2025 (2) TMI 308 - HC - Income Tax

Reopening of assessment u/s 147 - mere change of opinion - HELD THAT - As the AO has failed to provide the details of mismatch on the basis of Bank Remittance Data obtained from the Jammu Kashmir Bank and in absence of an opportunity of hearing provided to the petitioner the impugned notice dated 31.03.2022 issued under Section 148 of the Act is apparently without jurisdiction. Decided in favour of assessee.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment involve:

• Whether the notice issued under Section 148A(b) of the Income Tax Act, 1961, and the subsequent order under Section 148A(d) were validly issued, given the alleged procedural deficiencies.
• Whether the reopening of the assessment for the Assessment Year 2018-19 under Section 148 of the Income Tax Act was justified based on the alleged mismatch in bank remittance data.
• The applicability of the principle of "change of opinion" in the context of reopening assessments under Section 147 of the Income Tax Act.

2. ISSUE-WISE DETAILED ANALYSIS

Validity of Notices and Orders under Sections 148A(b) and 148A(d)

• Relevant legal framework and precedents: The issuance of notices under Sections 148A(b) and 148A(d) is governed by procedural requirements that mandate providing the assessee with the necessary details and an opportunity to be heard.
• Court's interpretation and reasoning: The Court found that the respondent failed to provide the petitioner with the necessary details of the alleged mismatch in bank remittance data, which were relied upon for issuing the notice. The absence of an opportunity for the petitioner to present its case constituted a procedural lapse.
• Key evidence and findings: The petitioner had requested specific documents and details to address the alleged mismatch, which were not provided by the respondent.
• Application of law to facts: The Court applied the procedural requirements under the Income Tax Act and found that the respondent's actions were not in compliance, rendering the notices and orders invalid.
• Treatment of competing arguments: The petitioner's argument regarding the lack of procedural compliance was not effectively countered by the respondent, as acknowledged by the Court.
• Conclusions: The notices and orders under Sections 148A(b) and 148A(d) were quashed due to procedural non-compliance.

Justification for Reopening Assessment under Section 148

• Relevant legal framework and precedents: The reopening of assessments under Section 148 requires a valid "reason to believe" that income has escaped assessment, as established in the case of Commissioner of Income Tax v. Kelvinator of India Ltd.
• Court's interpretation and reasoning: The Court held that the reopening was not justified as the respondent failed to establish a valid basis for the belief that income had escaped assessment, particularly in light of the procedural lapses.
• Key evidence and findings: The petitioner had addressed the alleged mismatch with supporting documents, and similar notices in previous years had been quashed by the Court.
• Application of law to facts: The Court found that the procedural lapses and lack of evidence supporting the alleged mismatch undermined the validity of the reopening.
• Treatment of competing arguments: The respondent's inability to provide a substantive rebuttal to the petitioner's claims of procedural lapses and lack of evidence was noted by the Court.
• Conclusions: The reopening of the assessment was not justified, and the notices under Section 148 were quashed.

Principle of "Change of Opinion"

• Relevant legal framework and precedents: The principle of "change of opinion" restricts the reopening of assessments based merely on a reassessment of already considered facts, as articulated in the Kelvinator case.
• Court's interpretation and reasoning: The Court reiterated that the power to reassess must be based on new material or evidence, not merely a change in opinion on previously assessed facts.
• Key evidence and findings: The Court found no new material or evidence that justified the reopening, reinforcing the petitioner's position.
• Application of law to facts: The Court applied the principle to conclude that the reopening was based on a mere change of opinion, which is not permissible.
• Treatment of competing arguments: The respondent's argument did not effectively address the lack of new evidence, which was critical to the Court's decision.
• Conclusions: The reopening was invalid as it was based on a change of opinion without new evidence.

3. SIGNIFICANT HOLDINGS

• Preserve verbatim quotes of crucial legal reasoning: The Court emphasized, "The Assessing Officer has no power to review; he has the power to re-assess. But reassessment has to be based on fulfilment of certain precondition and if the concept of 'change of opinion' is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place."
• Core principles established: The procedural requirements for issuing notices under Sections 148A(b) and 148A(d) must be strictly adhered to, and reopening assessments must not be based on a mere change of opinion.
• Final determinations on each issue: The impugned notices and orders under Sections 148 and 148A(d) were quashed due to procedural deficiencies and lack of justification, with the Court making the rule absolute and no order as to cost.