2022 (11) TMI 737 - HC - Income Tax

Reopening of assessment u/s 147 - change of opinion - reason to believe - Onus to prove - receipt of share application money from the four entities alleged to be unexplained - HELD THAT - When the issue and aspect on the basis of which the reassessment was sought to be acted upon, were considered in course of the regular assessment and the details were supplied by the assessee in that regard, the entire onus would shift on the department to examine the details in light of the income tax law to be applied to ensure that those details were properly offered for tax. When such material was considered and the assessment was concluded resulting into assessment order, reopening was not permissible in law on the basis of similar or same information. The purported exercise of powers to reopen the concluded assessment, the Assessing Officer is not permitted to just proceed to re-verify the facts or to undertake a fishing inquiry into the issues examined and concluded in the original assessment. Such kind of exercise of powers would partake abuse of powers to reopen the assessment The ground of receipt of share application money from the four entities alleged to be unexplained by the Assessing Officer to proceed to exercise powers of reassessment, was the very issue considered by the Assessing Officer by calling for the relevant information in that regard in course of regular assessment undertaken for the year under consideration. As the details from record indicated, the assessee had supplied all the relevant material in the nature of accounting entries, resolution passed, names of the allottees and their addresses and PAN numbers, which had satisfied the Assessing Officer at the relevant time about the genuineness of the entities and the transactions. There was not reason to doubt the same at the subsequent juncture by seeking further inquiry on the basis of changed opinion. The exercise undertaken seeking to reopen the assessment and issue of notice under section 148 of the Act and the decision to reject the objections of the assessee, both render unacceptable in law, liable to be set aside as illegal. As a result of above reasons and discussions, the present petition deserves to be allowed.

Issues Involved:
1. Legitimacy of the notice for reopening assessment under Section 148 of the Income Tax Act, 1961.
2. Alleged failure of the petitioner to disclose fully and truly all material facts necessary for assessment.
3. Whether the reopening of assessment was based on a mere change of opinion.
4. Applicability of the Proviso to Section 147 in the context of reassessment beyond four years.
5. Consideration of judicial precedents and their relevance to the case.

Detailed Analysis:

1. Legitimacy of the Notice for Reopening Assessment:
The petitioner challenged the notice dated 26.3.2018 issued by the Assessing Officer (AO) under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the Assessment Year 2011-2012. The AO believed that income chargeable to tax had escaped assessment within the meaning of Section 147 of the Act. The petitioner contended that the reopening was based on information received from the investigating wing, which alleged that the petitioner had received large funds from entities lacking creditworthiness. The AO's reasons for reopening were provided to the petitioner, who then filed detailed objections, which were subsequently rejected by the AO.

2. Alleged Failure to Disclose Material Facts:
The AO claimed that the petitioner had not fully and truly disclosed material facts necessary for the assessment, specifically regarding the source of funds received as share application money from certain entities. The AO argued that the petitioner failed to provide adequate details about the creditworthiness and genuineness of these transactions. The petitioner countered that all relevant information, including details of share allotments and financial statements, had been provided during the original assessment proceedings.

3. Reopening Based on Change of Opinion:
The petitioner argued that the reopening was based on a mere change of opinion, which is not permissible under the law. The petitioner emphasized that all details regarding share allotments and related transactions were scrutinized during the original assessment, and the AO had acted upon this information to pass the final order. The court highlighted that powers under Section 147 to reopen an assessment cannot be exercised merely due to a change of opinion by the AO. The court noted that the AO had already considered the details about the share application money during the original assessment, and there was no new tangible material to justify reopening.

4. Applicability of Proviso to Section 147:
The petitioner pointed out that the notice under Section 148 was issued beyond four years from the end of the relevant Assessment Year, making the Proviso to Section 147 applicable. The Proviso stipulates that reassessment beyond four years is permissible only if there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The court found that the petitioner had indeed disclosed all material facts during the original assessment, and the AO had scrutinized these details. Therefore, the conditions for invoking the Proviso to Section 147 were not met.

5. Judicial Precedents:
The petitioner relied on the Supreme Court's decision in Commissioner of Income Tax vs. Kelvinator of India Ltd., which emphasized that a mere change of opinion cannot justify reopening an assessment. The court also referred to its own decision in Orient News Prints Ltd. vs. Deputy Commissioner of Income Tax, where it was held that reopening based on a fishing inquiry is impermissible. The respondent cited the Supreme Court's decision in Phool Chand Bajranglal vs. Income Tax Officers, which allowed reopening if the original disclosure was found to be false. However, the court found that the facts of the present case did not align with those in Phool Chand Bajranglal, as there was no evidence of false disclosure by the petitioner.

Conclusion:
The court concluded that the reopening of the assessment was not justified, as it was based on a mere change of opinion and lacked new tangible material. The petitioner had disclosed all necessary material facts during the original assessment, and the conditions for invoking the Proviso to Section 147 were not met. Consequently, the court set aside the notice dated 26.3.2018 issued under Section 148 and the AO's order dated 5.10.2018 rejecting the petitioner's objections. The petition was allowed, and the rule was made absolute.

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