High Court quashes Income Tax Act notice & order, citing impermissible change of opinion by Assessing Officer.

The High Court quashed the notice issued under section 148 of the Income Tax Act, 1961, and the order rejecting objections to the reopening of assessment. The court found that the reasons for reopening indicated a change of opinion by the Assessing Officer, which was impermissible. The petitioner had provided all necessary details during the initial assessment, and the attempt to treat certain transactions differently during reassessment was deemed unjustified. The court ruled in favor of the petitioner, setting aside the notice and order, with no costs imposed.

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Issues:
Impugning a notice under section 148 of the Income Tax Act, 1961 and rejection of objections to the reopening of assessment.

Analysis:
1. The petitioner challenged a notice dated 30th March, 2019, issued under section 148 of the Income Tax Act, 1961, and an order dated 15th October, 2019, rejecting the objections to the reopening of assessment. The petitioner argued that the notice lacked jurisdiction and authority of law due to the absence of satisfaction of conditions precedent under section 148 of the Act. It was contended that there was no failure on the petitioner's part to disclose all material facts, hence no reason to believe in income escapement. The petitioner emphasized that the reasons for reopening indicated a mere change of opinion, which is impermissible in law.

2. The petitioner had initially filed the income return for Assessment Year 2012-13, revising it later. The assessment was completed by assessing the total income. Subsequently, a notice was issued after four years from the end of the relevant assessment year, alleging income escapement. The reasons for reopening were scrutinized, revealing a change of opinion by the Assessing Officer. The petitioner had provided all necessary details during the assessment process, including information related to a scheme of arrangement between entities, which was duly accepted by the Assessing Officer.

3. The Assessing Officer contended that certain transactions should be treated as transfers of assets attracting capital gain, rather than demerger. However, the petitioner had disclosed relevant details in the revised computation of total income, which were duly considered during the initial assessment. The Assessing Officer had all primary facts before him and was obligated to draw proper inferences during the assessment process. Reopening the assessment based on the same material and attempting to take a different view was deemed impermissible.

4. The Respondent argued that there was a failure to disclose all material facts, citing Explanation-1 to section 147 of the Act. However, the duty of the assessee is limited to disclosing primary relevant facts, and not to draw inferences from those facts. The Explanation does not impose a duty on the assessee to disclose inferences, as drawing proper inferences is the Assessing Officer's responsibility. The attempt to use the phrase "failure to disclose fully and truly all material facts" was seen as an effort to circumvent the restrictions imposed by the relevant proviso.

5. Ultimately, the High Court quashed and set aside the notice dated 30th March, 2019, and the order dated 15th October, 2019, ruling in favor of the petitioner. The petition was disposed of with no order as to costs.

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