2021 (11) TMI 813 - HC - Income Tax

Reopening of assessment u/s 147 - Validity of reasons to believe - HELD THAT - There is no material which has come in the hands of respondent after the assessment order was passed on 12/3/2016 which can be considered as material fact and the same was not truly and fairly disclosed. By letter dated 9/11/2015 petitioner had received the letter from office of the Assistant Commissioner, Office of Income Tax calling upon to furnish the documents and details of about 27 transactions/flat sales. Transaction amount has also been mentioned and the total of these transactions which is the amount mentioned in the reasons for reopening. In reply petitioner vide its letter dated 17/11/2015 provided all details and documents to the AO. Subsequently, the assessment order dated 29/2/2016 was passed. Date given as 12/3/2016 in the reasons, Shri Jain says appears to be erroneous. We are satisfied that this is nothing but change of opinion and using the words I have reason to believe that income chargeable to tax . By reason of the failure on the part of the assessee to disclose fully and truly all material facts . in the reason for reopening is clearly an attempt to take the case out of restrictions imposed by the proviso of Section 147 of the Act - Decided in favour of assessee.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for Assessment year 2013-2014 based on alleged escapement of income and change of opinion.

Analysis:
The petitioner contested a notice issued under Section 148 of the Income Tax Act, 1961, claiming it was a mere change of opinion and should be set aside. The respondent sought to reopen the assessment more than four years after the relevant assessment year, invoking the proviso to Section 147 of the Act. The grounds for reopening included a significant discrepancy in the turnover declared by the assessee for the sale of flats. The respondent alleged an escapement of income amounting to a substantial sum, asserting that the assessee failed to disclose material facts necessary for assessment. The respondent sought necessary sanction for issuing the notice under Section 148 from the Principal Commissioner of Income Tax-33, Mumbai.

The petitioner argued that the Assessing Officer had already raised queries regarding the sale of flats before passing the assessment order, and the petitioner had provided explanations and documents at that time. It was contended that no new material had come to light after the assessment order was passed, which could be considered as undisclosed and justifying the reopening of the assessment. The petitioner had also responded to a letter from the Office of Income Tax regarding specific transactions related to flat sales, providing all requested details and documents before the assessment order was finalized.

The Court found that the reasons provided for reopening the assessment amounted to a change of opinion rather than the discovery of new undisclosed material facts. The Court noted that the language used in the reasons for reopening was an attempt to circumvent the restrictions imposed by the proviso of Section 147 of the Act. Consequently, the Court quashed and set aside the impugned notice dated 29/3/2019, along with any subsequent notices or demands issued based on the invalidated notice. The petition was disposed of in favor of the petitioner.