Tax Assessment Reopening for 2008-2009 Unjustified; Change of Opinion Not Allowed Under Income Tax Act Section 147.

The HC quashed the notice dated 30th March 2013 and the order dated 6th February 2014, ruling that the reopening of the assessment for A.Y. 2008-2009 was unjustified. The court determined that the reopening was based on a change of opinion, which is impermissible under Section 147 of the Income Tax Act. It was also found that Section 50C was not applicable to the transaction of gifting a flat, as previously accepted during the original assessment. The court noted that audit objections were not mentioned as the basis for reopening, and thus, could not serve as tangible material.

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Issues Involved:
1. Validity of the notice under Section 148 of the Income Tax Act for reopening the assessment.
2. Applicability of Section 50C of the Income Tax Act to the transaction of gifting a residential flat.
3. Whether the reopening of assessment was based on a change of opinion.
4. Role of audit objections in the reopening of assessment.

Summary of Judgment:

1. Validity of the Notice under Section 148:
The petitioner challenged the notice dated 30th March 2013 issued under Section 148 of the Income Tax Act, 1961, for reopening the assessment for A.Y. 2008-2009. The court found that the reopening of the assessment was not justified as it was based on a change of opinion, which is not permissible under Section 147 of the Act.

2. Applicability of Section 50C:
During the original assessment proceedings, the applicability of Section 50C was specifically queried by the assessing officer. The petitioner had explained why Section 50C was not applicable to the transaction of gifting the flat. The assessing officer accepted this explanation, and the issue was not pursued further in the assessment order. The court held that reopening the assessment to apply Section 50C on the same transaction was not permissible as it would amount to a change of opinion.

3. Change of Opinion:
The court emphasized that once a query is raised during the assessment proceedings and responded to by the assessee, it follows that the query was considered by the assessing officer. Reopening the assessment on the same issue would constitute a change of opinion, which does not justify reopening under Section 147. The court cited previous judgments to support this view, including Commissioner of Income Tax-II Vs. Jet Speed Audio (P) Ltd. and Aroni Commercials Ltd. Vs. Deputy Commissioner of Income Tax-2(1).

4. Role of Audit Objections:
The court noted that the reopening notice did not mention audit objections as the basis for reopening. The tangible material required for reopening should emanate from the reasons recorded for issuing the notice under Section 148. Since the audit objections were not mentioned in the reasons recorded, they could not be considered as tangible material. The court also referred to the judgment in Commissioner of Income Tax Vs. PV.S. Beedies (P) Ltd., which held that reopening based on audit objections is permissible only if they point out a factual error or omission, not a legal opinion.

Conclusion:
The court quashed and set aside the impugned notice dated 30th March 2013 and the impugned order dated 6th February 2014, ruling that the reopening of the assessment was not justified. The petition was disposed of accordingly.

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