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2025 (3) TMI 721 - HC - Income TaxReopening of assessment - reasons to believe - claim of deduction u/s 54B - HELD THAT - Reasons so recorded for reopening in our considered opinion 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 u/s 143(3) of the Act has already considered the aspect of allowability of claim of deduction under Sections 54B. Thus the respondent authorities cannot reopen the reassessment on the ground that the then AO has not inquired properly and/or adopted casual approach. In our view issuance of notice u/s 148 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 Assessing Officer has not properly inquired in the proceedings. The impugned notice seeking reopening of assessment year falls within the category of change of opinion as at the relevant point of time in the original inquiry the petitioner has already made available all the documents and evidence so as to claim the deduction u/s 54B - Decided in favour of assesee.
1. ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment were:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Limitation for Reopening Assessment The legal framework involves Section 148 of the Income-Tax Act, which allows reopening of assessments if income has escaped assessment. The petitioner argued that the notice was issued beyond the permissible period of four years, as the relevant assessment year ended on 31.03.2016, and the notice was dated 31.03.2021. The Court considered the impact of the Covid-19 pandemic, which extended statutory timelines, and determined that the notice was not barred by limitation due to these extensions. Issue 2: Change of Opinion The petitioner contended that the reopening was based on a mere change of opinion, as all relevant facts and documents were disclosed during the original assessment. The Court examined whether new information or tangible material had come to light that justified reopening. The Court found that the reopening was based on the same material available during the original assessment, indicating a change of opinion rather than new evidence. The legal precedent establishes that reopening cannot be based solely on a change of opinion. Issue 3: Conditions for Reopening Beyond Four Years The legal framework requires that for reopening beyond four years, there must be a failure to disclose fully and truly all material facts necessary for the assessment. The petitioner argued that all relevant information was disclosed during the original assessment, and the Court agreed, noting that the Assessing Officer had all necessary information to make an informed decision. Thus, the conditions for reopening beyond four years were not met. Issue 4: Proper Sanction for Notice The petitioner argued that the sanction for the notice was granted without proper application of mind. The Court found that the sanction was indeed granted mechanically, without due consideration of the facts and circumstances, rendering the notice invalid. 3. SIGNIFICANT HOLDINGS The Court held that the reopening of the assessment was invalid as it was based on a mere change of opinion, which is not permissible under the law. The Court emphasized that reopening must be based on new information or tangible material, which was not the case here. The Court also found that the conditions for reopening beyond four years were not satisfied, as there was no failure to disclose material facts. Furthermore, the sanction for the notice was granted without proper application of mind, further invalidating the notice. The Court concluded by quashing the impugned notice dated 31.03.2021, allowing the petition in favor of the petitioner.
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