Court quashes assessment reopening based on 'Change of Opinion' without fresh material.

The court quashed the notice and order reopening the assessment under Section 148 of the Income Tax Act for the Assessment Year 2014-15. It held that the reopening was based on a 'Change of Opinion' without fresh tangible material, constituting an abuse of power by the Assessing Officer. The court emphasized that once the assessee discloses all necessary facts, the duty shifts to the Income-tax Officer to draw correct inferences, citing relevant case law.

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Issues Involved:

1. Legality of the reopening of assessment under Section 148 of the Income Tax Act, 1961.
2. Jurisdiction of the Assessing Officer in reopening the assessment.
3. Whether the reopening was based on a 'Change of Opinion'.

Summary:

Issue 1: Legality of the reopening of assessment under Section 148 of the Income Tax Act, 1961

The petitioner challenged the notice dated 31.03.2021 issued under Section 148 of the Income Tax Act, 1961, proposing to re-assess the income/loss for the Assessment Year 2014-15, and the order dated 27.01.2022 disposing of the objections raised by the petitioner. The petitioner argued that the reopening was based on a 'Change of Opinion' as the return filed for the Assessment Year 2014-15 was scrutinized under Sec. 143(3) and the deductions were duly considered and allowed by the Assessing Officer.

Issue 2: Jurisdiction of the Assessing Officer in reopening the assessment

The petitioner contended that the action of the respondent in reopening the assessment was without jurisdiction as no income had escaped assessment. The petitioner had submitted all relevant documents during the original assessment in 2016, which were duly considered, and an assessment order was passed under Section 143(3). The respondent's counsel argued that the petitioner failed to disclose fully and truly all necessary facts during the assessment proceedings, and the scheme of tax evasion was embedded in the annual report, audited P&L account, balance sheet, and books of account in such a manner that it could be detected only after detailed verification.

Issue 3: Whether the reopening was based on a 'Change of Opinion'

The court observed that the reasons for reopening indicated that the requisite material facts were embedded in such a manner that they could not be discovered by the AO at the time of the original assessment proceedings. The court found that there was no fresh tangible material available with the assessing authorities to assume jurisdiction under Section 148. The reopening was based on the same records and was a clear case of 'Change of Opinion'. The court cited the decision in Parasuram Pottery Works Co. Ltd vs. CIT, emphasizing that once the assessee makes a true and full disclosure of the primary facts, the duty of the assessee ends, and it is for the Income-tax Officer to draw the correct inference.

Conclusion:

The court quashed and set aside the notice dated 31 March 2021 and the order dated 27 January 2022, allowing the petition on the grounds that the reopening of the assessment was based on a 'Change of Opinion' and lacked fresh tangible material, thus constituting an abuse of power by the Assessing Officer.

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