Reopening notice under s.148 set aside; reassessment invalid where AO relied solely on Insight Portal and changed opinion

The HC set aside the reopening notice under s.148 and quashed all consequential proceedings, ruling for the assessee. The court found the AO reopened a completed assessment based solely on Insight Portal information without independent verification, effectively changing opinion. The AO also proceeded on incorrect factual premises-treating the prior assessment as completed under s.143(1) when it was under s.143(3)-so no jurisdiction existed to reopen. Reassessment steps taken pursuant to the impugned notice were invalid and do not survive.

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Issues Involved:
1. Challenge to the notice under Section 148 of the Income Tax Act, 1961.
2. Validity of re-opening assessment based on the same grounds as the original assessment.
3. Re-opening assessment based on information from the Insight Portal without independent verification.
4. Incorrect facts stated in the re-opening notice.
5. Availability of an alternate remedy and its impact on the writ petition.

Summary:

1. Challenge to the notice under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice dated 31.03.2021 issued by the Assistant Commissioner of Income Tax under Section 148 of the Income Tax Act, 1961, proposing to re-assess the income/loss for the assessment year 2017-18. The petitioner contended that the notice was impermissible as it sought to re-open the assessment on the same grounds as the original assessment proceedings concluded under Section 143(3) of the Act.

2. Validity of re-opening assessment based on the same grounds as the original assessment:
The petitioner argued that the issues on which the original assessment proceedings under Section 143(3) of the Act had been concluded were sought to be re-opened on the very same grounds, which was impermissible. The petitioner had provided all relevant information during the original assessment proceedings, and it was not permissible to re-open the proceedings merely on the basis of a change in opinion of the Income Tax Officer. The court referred to several precedents to support this argument.

3. Re-opening assessment based on information from the Insight Portal without independent verification:
The petitioner contended that the re-opening of the assessment was based solely on information available on the Insight Portal without any independent verification and application of mind by the Assessing Officer. The court noted that the reasons supplied for re-opening the assessment did not indicate any satisfaction, even prima-facie, being recorded by the Assessing Officer that the petitioner had failed to make a true and correct disclosure of its income. The court found that the re-opening was done in a mechanical manner without due application of mind, relying on borrowed satisfaction, which was impermissible.

4. Incorrect facts stated in the re-opening notice:
The petitioner pointed out that the reasons for re-opening the assessment incorrectly stated that the return of income had been processed only under Section 143(1) of the Act, while in fact, the assessment order dated 29.03.2022 had been passed under Section 143(3) of the Act. The court found this to be a significant error, indicating that the re-opening of the assessment was based on incorrect facts. The court emphasized that the assessment order under Section 143(3) of the Act could not be treated merely as a scrap of paper, and the Assessing Officer was expected to have duly applied his mind while accepting the return.

5. Availability of an alternate remedy and its impact on the writ petition:
The respondent-Department argued that since the order of assessment had been passed pursuant to the notice issued under Section 148 of the Act, a statutory remedy of filing an appeal was available to the petitioner. The court, however, held that the writ petition was maintainable as the challenge was to the jurisdictional aspect of the notice under Section 148 of the Act. The court referred to precedents that allowed for entertaining a writ petition in cases where a jurisdictional issue was raised, and the controversy was purely legal without involving disputed questions of fact.

Conclusion:
The court quashed the notice issued under Section 148 of the Act on the grounds that the re-opening of the assessment was done without independent verification of information, based on incorrect facts, and amounted to a change of opinion. Consequently, steps taken pursuant to the said notice were also invalidated. The writ petition was allowed with no order as to costs.

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