Court Invalidates Reassessment Due to Lack of New Evidence; Audit Objections Insufficient for Reopening Tax Case.

The court quashed the notice dated 27th March 2021 issued under Section 148 of the Income Tax Act, 1961, and subsequent orders, deeming them unsustainable as they were based on a change of opinion rather than new tangible material. The court held that reopening the assessment was invalid since the Assessing Officer had already scrutinized and allowed the depreciation claim on goodwill during the original assessment. The reassessment proceedings, influenced by audit objections without independent determination by the A.O., were set aside, and the petition was allowed.

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Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Allegation of income escaping assessment.
3. Claim of depreciation on goodwill.
4. Reassessment based on change of opinion.
5. Role of audit objections in reassessment proceedings.

Summary:

1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice dated 27th March 2021 issued under Section 148 of the Income Tax Act, 1961, alleging that the income chargeable to tax for Assessment Year 2016-17 had escaped assessment. The court found that the reasons for reopening the assessment indicated a clear change of opinion by the Assessing Officer (A.O.), which does not constitute a valid reason for reopening under Section 148.

2. Allegation of income escaping assessment:
The notice was based on the claim that the petitioner's income had escaped assessment due to the depreciation claimed on goodwill arising from the amalgamation of Elitecore Technologies Pvt. Ltd. (ETPL) with the petitioner. The court noted that the A.O. had already scrutinized and allowed this claim during the original assessment proceedings.

3. Claim of depreciation on goodwill:
The petitioner claimed depreciation on goodwill amounting to Rs. 38,15,17,889/- resulting from the amalgamation. During the original assessment, detailed inquiries were made, and the A.O. was satisfied with the explanations provided by the petitioner. The court held that the A.O. had already considered and allowed the depreciation claim, and reopening the assessment on the same grounds was not justified.

4. Reassessment based on change of opinion:
The court emphasized that reopening an assessment based on a mere change of opinion is not permissible. It cited the judgment in Aroni Commercials Ltd. vs. Deputy Commissioner of Income Tax, stating that once a query is raised and answered during the assessment proceedings, it is assumed to have been considered by the A.O. The court concluded that the reopening was merely a change of opinion and not based on any new tangible material.

5. Role of audit objections in reassessment proceedings:
The petitioner argued that the reassessment was initiated based on audit objections, which were initially defended by the A.O. The court referred to the judgment in Indian & Eastern Newspaper Society vs. Commissioner of Income Tax, stating that the A.O. must independently determine the effect of the law and cannot rely solely on audit objections. The court found that the A.O. had not formed an independent opinion and was influenced by the audit objections, making the reassessment invalid.

Conclusion:
The court quashed the impugned notice dated 27th March 2021, the scrutiny notice dated 7th December 2021, and the order dated 24th January 2022, deeming them unsustainable and based on a change of opinion rather than new tangible material. The petition was allowed, and the reassessment proceedings were set aside.

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