assessment was based on a mere change of opinion and not on any new information or tangible material. The revenue authorities had already scrutinized the deductions under Sections 54B and 54F during the original assessment proceedings. Therefore, the impugned notice dated 31.3.2021 under Section 148 of the Income-Tax Act, 1961, was quashed and set aside. The petition was allowed.

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