2023 (6) TMI 443 - HC - Income Tax

Validity of reopening of assessment - reason to believe - Change of opinion - query was raised during the scrutiny proceedings u/s 143(3) - HELD THAT - Once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the AO while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. If an AO has to record the consideration bestowed by him on all issues raised by him during the assessment proceeding even where he is satisfied then it would be impossible for the Assessing Officer to complete all the assessments which are required to be scrutinized by him u/s 143(3) - See ARONI COMMERCIALS LIMITED 2014 (2) TMI 659 - BOMBAY HIGH COURT There can be no doubt that the very issues raised in the reasons to believe has been raised by the assessing officer during the scrutiny u/s 143(3) detailed explanation has been given and the assessing officer has been satisfied with the explanation. Reopening of the assessment by impugned notice is merely on the basis of change of opinion of the AO from that held earlier during the course of assessment proceedings. This change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. Decided in favour of assessee.

Summary

Issues:
The issues involved in this case are the validity of a notice issued under Section 148 of the Income Tax Act 1961 for the Assessment Year 2012-2013 and the rejection of objections raised by the petitioner.

Validity of Notice under Section 148:
The petitioner, engaged in construction and development of properties, had filed its return of income for A.Y. 2012-2013 on 31st August 2012. Subsequently, a notice under Section 148 of the Act was issued on 29th March 2019, citing reasons to believe that the petitioner had escaped income to the extent of Rs. 185,94,07,170. The reasons provided highlighted discrepancies in the work in progress figures and unbooked property sales. The petitioner contended that the notice should be quashed as the pre-conditions for issuing such a notice were not met, and all relevant details were disclosed during the scrutiny assessment under Section 143(3) of the Act. The petitioner argued that the assessing officer did not allege any failure to disclose material facts, and even if there were discrepancies, they were explained adequately during the assessment proceedings.

Rejection of Objections:
The respondents failed to file a reply despite a grant of time to do so. The petitioner argued that the issues raised in the notice had already been addressed during the assessment proceedings, with detailed explanations provided for the discrepancies highlighted. The petitioner emphasized that the assessing officer had considered the explanations provided during the scrutiny assessment, as per legal precedents. It was contended that the notice to reopen the assessment was based on a mere change of opinion and did not constitute valid reasons to believe that income had escaped assessment. The Court, after considering the facts and circumstances, found in favor of the petitioner and allowed the petition, quashing the impugned notice and order.

Judgement Delivered by:
K.R. SHRIRAM & M.M. SATHAYE JJ