High Court quashes Income Tax Act notice for Assessment Year 2013-2014 due to change of opinion

The High Court quashed the notice issued under Section 148 of the Income Tax Act, 1961 for Assessment Year 2013-2014 and the subsequent order on objections. The Court found that the reasons for reopening the assessment were based on a change of opinion rather than a failure to disclose material facts. As the Assessing Officer had added back only 1% of the total turnover/sales to the total income instead of the suggested 5%, indicating a clear change of opinion without justification, the Court concluded that the notice and order should be set aside. The petition was allowed, and the documents were quashed without costs.

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Issues:
Impugning a notice under Section 148 of the Income Tax Act, 1961 for Assessment Year 2013-2014 and the order on objections dated 24th January 2022.

Analysis:
The High Court examined the notice issued under Section 148 of the Income Tax Act, 1961 for Assessment Year 2013-2014 and the subsequent order on objections. The notice was issued more than four years after the relevant assessment year had expired. Since the assessment had been completed under Section 143(3) of the Act, the proviso to Section 147 applied, placing the onus on the respondent to demonstrate a failure on the petitioner's part to fully disclose material facts for assessment. The reasons recorded for reopening were scrutinized, revealing that they were based on a change of opinion rather than a failure to disclose material facts. Specifically, the Assessing Officer had added back only 1% of the total turnover/sales to the total income of the assessee, whereas it was suggested that 5% should have been added back. This discrepancy indicated a clear change of opinion without any justification for the 5% figure. Consequently, the High Court concluded that the notice and the impugned order should be quashed and set aside.

The Court allowed the petition in terms of the prayer clause, which requested the issuance of a writ of Certiorari or any other appropriate writ under Article 226 of the Constitution of India to call for the records related to the notice dated 31st March 2021 under Section 148 and the order dated 24th January 2022, ultimately quashing and setting aside both. The petition was disposed of accordingly, with no order as to costs.

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