2023 (6) TMI 886 - HC - Income Tax

Tax Notice Quashed: Court Rules Reopening of Assessment Invalid Without New Evidence Beyond Four Years.

The Court allowed the petition, quashing the notice issued under Section 148 of the Income Tax Act dated 30.03.2021 and the subsequent order dated ... Reopening of assessment u/s 147 - Non disposing of objections - reopen the assessment after scrutiny assessment, after a period of more than four years - HELD THAT:- As without disposing of the objections filed by the petitioner, yet, another notice came to be issued to the petitioner, which also contained the reasons for reopening. Once again, the petitioner submitted its objections to the aforesaid notice. Respondent No.2 has recorded reasons only on the basis of the information or the material, which was already available on the record, and not from any other source or the material, so as to state that the petitioner had withheld or did not disclose something at the time of original scrutiny. It is an undisputed fact that the Respondents sought to re-open a completed assessment, beyond the period of four years from the end of the relevant assessment year. Attempt on the part of the revenue to reopen the assessment after scrutiny assessment, after a period of more than four years, especially, in absence of any circumstances about non-disclosure of true and full material on the part of the assessee, is not permitted. Decided in favour of assessee. Issues Involved:1. Validity of the notice issued under Section 148 of the Income Tax Act.2. Legality of reopening the assessment beyond the period of four years.3. Requirement of new tangible material for reopening the assessment.Summary:Issue 1: Validity of the notice issued under Section 148 of the Income Tax ActThe petitioner challenged the notice dated 30.03.2021 issued under Section 148 of the Income Tax Act, arguing that the reasons for reopening the assessment were based solely on information already available on record during the original assessment. The Court noted that the reasons recorded by Respondent No.2 were based on existing information and not on any new material, thus failing to demonstrate that the petitioner had withheld any information during the original scrutiny.Issue 2: Legality of reopening the assessment beyond the period of four yearsThe petitioner contended that reopening the assessment beyond the four-year period was impermissible unless there was a failure on the part of the assessee to fully and truly disclose all material facts. The Court referenced the Division Bench decision in Special Civil Application No. 19990 of 2019, which held that reopening an assessment after four years without new tangible material is not permissible. The Court observed that the respondents sought to reopen the assessment based on the same materials available during the original assessment, with no new material surfacing during the reassessment proceedings.Issue 3: Requirement of new tangible material for reopening the assessmentThe petitioner argued that there was no fresh and tangible material with the respondents to form a belief or opinion that any income had escaped assessment. The Court cited the case of 'INTERCONTINENTAL (INDIA) VS. DEPUTY COMMISSIONER OF INCOME TAX' and 'JIVRAJ TEA LIMITED VS. ASSISTANT COMMISSIONER OF INCOME TAX', which established that reopening an assessment after four years requires the existence of new tangible material. The Court concluded that the respondents' attempt to reopen the assessment was not supported by any new material, thus rendering the notice and subsequent order invalid.Conclusion:The Court allowed the petition, quashing the impugned notice dated 30.03.2021 and the order dated 25.02.2022, ruling that the reopening of the assessment was not permissible under the given circumstances.