Court validates Income Tax Act Section 148 notice for reassessment, emphasizing tangible evidence.

The court upheld the validity of the notice issued under Section 148 of the Income Tax Act, determining that the reassessment was not a mere change of opinion but based on tangible material indicating income escapement. It was found that the petitioner failed to make a full and true disclosure of all material facts necessary for assessment, justifying the reopening beyond the four-year limitation period. The approval for issuing the notice was deemed adequate, and the court dismissed the writ petition, affirming the validity of the notice and subsequent proceedings.

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Issues Involved:
1. Validity of the notice under Section 148 of the Income Tax Act.
2. Whether the reassessment was based on a change of opinion.
3. Applicability of the four-year limitation period for reopening the assessment.
4. Adequacy of approval for issuing the notice under Section 148.
5. Full and true disclosure of material facts by the petitioner.

Detailed Analysis:

1. Validity of the Notice under Section 148:
The court examined whether the notice issued under Section 148 of the Income Tax Act was valid. The petitioner challenged the notice dated 22.03.2021, arguing it was barred by limitation and based on an internal audit objection, which is not permissible under the Act. The court referred to Section 147 and 148 of the Act, which allow reassessment if the Assessing Officer has reason to believe that income has escaped assessment. The court cited Supreme Court judgments, including *Raymond Woolen Mills Ltd. v. ITO* and *CIT v. P.V.S. Beedies (P) Ltd.*, to establish that reopening based on factual errors pointed out by the audit party is valid. The court concluded that the notice was valid as the audit objection pointed out a factual error leading to the belief that income had escaped assessment.

2. Reassessment Based on Change of Opinion:
The petitioner argued that the reassessment was based on a mere change of opinion, which is not permissible. The court referred to the Supreme Court's judgment in *CIT v. Kelvinator of India Ltd.*, which distinguishes between the power to review and reassess. It emphasized that reassessment must be based on tangible material indicating income escapement. The court found that the petitioner had not disclosed all material facts during the original assessment, and the Assessing Officer had reason to believe that income had escaped assessment. Therefore, it was not a case of change of opinion.

3. Four-Year Limitation Period:
The petitioner contended that the notice was issued beyond the four-year limitation period stipulated in the proviso to Section 147 of the Act. The court noted that the limitation period does not apply if the assessee failed to disclose fully and truly all material facts necessary for the assessment. The court held that the petitioner had not made a full and true disclosure, and thus, the bar of four years did not apply.

4. Adequacy of Approval for Issuing the Notice:
The petitioner argued that the notice was issued without the necessary approval from the Principal Commissioner of Income Tax (PCIT). The court found that the PCIT had granted approval on 20.03.2020, and the approval was uploaded on the portal of the Department. The court held that there is no need for the physical receipt of the approval paper before issuing the notice, and the notice was not vitiated on this ground.

5. Full and True Disclosure of Material Facts:
The court examined whether the petitioner had made a full and true disclosure of all material facts necessary for the assessment. The petitioner had collected deposits from 2,37,83,732 persons but furnished KYC documents of only 1051 persons. The court found that the petitioner had not disclosed all material facts, leading to the belief that income had escaped assessment. The court cited several Supreme Court judgments, including *Phool Chand Bajrang Lal v. ITO* and *Srikrishna (P) Ltd. v. ITO*, to emphasize the obligation of the assessee to disclose all material facts fully and truly.

Conclusion:
The court concluded that the petitioner did not make a true and full disclosure of all material facts, and the Assessing Officer had reason to believe that the petitioner's income for the relevant year had escaped assessment. The notice dated 22.03.2020 issued under Section 148 of the Act and the subsequent proceedings, including the order dated 25.01.2022, were valid. The writ petition was dismissed with no order as to costs.

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