Court quashes Income Tax Act notice under section 148 due to impermissible grounds

The court allowed the petition, quashing the notice issued under section 148 of the Income Tax Act based on impermissible reopening grounds, including a change of opinion, invalid sanction obtained, and reopening not based on the Assessing Officer's independent belief. The court set aside the notice and order, disposing of the petition in favor of the petitioner.

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Issues Involved:
1. Deduction of Corporate Social Responsibility (CSR) expenses under sections 35AC and 80G of the Income Tax Act, 1961.
2. Validity of reopening the assessment under section 147 of the Income Tax Act, 1961.
3. Validity of sanction obtained under section 151 of the Income Tax Act, 1961.
4. Reopening of assessment based on audit objections.

Detailed Analysis:

1. Deduction of CSR Expenses:
The petitioner, a company engaged in air conditioning and refrigeration, incurred Rs. 3,30,82,713 towards CSR activities for the Assessment Year (A.Y.) 2015-16. The petitioner disclosed this in "Note 25" of the Annual Accounts. In its return of income, the petitioner claimed deductions under sections 35AC and 80G of the Income Tax Act, 1961, for donations made to various institutions. The petitioner argued that since the donations were part of CSR expenses already debited to the profit and loss account, the donations in other expenses were shown as Nil in "Note 25". The deductions were also reflected in the Tax Audit Report.

2. Validity of Reopening the Assessment:
The petitioner received a notice dated 31.03.2021 under section 148 of the Act, asserting that income chargeable to tax for A.Y. 2015-16 had escaped assessment. The reopening was based on a change of opinion, relying on materials already considered by the Assessing Officer during the assessment proceedings. The court held that reopening based on the same primary facts and a change of opinion is not permissible. The court cited the Calcutta High Court's judgment in Income Tax Officer vs. Calcutta Chromotype (P) Ltd., stating that there was nothing more to disclose, and the petitioner had fully disclosed all material facts.

3. Validity of Sanction Obtained:
The petitioner argued that the sanction obtained under section 151 of the Act was invalid since it was granted by an Additional Commissioner of Income Tax, whereas the law requires sanction from a Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, or Commissioner if the reopening is more than four years after the relevant assessment year. The court agreed with the petitioner, stating that the sanction was not valid and, therefore, the notice issued based on this invalid sanction had to be quashed.

4. Reopening Based on Audit Objections:
The petitioner contended that the reopening was based on audit objections. The court referred to previous judgments, including Hamilton Housewares (P) Ltd. vs. Deputy Commissioner of Income Tax and Commissioner of Income Tax vs. Rajan N. Aswani, which established that the decision to reopen must be based on the Assessing Officer's independent belief. The court found that the reopening in this case was at the behest of the audit party and not an independent decision by the Assessing Officer, making the reopening misconceived, incorrect, and bad in law.

Conclusion:
The court allowed the petition, quashing the notice dated 31.03.2021 issued under section 148 of the Act and the impugned order dated 21.01.2022. The petition was disposed of, and the court issued a writ of Certiorari to set aside the impugned notice and order.

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