2006 (6) TMI 88 - HC - Income Tax

Notice u/a 148 - It is well-settled that if a notice under section 148 of the Act has been issued without the jurisdictional foundation under section 147 being available to the Assessing Officer, the notice and the subsequent proceedings will be without jurisdiction, liable to be struck down in exercise of writ jurisdiction of this court - It is a case of absence of material and hence the absence of jurisdiction in the Assessing Officer to initiate the proceedings under section 147/148 - The instant case is a case of mere change of opinion which does not provide jurisdiction to the respondent to initiate proceedings under section 147 - impugned notice under section 147 is quashed

Issues Involved:
1. Jurisdiction of the respondent to initiate proceedings under Section 147 of the Income-tax Act.
2. Validity of reopening the assessment based on a change of opinion.
3. Compliance with the conditions stipulated under Section 72A of the Income-tax Act.
4. Relevance of the status of the amalgamating company for the relief under Section 72A.
5. Application of the guidelines issued by the Central Board of Direct Taxes (CBDT) regarding reopening of assessments.
6. Adequacy and sufficiency of the reasons to believe income had escaped assessment.

Detailed Analysis:

1. Jurisdiction of the Respondent to Initiate Proceedings Under Section 147:
The petitioner challenged the jurisdiction of the respondent to initiate proceedings under Section 147 of the Income-tax Act, arguing that the reopening of the assessment was based on mere change of opinion, which is not permissible. The court emphasized that the respondent cannot supplement fresh reasons in the form of a counter affidavit or otherwise. The reasons to believe must be based on the original grounds stated in the impugned proceedings.

2. Validity of Reopening the Assessment Based on a Change of Opinion:
The court held that reopening an assessment merely on the ground of change of opinion is not permissible. The original assessment was completed after a thorough examination of the details provided by the petitioner. The court cited the Supreme Court's decision in Mohinder Singh Gill v. Chief Election Commissioner, which states that an order's validity must be judged by the reasons mentioned at the time of its issuance and cannot be supplemented by fresh reasons later.

3. Compliance with the Conditions Stipulated Under Section 72A:
The respondent argued that the petitioner did not satisfy the twin conditions stipulated in Section 72A of the Act, as the amalgamating company (DHCL) was not an industrial undertaking. The court found that the original assessment had considered the eligibility under Section 72A, and the reopening of the assessment was not justified as it was based on a mere change of opinion without any new material or information.

4. Relevance of the Status of the Amalgamating Company for the Relief Under Section 72A:
The petitioner contended that the relevant status for relief under Section 72A is that of the amalgamating company (DHCL), not the petitioner. The court agreed with this contention, stating that the respondent's focus on the petitioner's status was a misdirection. The correct inquiry should have been whether DHCL was an industrial undertaking.

5. Application of the Guidelines Issued by the CBDT Regarding Reopening of Assessments:
The petitioner argued that the reopening of the assessment was contrary to the guidelines issued by the CBDT, which state that a change of opinion cannot provide a reason to believe under the amended Section 147 of the Act. The court upheld this argument, emphasizing that the reopening of the assessment was not justified as it was based on a mere change of opinion.

6. Adequacy and Sufficiency of the Reasons to Believe Income Had Escaped Assessment:
The court found that the reasons communicated by the respondent did not constitute adequate reasons to believe that income had escaped assessment. The reasons were merely assertive conclusions without a rational connection or live link to the formation of the requisite belief. The court reiterated that the power to reopen an assessment is not intended to enable the assessing authorities to review final decisions based on changing opinions or moods.

Conclusion:
The court allowed the writ petition, quashing the impugned notice under Section 147 of the Income-tax Act relevant to the assessment year 2000-01. The court held that the reopening of the assessment was based on a mere change of opinion, which does not provide jurisdiction to the respondent to initiate proceedings under Section 147. The court emphasized that the reasons to believe must be based on new material or information, not a re-evaluation of the same facts.

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