Court Overturns Tax Reassessment for 2016-17; Lacks New Evidence, Procedural Compliance, Declares Reasons Vague.

The court set aside the notice dated 31st March 2021 and the order dated 11th March 2022, declaring the reopening of the assessment for the 2016-17 year unjustified due to the lack of new tangible material and vague reasons. The court found procedural non-compliance, as the reasons for reopening were inadequately verified and lacked substantive detail, leading to a potential fishing enquiry. Consequently, the writ petition was allowed, and all consequential proceedings were stayed, with no order as to costs.

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Issues Involved:
1. Validity of the notice under Section 148 of the Income Tax Act, 1961.
2. Adequacy and verification of the reasons provided for reopening the assessment.
3. Compliance with procedural requirements and judicial precedents.

Issue-wise Detailed Analysis:

1. Validity of the notice under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice dated 31st March 2021 issued under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the assessment year 2016-17. The notice was based on the "reason to believe" that income chargeable to tax had escaped assessment. The petitioner contended that the notice was issued without proper jurisdictional conditions being met, as the reasons were based solely on vague and ambiguous information from the "INSIGHTS PORTAL" under the "High Risk Transaction cases" category. The court agreed with the petitioner, finding no new tangible material to justify reopening the assessment and noting that the reasons provided were vague and unsubstantiated.

2. Adequacy and verification of the reasons provided for reopening the assessment:
The petitioner argued that the reasons for reopening the assessment were not adequately verified and lacked a live link or nexus between the information received and the purported escaped income. The court noted that the reasons recorded mentioned the need for further verification of high-risk transactions, but there was no substantial information or detail about the nature of the transactions or accounts. The court found that the reasons were insufficient to establish a "reason to believe" that income had escaped assessment, and the reopening of the assessment based on such reasons would lead to a fishing and roving enquiry, which is impermissible.

3. Compliance with procedural requirements and judicial precedents:
The petitioner contended that the notice under Section 143(2) of the Act was issued in contravention of the Supreme Court judgment in GKN Driveshafts (India) Ltd. v/s. Income-tax Officer, which requires the assessing officer to supply reasons for reopening the assessment, allow the assessee to file objections, and dispose of the objections by a speaking order. The court found that the procedural requirements were not followed, as the reasons recorded did not provide sufficient detail, and the approval for reopening the assessment was granted without proper application of mind. The court also noted that the impugned order was passed by the National Faceless Assessment Centre (NFAC) while the reasons were recorded by the jurisdictional assessing officer, leading to procedural inconsistencies.

Conclusion:
The court concluded that the reopening of the assessment was not justified as there was no new tangible material, and the reasons provided were vague and unsubstantiated. The court set aside the impugned notice dated 31st March 2021 and the impugned order dated 11th March 2022, staying all consequential proceedings. The writ petition was allowed with no order as to cost.

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