Court quashes tax order & notice, citing time limit violation.

The court allowed the writ petition, quashing the impugned order dated 29.12.2016 and the notice issued on 31.03.2016 under Section 148 of the Income Tax Act, 1961. The court emphasized that the proceedings were based on a change of opinion and were initiated beyond the permissible period, making them invalid.

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Issues Involved:
1. Validity of the impugned order dated 29.12.2016 under Section 143(3) r/w Section 147 of the Income Tax Act, 1961.
2. Whether the re-assessment notice issued on 31.03.2016 under Section 148 of the Income Tax Act, 1961 was valid.
3. Classification of the income from the sale of shares as "Long Term Capital Gains (LTCG)" or "business profit" under Section 28(va) of the Income Tax Act, 1961.
4. Whether the respondent had the authority to seek clarification after the assessment order was passed.
5. Whether the proceedings were based on a change of opinion.

Detailed Analysis:

1. Validity of the Impugned Order Dated 29.12.2016:
The petitioner challenged the impugned order dated 29.12.2016, which was passed under Section 143(3) r/w Section 147 of the Income Tax Act, 1961. The court observed that the reasons given for invoking Section 148 read with proviso to Section 147 were not the basis of the impugned order. The order reclassified the income from the sale of shares as business income, which was previously accepted as LTCG. The court found this reclassification to be based on a change of opinion, which is not permissible.

2. Validity of the Re-assessment Notice Issued on 31.03.2016:
The notice under Section 148 was issued on 31.03.2016, which the petitioner argued was beyond the permissible period of four years from the end of the relevant assessment year. The court noted that the reasons for issuing the notice were not communicated to the petitioner and were in variance with the reasons given in the impugned order. The court concluded that the notice was issued due to a change of opinion and was therefore invalid.

3. Classification of Income as LTCG or Business Profit:
The respondent contended that the income from the sale of shares should be treated as business profit under Section 28(va) due to the non-compete clause in the agreement. The petitioner argued that the income was correctly classified as LTCG. The court found that the issue had already been examined during the regular assessment and that the respondent's attempt to reclassify the income was based on a change of opinion.

4. Authority to Seek Clarification After Assessment Order:
The court observed that the respondent had become functus officio after the assessment order was passed and had no authority to seek clarification on the sale of shares. The respondent's letter dated 05.02.2014 asking for clarification was therefore not valid.

5. Proceedings Based on Change of Opinion:
The court concluded that the entire proceedings were based on a change of opinion. The respondent had entertained a view as early as 05.02.2014 that the amount was business income but failed to issue a notice within the permissible period. The court held that the impugned order and the notice under Section 148 were not sustainable.

Conclusion:
The court allowed the writ petition, quashing the impugned order dated 29.12.2016 and the notice issued on 31.03.2016 under Section 148 of the Income Tax Act, 1961. The court emphasized that the proceedings were based on a change of opinion and were initiated beyond the permissible period, making them invalid.

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