2023 (11) TMI 508 - HC - Income Tax

Validity of reopening of assessment u/s 147 - reason to believe - scope of change of opinion - borrowed satisfaction - HELD THAT - The admitted facts clearly indicate that the basis of which the AO issued notice alleging that there was information that suggests escapement of income was an internal audit objection. What is information is explained in Section 148 of the Act to mean any objection raised by the Comptroller and Auditor General of India . and no one else. This itself makes the re-opening of assessment in the present case impermissible. Consequently, de-hors any audit objection raised by the CAG, a view deviating from that which was already taken during the course of issuing the original assessment order is nothing but a change of opinion which is impermissible under the provisions of the Act. As prima-facie the information which formed the basis of re-opening itself does not fall within the meaning of the term information under the 1st Explanation to Section 148 of the Act and hence, the re-opening is not permissible as it clearly falls within the purview of a change of opinion which is impermissible in law. Decided in favour of assessee.

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Validity of the approval under Section 151 of the Act.
3. Validity of the communication/letter seeking explanation and details.
4. Validity of the order passed under Section 148A(d) of the Act.
5. Applicability of Section 50C of the Act.
6. Concept of "change of opinion" in reassessment.

Summary:

1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961:
The Petitioner challenged the notice dated 30th July 2022 issued under Section 148 of the Act for AY 2015-16. The Petitioner argued that the original assessment already dealt with the issue of long-term capital gains and the sale consideration, and the reassessment was based on a change of opinion, which is impermissible.

2. Validity of the approval under Section 151 of the Act:
The approval granted by the PCCIT, Mumbai, under Section 151 of the Act was questioned. The Petitioner contended that the approval was based on an internal audit objection and not by the Comptroller and Auditor General of India (CAG), as required by law. The Court found this approval to be untenable since it was based on internal audit objections, which do not constitute valid "information" under Section 148 of the Act.

3. Validity of the communication/letter seeking explanation and details:
The communication dated 28th May 2022 seeking explanation and details from the Petitioner to facilitate the JAO to pass an order under Section 148A(d) of the Act was also challenged. The Petitioner argued that the AO had already considered the issue in the original assessment proceedings. The Court agreed that the basis for reopening was not valid, as it was based on internal audit objections.

4. Validity of the order passed under Section 148A(d) of the Act:
The order dated 29th July 2022 passed under Section 148A(d) of the Act was challenged. The Petitioner argued that the sale consideration offered was Rs. 12 Crores, which was higher than the stamp duty valuation of Rs. 16.50 Crores, thus Section 50C of the Act was not applicable. The Court found that the AO's decision to reopen the assessment was based on a change of opinion, which is impermissible.

5. Applicability of Section 50C of the Act:
The Petitioner contended that Section 50C of the Act was not applicable as the sale consideration of Rs. 18 Crores was higher than the stamp valuation of Rs. 16.50 Crores. The Court noted that the AO had already accepted the non-applicability of Section 50C in the original assessment order.

6. Concept of "change of opinion" in reassessment:
The Court emphasized that reassessment based on a change of opinion is impermissible under the Act. The AO had already dealt with the issue of long-term capital gains and the sale consideration in the original assessment order. The reopening was based on internal audit objections, which do not constitute valid "information" under Section 148 of the Act.

Conclusion:
The Court allowed the Writ Petition and quashed the impugned notice, approval, order, and communication, as they were based on impermissible grounds of change of opinion and invalid information. The reopening of the assessment was deemed not permissible under the law.

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