2025 (2) TMI 192 - HC - Income Tax

Reopening of assessment u/s 147 - change of opinion - information received on Insight Portal pertaining to the cash deposit - HELD THAT - Information received on Insight Portal pertaining to the cash deposit which was duly considered during the regular course of assessment. Therefore it cannot be said that there is any fresh material in possession of the respondent AO so as to assume the jurisdiction which has a live nexus with the material on record to form a reason to believe that the income has escaped the assessment. We are of the opinion that the impugned notice issued by the respondent AO u/s 148 for reopening of the AY 2017-18 is liable to be quashed and set-aside being without jurisdiction and as such the same is hereby quashed and set-aside - Decided in favour of assessee.

The judgment addresses the issues surrounding the legality and validity of a notice issued under Section 148 of the Income Tax Act, 1961, for reopening an assessment for the Assessment Year 2017-18. The petitioner challenged this notice, arguing that it was based on previously considered information and amounted to a mere change of opinion by the Assessing Officer.

1. ISSUES PRESENTED and CONSIDERED

The core legal question considered was whether the notice issued under Section 148 for reopening the assessment was valid, given that the issues it purported to address had already been scrutinized during the original assessment proceedings. Specifically, the court examined whether the Assessing Officer had a valid "reason to believe" that income had escaped assessment, as required by Section 147 of the Income Tax Act.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents: The legal framework centers on Sections 147 and 148 of the Income Tax Act, which allow the reopening of an assessment if the Assessing Officer has reason to believe that income has escaped assessment. The court also considered the principles governing the reopening of assessments, particularly the need for new, tangible material to justify such action.

Court's Interpretation and Reasoning: The court scrutinized the reasons provided by the Assessing Officer for reopening the assessment. It noted that the reasons were based on information received via the Insight Portal regarding unexplained credit entries, which the officer claimed were not fully disclosed during the original assessment. However, the court found that these entries had already been considered during the initial assessment proceedings.

Key Evidence and Findings: The petitioner had provided detailed responses to the Assessing Officer's queries during the original assessment, which included explanations for cash deposits during the demonetization period. The court found that the Assessing Officer had already scrutinized these details, leading to an addition in the original assessment order.

Application of Law to Facts: The court applied the legal standard for reopening assessments, emphasizing that the Assessing Officer must have new material that was not available during the original assessment. The court concluded that the information from the Insight Portal did not constitute new material, as it had already been considered.

Treatment of Competing Arguments: The petitioner argued that the notice was based on a change of opinion, which is not a valid ground for reopening an assessment. The respondent contended that the petitioner had failed to fully disclose material facts, justifying the reopening. The court sided with the petitioner, finding no failure to disclose and no new material to support the reopening.

Conclusions: The court concluded that the notice under Section 148 was invalid, as it was based on issues already addressed in the original assessment. The court held that the reopening was without jurisdiction and quashed the notice.

3. SIGNIFICANT HOLDINGS

The court established that for a valid reopening of an assessment under Section 147, there must be new, tangible material that was not available during the original assessment. The court held that a mere change of opinion does not justify reopening an assessment. The final determination was that the notice issued for reopening the assessment was without jurisdiction and was quashed.

The court's decision underscores the principle that the reopening of assessments requires a substantive basis beyond mere reassessment of previously considered facts. This judgment reinforces the necessity for Assessing Officers to have a bona fide belief based on new information when seeking to reopen assessments under the Income Tax Act.

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