Tax Reassessment Quashed: Court Rules No New Evidence, Overturns Notices for Improper Reopening Beyond Four Years.

The court quashed the impugned notice dated 21st March 2021 and the order dated 22nd November 2021, finding the reopening of assessment impermissible as it was based on a change of opinion without fresh tangible material. The reopening beyond four years was deemed unsustainable since there was no failure by the assessee to disclose material facts. The court allowed the special civil application and made the rule absolute, with no order as to costs.

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Issues Involved:

1. Legality and validity of the impugned notice dated 21st March 2021 and the impugned order dated 22nd November 2021.
2. Reopening of assessment based on material already available on record.
3. Reopening beyond the period of four years without failure on the part of the assessee to disclose material facts.
4. Alleged escapement of income and applicability of Section 56(1) or Section 68.
5. Reopening based on change of opinion.

Summary:

Issue 1: Legality and Validity of the Impugned Notice and Order

The petitioner challenged the legality and validity of the impugned notice dated 21st March 2021 and the impugned order dated 22nd November 2021 under Article 226 of the Constitution of India. The petitioner argued that the reopening of the assessment was based on material already available on record and lacked fresh tangible material, making it impermissible.

Issue 2: Reopening of Assessment Based on Existing Material

The petitioner contended that the reopening of the assessment was done on the basis of material already available during the scrutiny process. The Assessing Officer had previously raised queries regarding the share capital increase and share premium, to which the petitioner had provided detailed replies. The assessment order was passed on 6th November 2017, accepting the returned income without any additions.

Issue 3: Reopening Beyond Four Years Without Failure to Disclose Facts

The petitioner argued that the reopening was beyond the period of four years from the end of the assessment year and there was no failure on the part of the assessee to fully disclose material facts. The petitioner cited various judgments to substantiate that the reopening in such circumstances was not sustainable in law.

Issue 4: Alleged Escapement of Income

The petitioner contended that the income had not escaped assessment, particularly as the share premium received from a non-resident parent company was exempt from taxation. The reasons for reopening were deemed ex-facie bad, and there was no substance in the allegations under Section 56(1) or Section 68.

Issue 5: Reopening Based on Change of Opinion

The court noted that the reopening was sought based on a change of opinion, which is impermissible under well-established legal principles. The court referred to several judgments, including those in the cases of Shanti Enterprise, Premium Finance (P.) Ltd., and Gujarat State Board of School Textbooks, to emphasize that reopening based on a change of opinion is not allowed.

Conclusion:

The court concluded that the entire reopening exercise was based on a change of opinion without any fresh tangible material distinct from what was already available during the assessment proceedings. The court quashed and set aside the impugned notice dated 21st March 2021 and the consequential order dated 22nd November 2021. The special civil application was allowed, and the rule was made absolute to the aforesaid extent, with no order as to costs.

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