Court quashes reassessment notice for lack of new material.

The court held that the reopening of the assessment was based on a mere change of opinion, which was impermissible. The Assessing Officer had already considered the relevant facts during the regular assessment, and the reassessment notice did not present any new material to justify reopening. Citing legal precedents, the court emphasized the need for tangible material to support a conclusion of income escapement. Consequently, the court allowed the petition, quashing the notice issued under Section 148 and the order rejecting objections.

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Issues Involved:

1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Jurisdiction of the Assessing Officer to reopen the assessment under Section 147 of the Income Tax Act, 1961.
3. Whether the reopening of the assessment was based on a mere change of opinion.

Detailed Analysis:

1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961:

The petitioner challenged the notice dated 23.9.2018 issued under Section 148 of the Income Tax Act, 1961, which sought to reopen the assessment for the assessment year 2013-14. The petitioner argued that the notice and the subsequent order disposing of the objections were without jurisdiction. The Assessing Officer had stated that the income chargeable to tax for the assessment year 2013-14 had escaped assessment within the meaning of Section 147 of the Act.

2. Jurisdiction of the Assessing Officer to reopen the assessment under Section 147 of the Income Tax Act, 1961:

The petitioner contended that for reopening the assessment under Section 147, the Assessing Officer must form a tentative opinion that there was an escapement of income during the year under consideration and must record such prima facie opinion in writing. It was emphasized that the opinion so formed should not be based on mere suspicion and must show a nexus to the opinion and the factum of escapement of income. The petitioner maintained that the words "reason to believe" do not grant arbitrary powers to the Assessing Officer to reopen the assessment.

3. Whether the reopening of the assessment was based on a mere change of opinion:

The petitioner argued that the reopening of the assessment was based on a mere change of opinion, which is not permissible in law. The details relating to royalty and rubble expenses were already examined by the Assessing Officer during the regular assessment. The petitioner had provided complete details of the quantity of marble rubble produced and sold, as well as the royalty paid, during the regular assessment proceedings. The Assessing Officer had fully examined these details and completed the regular assessment accordingly.

The respondent contended that the assessee had underreported the mining production of marble rubble by 25,612 MT, leading to an underreporting of profit by Rs.1,90,29,716/-. This formed the basis for issuing the notice under Section 148.

The court noted that the factual details on which the power to reassess was sought to be exercised were already furnished by the petitioner and considered by the Assessing Officer during the regular assessment. The Assessing Officer was aware of these facts and details. The reassessment notice was based on the same facts, amounting to a change of opinion, which is not permissible in law.

The court referred to the Supreme Court's decision in Commissioner of Income Tax Vs. Kelvinator of India Limited, emphasizing that there must be "tangible material" available with the Assessing Officer to conclude that there was an escapement of income from assessment. The concept of "change of opinion" serves as an inbuilt test to check the abuse of power by the Assessing Officer.

The court also referred to the Division Bench's decision in Inductotherm (India) Private Limited, which held that even for reopening an assessment accepted under Section 143(1) without scrutiny, the Assessing Officer must have tangible material to form a reason to believe that income chargeable to tax had escaped assessment.

Judgment:

The court concluded that the reopening of the assessment was based on a mere change of opinion and that the Assessing Officer had misguided himself in law. The court allowed the petition, setting aside the notice dated 29.3.2018 issued under Section 148 and the order dated 28.9.2018 rejecting the objections.

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