2022 (12) TMI 294 - HC - Income Tax

Reopening of assessment u/s 147 - objections to the reasons recorded - Notice beyond four years - treatment of share of profit in capacity of partner - HELD THAT - AO had considered the very issue in respect of which subsequently he issued notice under section 148 seeking to reopen the assessment. The assessment order passed by assessing authority also reflected consideration of the same. Therefore, there was no basis for re-opening of the reassessment. It is trite principle that change of opinion could not be a ground to resort to reopening of process. AO in the present case could be said to have any new facts discovered to justify the re-opening. If it was a mere change of opinion on the part of the AO in issuing the order such course was not permissible in law. The entire assumption of jurisdiction to reopen the assessment was without any factual and legal basis. The present case offers a situation where powers u/s 148 of the Act were invoked after four years. Notice was issued on 30.3.2021 seeking to re-open the Assessment for the financial year 2014-2015. In the facts obtained in this case, there is nothing to suggest that the assessee had not disclosed fully and truely all material facts necessary for the assessment, rather it was otherwise. On that count itself, the notice was rendered bad.

Summary

Issues:
Challenge against notice under section 148 of the Income Tax Act, 1961 for Assessment Year 2014-2015.

Analysis:

1. Reopening of Assessment:
The Special Civil Application challenged a notice issued under section 148 of the Income Tax Act, 1961 for the Assessment Year 2014-2015. The Assessing Officer sought to reassess the income chargeable to tax, alleging that it had escaped assessment under section 147 of the Act. The petitioner was required to respond within the stipulated time. The reasons for reopening the assessment were provided to the assessee, highlighting income details and the need to disallow certain expenses claimed by the assessee. The assessee objected to the reasons recorded, arguing that no new material justified the reassessment.

2. Consideration of Previous Assessments:
The court observed that the Assessing Officer had previously considered the issue for which the reassessment notice was issued. The assessment order reflected a discussion on the same matter. The court emphasized that a mere change of opinion cannot be a valid ground for reopening an assessment. In this case, there were no new facts discovered to justify the reassessment, rendering the jurisdiction to reopen the assessment baseless.

3. Time Limit for Reassessment:
The notice under section 148 was issued after four years, seeking to reopen the assessment for the financial year 2014-2015. Section 147 of the Act provides a time limit for such actions, barring reassessment after four years from the end of the relevant assessment year unless there is a failure on the part of the assessee to disclose all material facts necessary for assessment. In this case, there was no indication that the assessee had failed to disclose relevant information, rendering the notice invalid.

4. Conclusion:
The court held that the notice issued by the departmental officer was without legal basis and quashed it. The petition challenging the notice was allowed, and the rule was made absolute in favor of the petitioner. The judgment emphasized the importance of adhering to legal provisions and ensuring that reassessment actions are based on valid grounds and not a mere change of opinion.

This detailed analysis of the judgment highlights the key legal issues involved, the court's reasoning, and the ultimate decision in favor of the petitioner.