2023 (4) TMI 958 - HC - Income Tax

Reopening assessment under section 147 beyond four years quashed where notice relied only on existing records and no new material

Re-opening of assessment under section 147 beyond four years was quashed by the HC because the notice relied solely on materials already available in the ... Re-opening of assessment beyond four years - failure to fully and truly disclose material facts - change of opinion as impermissible basis for reassessment - constructive disclosure under Explanation to section 147 - validity of notice under section 148Re-opening of assessment beyond four years - failure to fully and truly disclose material facts - validity of notice under section 148 - Quashing of reassessment proceedings where re-opening beyond four years was sought without fresh tangible material and without failure to fully and truly disclose material facts - HELD THAT: - The Court found that the notice under Section 148 was issued after the four-year period and that the revenue relied solely on material which was already part of the assessment records. The petitioner had been specifically queried under Section 142(1) during the original scrutiny and had furnished detailed replies (including Annexure-H and specific explanations at paragraphs 24-25 of its reply) that disclosed the contested figure concerning the NPA sell-down. The reasons recorded for re-opening alleged non-disclosure, but the Court held those allegations unsustainable because the same particulars were on record and had been considered during the assessment which resulted in no addition. In those circumstances there was no fresh tangible material to justify invoking the proviso to Section 147, and re-opening simply on the basis of the existing assessment record amounted to impermissible action. The Court applied precedent holding that re-opening beyond four years requires proof of failure to disclose primary facts and cannot be founded merely on material already disclosed and examined during assessment. [Paras 15, 16, 18, 19, 23]Impugned notice dated 26.03.2021 and order dated 09.11.2021 are unsustainable insofar as reassessment was sought to be initiated beyond four years on the same material; re-opening quashed.Change of opinion as impermissible basis for reassessment - constructive disclosure under Explanation to section 147 - Reassessment cannot be sustained where it amounts to a mere change of opinion by the assessing authority based on the same assessment record - HELD THAT: - The Court held that where the assessing officer has considered the claim during scrutiny, obtained explanations, and consciously made no addition in the assessment order, a subsequent attempt to re-open on the same material constitutes a change of opinion and is impermissible. The Explanation to Section 147 does not require the assessee to disclose inferences; the duty is limited to disclosure of primary facts. The authority cannot convert reconsideration of the same evidence into a reason for reopening. Relying on the settled propositions in the cited authorities, the Court concluded that reopening on the basis of the assessment records already available to and acted upon by the assessing officer was not justified and would amount to review of the original assessment rather than rectification of non-disclosure. [Paras 16, 21, 22]Re-opening predicated on change of opinion and on inferences from already disclosed material is not permissible; the impugned proceedings are accordingly invalid.Final Conclusion: The writ petition is allowed: the impugned notice dated 26.03.2021 and the order dated 09.11.2021 are quashed and set aside because reassessment was sought to be initiated beyond four years without any fresh tangible material and amounted to an impermissible change of opinion by the revenue. Issues Involved:1. Legality and validity of the impugned order dated 09.11.2021 and the impugned notice dated 26.03.2021 issued by the respondent authority.2. Implementation and execution of the impugned notice at Annexure-A.3. Stay of further proceedings for assessment and recovery for Assessment Year 2015-16.4. Re-opening of assessment beyond the period of four years.5. Allegation of failure to disclose fully and truly all material facts.Summary:Issue 1: Legality and Validity of Impugned Order and NoticeThe petitioner, a private sector bank, challenged the legality and validity of the impugned order dated 09.11.2021 and the impugned notice dated 26.03.2021 under Article 226 of the Constitution of India. The petitioner argued that the notice under Section 148 of the Income Tax Act was issued without fresh tangible material and beyond the period of four years, making it impermissible. The Court found that the reasons recorded for reopening the assessment were based on the same material already examined during the original assessment, thus constituting a mere change of opinion, which is not permissible.Issue 2: Implementation and Execution of Impugned NoticeThe petitioner sought the implementation and execution of the impugned notice at Annexure-A. The Court noted that the assessing officer had already examined the issues during the original assessment proceedings, and no new material was presented to justify reopening the assessment. Therefore, the impugned notice was deemed unsustainable.Issue 3: Stay of Further ProceedingsThe petitioner requested a stay on further proceedings for assessment and recovery for Assessment Year 2015-16. The Court had earlier directed the authorities not to issue any final order without the leave of the Court. Upon reviewing the case, the Court found that reopening the assessment was not justified, thus granting the stay on further proceedings.Issue 4: Re-opening of Assessment Beyond Four YearsThe petitioner argued that the reopening of the assessment was beyond the period of four years and without fresh tangible material. The Court agreed, stating that the reopening was based on the same material already scrutinized during the original assessment, which is not permissible as per the settled proposition of law. The Court cited several judgments supporting this view, including 'Shanti Enterprise v. I.T.O.' and 'Intercontinental (India) v. Dy. CIR.'Issue 5: Allegation of Failure to Disclose Material FactsThe respondent authority claimed that the petitioner had failed to disclose fully and truly all material facts. However, the Court found that the petitioner had provided detailed explanations and relevant documents during the original assessment proceedings. Therefore, the allegation of non-disclosure was not accepted. The Court cited the case of 'Anupam Rasayan India Ltd. v. Income-tax Officer' to support its conclusion that there was no failure on the part of the petitioner to disclose material facts.Conclusion:The Court quashed and set aside the impugned notice dated 26.03.2021 and the impugned order dated 09.11.2021. The petition was allowed, and the reopening of the assessment was deemed impermissible due to the lack of fresh tangible material and the fact that it was based on a mere change of opinion.