2018 (5) TMI 1386 - HC - Income Tax

Court rules notice under Section 148 of Income-tax Act illegal, beyond time limit, lacks new material.

The court held that the notice issued under Section 148 of the Income-tax Act, 1961 for reopening the assessment was illegal and based on a change of ... Reopening of the assessment u/s 147 - as per AO income chargeable to tax had escaped the assessment - the assessee had already tabulated necessary details as were required by the Assessing Officer at the time of original assessment - there was no failure on the part of the assessee to disclose fully and truly any material facts which were necessary for assessment - Held that - reopening is not permissible after lapse of 4 years from the end of the relevant assessment year unless income chargeable to tax has escaped assessment on account of failure on the part of the assessee to disclose fully and truly all material facts - thus re-assessment proceedings being illegal and bad in law - Decided in favor of assessee Issues Involved:1. Legality of the notice issued under Section 148 of the Income-tax Act, 1961 for reopening the assessment.2. Compliance with the requirements of Section 147 of the Income-tax Act, 1961 for reopening the assessment beyond four years.3. Alleged failure of the assessee to disclose fully and truly all material facts necessary for the assessment.4. Whether the reopening of the assessment was based on a 'change of opinion.'Issue-wise Detailed Analysis:1. Legality of the notice issued under Section 148 of the Income-tax Act, 1961 for reopening the assessment:The petitioner challenged the notice dated 26th March 2017 issued by the respondent-Assistant Commissioner of Income Tax under Section 148, seeking to reopen the assessment for the assessment year 2010-2011. The petitioner argued that the notice was issued without any new material and was based on a mere change of opinion, which is not permissible under the law. The respondent contended that the notice was justified as the petitioner had not disclosed all material facts necessary for the assessment.2. Compliance with the requirements of Section 147 of the Income-tax Act, 1961 for reopening the assessment beyond four years:The petitioner filed objections stating that the reopening was beyond four years from the end of the relevant assessment year without any failure on the part of the assessee to disclose material facts. The court noted that under Section 147, reopening after four years is permissible only if there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The court found that the petitioner had disclosed all necessary details during the original assessment proceedings.3. Alleged failure of the assessee to disclose fully and truly all material facts necessary for the assessment:The respondent argued that the petitioner had not provided sufficient information during the original assessment, leading to the belief that income chargeable to tax had escaped assessment. However, the court observed that the petitioner had filed the return of income under Section 139 and provided all required details during the original assessment, including responses to notices under Section 142 [1]. The court concluded that there was no failure on the part of the petitioner to disclose material facts.4. Whether the reopening of the assessment was based on a 'change of opinion':The petitioner argued that the reopening was based on a change of opinion, as the same issues were considered during the original assessment. The court referred to precedents, including the cases of Corporation Bank Limited and ACIT v. ICIC Securities Primary Dealership Limited, which held that reopening based on a mere relook or change of opinion is not permissible. The court found that the Assessing Officer had no new material and was merely changing his opinion on the same set of facts.Conclusion:The court concluded that the impugned notice issued by the Assessing Officer was beyond the period of four years and did not comply with the requirements of proviso to Section 147 of the Act. The court held that the reopening of the assessment was illegal and based on a change of opinion without any new material. Consequently, the court quashed the notice dated 26th March 2017 issued under Section 148 of the Income-tax Act, 1961. The re-assessment proceedings were declared illegal and bad in law, and the rule nisi was made absolute with no order as to costs.