2023 (11) TMI 1004 - HC - Income Tax

Validity of Reopening of assessment - income in respect of the transfer of the petitioner s shares while acquiring National Woods Products had escaped assessment u/s 56(2)(viib) - whether the re-assessment proceedings initiated are vitiated in any manner inasmuch as the same is said to be based on a change of opinion? - HELD THAT - The petitioner had not filed the return of his income under Section 56(2)(viib) of the IT Act. Considering the provisions of Explanation 1 to Section 147 of the IT Act, the mere submission of books of accounts and other material would not discharge an assessee from the obligation of disclosing fully and truly all material facts necessary for the assessment of the income. The reasons recorded by the AO would disclose that the AO has formed an opinion and has the belief that the income in respect of the transfer of the petitioner s shares while acquiring National Woods Products had escaped assessment u/s 56(2)(viib). The reasons recorded by the Principal Commissioner of Income Tax to accord sanction for the issue of notice u/s 148 cannot be said that the sanction was granted mechanically and without application of the mind. The mere submission of books of accounts and the certificate issued by the Statutory Auditor would not amount to the fact that the petitioner has disclosed fully and truly all material facts in his returns for completion of the assessment proceedings in respect of his income. Therefore, find that there is no error of jurisdiction committed by the authorities by re-opening the assessment. The petitioner has participated in the re-assessment proceedings, and now the final order has been passed. The petitioner has the remedy of approaching the Appellate Authority under Section 246A of the IT Act against the said assessment order. WP dismissed.

Summary

Issues involved:
The present writ petition challenges Ext.P8 notice, Exts.P21 order, and Ext.P22 penalty notice. The petitioner seeks a writ of mandamus to declare the re-assessment proceedings as without jurisdiction.

Details of the judgment:

Issue 1: Re-assessment proceedings based on change of opinion
The petitioner filed returns for Assessment Year 2014-15 under the Income Tax Act. The 3rd respondent issued a notice under Section 148 proposing to reassess the income under Section 147. The petitioner argued that the re-opening of the assessment on the issue of share valuation amounted to a change of opinion by the Assessing Authority. The petitioner cited relevant case law to support this argument.

Issue 2: Disclosure of material facts by the assessee
The Revenue contended that the petitioner failed to disclose fully and truly all material facts necessary for income assessment. The valuation of shares was done after acquiring assets, not when acquiring 'National Wood Products'. The Revenue cited Explanation 1 to Section 147 to support their position.

Issue 3: Jurisdiction and availability of statutory remedy
The Revenue argued that the re-assessment proceedings resulted in the Ext.P21 assessment order, and the petitioner had the statutory remedy of appeal under Section 246A of the IT Act. The Revenue opposed the filing of a writ petition under Article 226, citing the availability of an appeal.

Conclusion:
The court found that the re-assessment was not based on a change of opinion, and the petitioner had not fully disclosed all material facts. The court upheld the re-assessment proceedings and dismissed the writ petition. The petitioner was granted liberty to file an appeal against the assessment order within three weeks. The Appellate Authority was directed to decide the appeal on merit without considering the question of limitation.