2022 (1) TMI 126 - HC - Income Tax

Reopening of assessment u/s 147 - whether there is tangible material mentioned for reopening the assessment? - profit on sale of surrendered and allotment of new flats and gift of 3G Motors Private Limited shares (Devkinandan J. Gupta) - HELD THAT - The reasons in this case relate to same issues which we have mentioned earlier on capital gains on exchange of flats and on the gift of shares of 3G Motors Private Limited received by petitioner from his late father - AO in the reasons for the re-opening says that he is of the opinion that there has been escapement of income, on perusal of revised return of income filed, ledger of profit on surrender/allotment of new flats, details filed and submission made by the assessee that the transfer of capital assets has been effected by way of exchange in this case and as per assessees calculations. Therefore, it is clear that the primary facts necessary for assessment were also disclosed. It is settled law that the Assessing Officer is not entitled for change of opinion to commence proceedings for reassessment. It is also settled law that when on consideration of material on record, one view is conclusively taken by the Assessing Officer, it would not be open to reopen the assessment based on the very same material with a view to take another view. Notice is hereby quashed - Decided in favour of assessee.

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Applicability of the proviso to Section 147 of the Income Tax Act, 1961.
3. Assessment reopening based on tangible material or change of opinion.
4. Examination of primary facts and the Assessing Officer's application of mind.

Detailed Analysis:

1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice dated 29/3/2019 issued under Section 148 of the Income Tax Act, 1961, for the Assessment Year 2014-15 and the subsequent order dated 11/11/2019 rejecting the petitioner's objections. The court emphasized that the reasons for reopening an assessment must be based on the recorded reasons at the time of issuing the notice and cannot be improved or supplemented by affidavits or oral submissions. The court cited the case of First Source Solutions Limited vs. The Assistant Commissioner of Income Tax, which held that the reasons for reopening must be examined solely based on the reasons recorded at the time of issuing the notice.

2. Applicability of the proviso to Section 147 of the Income Tax Act, 1961:
The court noted that since the reopening was proposed within four years from the relevant Assessment Year, the proviso to Section 147 would not apply. The court reiterated that the primary consideration is whether there is tangible material mentioned for reopening the assessment.

3. Assessment reopening based on tangible material or change of opinion:
The court examined the reasons provided for reopening the assessment and concluded that it was merely a change of opinion. It is settled law that the Assessing Officer has no power to review an assessment that has been concluded. The court referred to the judgment in Consolidated Photo and Finvest Ltd. vs. CIT, where it was held that a mere change of opinion cannot be a basis for reopening an assessment. The court also cited the case of Commissioner of Income Tax and Ors. vs. Rubix Trading Pvt. Ltd., where it was held that reopening an assessment based on the same material with a view to take another view is not permissible.

4. Examination of primary facts and the Assessing Officer's application of mind:
The court observed that during the original assessment proceedings, the petitioner had provided detailed information and documents regarding the profit on the sale of surrendered flats and the gift of shares. The Assessing Officer had issued notices under Section 142(1) and scrutinized the details provided by the petitioner. The court noted that the Assessing Officer had applied his mind to the issues during the original assessment proceedings, as evidenced by the notices issued and the details sought. The court referred to the case of Aroni Commercials Ltd. vs. Deputy Commissioner of Income-tax, where it was held that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query was a subject of consideration by the Assessing Officer while completing the assessment.

Conclusion:
The court concluded that the reopening of the assessment was based on a mere change of opinion and not on any new tangible material. The primary facts necessary for the assessment were disclosed by the petitioner, and the Assessing Officer had applied his mind during the original assessment proceedings. Consequently, the court quashed and set aside the notice dated 29/3/2019 and the order dated 11/11/2019. The petition was disposed of in favor of the petitioner.

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