Court Invalidates Orders and Notices Issued Without New Evidence, Citing Change of Opinion and Full Disclosure by Petitioner.

The HC quashed the notice dated 26th March 2021, the order disposing of objections dated 24th March 2022, the impugned assessment order, the impugned notice of remand, and the show cause notice for penalty, all issued without new tangible material and based on a change of opinion. The Rule was made absolute per prayer clause (a), with no order as to costs. The Court held that the Petitioner had fully disclosed all material facts, and the Respondents failed to justify reopening the assessment under the law.

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Issues Involved:
1. Failure to disclose material facts.
2. Re-assessment based on change of opinion.
3. Lack of new tangible material.
4. No income escaped assessment on merits.

Summary:

1. Failure to disclose material facts:
The Petitioner contended there was no failure on their part to disclose truly and fully material facts necessary for the assessment year 2015-16. The Petitioner had filed the original return on 27th September 2015, followed by a revised return on 7th December 2015. All required details were furnished in response to the scrutiny assessment initiated by notice dated 1st February 2017 under Section 143(2) of the Income Tax Act, 1961. The assessment order dated 25th May 2017 was passed after considering these submissions. The Petitioner argued that the reopening of the assessment was based on verified facts already on record, without any failure or omission on their part.

2. Re-assessment based on change of opinion:
The Petitioner argued that the re-assessment was purely on the basis of a change of opinion, which is impermissible in law. The original assessment order was passed after considering the detailed information and specific queries raised by the AO. The Petitioner relied on the Supreme Court decision in GKN Driveshafts (India) Ltd. v D.C.I.T., which mandates that reasons for reopening must be conveyed to the assessee, allowing them to file objections. The Petitioner reiterated that the AO had already applied his mind to the facts and material provided during the original assessment.

3. Lack of new tangible material:
The Petitioner contended that there was no new tangible material to justify the reopening of the assessment. The detailed computation of capital gains, deductions claimed under Sections 54 and 54(F) of the Act, and details regarding ownership and transfer of properties were already provided during the original assessment. The Petitioner relied on the decision in Gemini Leather Stores v. ITO, which states that failure of the assessing officer to make an enquiry does not indicate any failure/omission on the part of the assessee to disclose facts.

4. No income escaped assessment on merits:
The Petitioner argued that even on merits, there was no income that had escaped assessment. The AO had all the material facts before him during the original assessment, and it was for him to make necessary enquiries and draw proper inferences. The Petitioner cited the decision in Aroni Commercials Ltd. v Deputy Commissioner of Income Tax, which held that reopening an assessment based on the same material with a different view constitutes a change of opinion.

Court's Decision:
The Court found that the Petitioner had fully and truly disclosed all material facts necessary for the assessment. The AO issued the first assessment order after scrutinizing the material furnished by the Petitioner. The Respondents failed to provide reasons for reopening the assessment as mandated by law. The Court held that the reopening of the assessment was based on a change of opinion without any new tangible material. Consequently, the notice dated 26th March 2021, the order disposing objections dated 24th March 2022, the impugned assessment order, and the impugned notice of remand dated 24th March 2022, as well as the impugned show cause notice for levy of penalty dated 24th March 2022, were quashed and set aside. The Rule was made absolute in terms of prayer clause (a), and there was no order as to costs.

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