2017 (2) TMI 121 - HC - Income Tax

Court invalidates Section 148 Notices, emphasizing no reopening on same grounds

JIVRAJ TEA COMPANY Versus DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-6

The Court ruled in favor of the petitioner, holding that the impugned Notices under Section 148 of the Income-tax Act, 1961 were invalid and ordered them ... Reopening of assessment - purchases made from the sister concerns - Held that:- In both the cases assessment for AY 2005-2006 is sought to be reopened on the grounds reproduced hereinabove. However, it is required to be noted that the issue/question with respect to the purchases made from the sister concerns and the price paid to these sister concerns were as such gone into in detail by the Assessing Officer during the course of scrutiny assessment proceedings. Specific queries were asked by the Assessing Officer with respect to the transactions with the sister concerns and the purchase price paid to the sister concerns and the said queries were satisfied by the assessee concerned. The assessee also justified the purchases from the sister concern and also justified the purchase price paid to the sister concerns. Therefore, when the aforesaid issue was already gone into in detail by the Assessing Officer, subsequent re-opening on the very ground can be said to be a mere change of opinion by the subsequent Assessing Officer. As held by the Hon'ble Supreme Court in the case of Commissioner of Income-tax v. Kelvinator of India Limited [2010 (1) TMI 11 - SUPREME COURT OF INDIA ] on the mere change of opinion by the subsequent Assessing Officer, reopening of assessment is not permissible. As observed hereinabove, the issue with respect to the purchases made from the sister concerns and the price paid to the sister concern was in fact gone into in detail by the Assessing Officer during the course of scrutiny assessment proceedings. Under the circumstances, the impugned Notices to reopen the assessment for A.Y 2005-2006 in each case on the grounds/ reasons stated by the Assessing Officer cannot be sustained and the same deserve to be quashed and set-aside on the aforesaid ground alone. Issues:1. Validity of Notice under Section 148 of the Income-tax Act, 1961 for reopening assessment for Assessment Year 2005-2006.2. Whether the Income chargeable to tax has escaped assessment.3. Permissibility of reopening assessment based on the same grounds previously scrutinized.Detailed Analysis:Issue 1: The petitioner sought to quash and set aside the impugned Notice under Section 148 of the Income-tax Act, 1961, which aimed to reopen the assessment for Assessment Year 2005-2006. The petitioner contended that the Assessing Officer had already scrutinized the transactions with sister concerns and the purchase prices paid, rendering the reopening invalid as it would amount to a mere change of opinion by the subsequent Assessing Officer.Issue 2: The Assessing Officer alleged that income chargeable to tax had escaped assessment due to the petitioner's excess payment to related parties for tea purchases, amounting to a specific sum. The reasons recorded for reopening the assessment highlighted discrepancies in purchase prices from private parties compared to related concerns, leading to the belief that income had escaped assessment.Issue 3: The Court noted that the Assessing Officer had thoroughly examined the transactions with sister concerns and the purchase prices during the scrutiny assessment proceedings. Specific queries were raised, and the petitioner provided justifications and necessary information. As the issue had already been scrutinized in detail, the subsequent reopening on the same grounds was deemed impermissible, following the precedent set by the Supreme Court in Commissioner of Income-tax v. Kelvinator of India Limited.Judgment: The Court ruled in favor of the petitioner, holding that the impugned Notices under Section 148 of the Income-tax Act, 1961 were invalid and ordered them to be quashed and set aside. The Court emphasized that since the Assessing Officer had already examined the relevant issues during the scrutiny assessment, reopening the assessment based on the same grounds would amount to a mere change of opinion and was not permissible.