2015 (12) TMI 1079 - HC - Income Tax

Reopening of assessment - uncounted share application money received - change of opinion - Held that - The questionnaire and, particularly, question No. 3, specifically raised the issue with regard to the shares. The responses were given by the assessee from time to time and what is more important is that the Assessing Officer had directly issued letters to all the share applicants, who had, in turn, given their confirmations along with their PAN numbers and bank details. After having received the said information, the Assessing Officer did not think it fit to make an addition and that itself would amount to forming an opinion, as indicated in CIT v. Usha International Limited (2012 (9) TMI 767 - DELHI HIGH COURT ) and Lahmeyer Holding GMBH (2015 (5) TMI 654 - DELHI HIGH COURT ). Therefore, the present exercise of issuing the notice under Section 148 of the said Act would be nothing but one of change of opinion, which is impermissible. As decided in Swarovski India Limited v. Deputy CIT 2014 (9) TMI 4 - DELHI HIGH COURT wherein a notice under Section 148 of the said Act was quashed for being issued after the expiry of four years from the relevant assessment year, wherein there was no specific mention of which material facts were not disclosed by the assessee in the course of its original assessment proceedings under Section 143(3) of the said Act. In the present case also there is not even a whisper of the allegation that there has been a failure on the part of the assessee to disclose fully and truly all material particulars necessary for assessment. - Decided in favour of assessee

Summary

Issues Involved:
1. Validity of the notice under Section 148 of the Income Tax Act, 1961.
2. Allegation of failure to disclose material particulars by the assessee.
3. Change of opinion by the Assessing Officer.

Issue-wise Detailed Analysis:

1. Validity of the notice under Section 148 of the Income Tax Act, 1961:

The writ petition challenges the notice dated 23.08.2014 issued under Section 148 of the Income Tax Act, 1961, and all subsequent proceedings, including the order dated 26.09.2014. The petitioner contends that the re-assessment proceedings were initiated after four years from the end of the relevant assessment year without fulfilling the pre-conditions required by law. Specifically, there was no failure on the part of the assessee to fully and truly disclose all material particulars necessary for the assessment. The court found that the reasons provided for initiating re-assessment did not even allege such a failure, making the notice and proceedings invalid.

2. Allegation of failure to disclose material particulars by the assessee:

The petitioner argued that the re-assessment proceedings were invalid as there was no failure to disclose material particulars. The court noted that the reasons for reopening the assessment did not contain any allegation of such failure by the assessee. The court referred to several decisions, including Global Signal Cables (India) Private Limited v. Deputy Commissioner of Income Tax and Haryana Acrylic Manufacturing Company v. CIT, which held that in the absence of an allegation of failure to disclose material facts, any action under Section 147 beyond the four-year period would be without jurisdiction. The court concluded that the notice and proceedings were invalid due to the lack of such an allegation.

3. Change of opinion by the Assessing Officer:

The petitioner also argued that the re-assessment was a case of change of opinion, as the issue sought to be re-assessed had already been considered during the original assessment under Section 143(3). The court noted that the original assessment involved a detailed examination of the share application money received by the assessee, including the issuance of a questionnaire and notices under Section 133(6). The court referred to the decision in Lahmeyer Holding GMBH v. Deputy Director of Income Tax, which held that re-assessment would be invalid if an issue or query was raised and answered by the assessee in the original assessment, and the Assessing Officer did not make any addition. The court concluded that the present case was indeed one of change of opinion, making the re-assessment proceedings impermissible.

Conclusion:

On both grounds-the lack of an allegation of failure to disclose material particulars and the change of opinion-the court allowed the writ petition. The notice under Section 148 dated 28.03.2014 and all proceedings pursuant thereto, including the order dated 26.09.2014, were quashed and set aside. There was no order as to costs.