2023 (12) TMI 345 - HC - Income Tax

Reassessment under s.147 invalid where second inquiry relied on same material and merely changed opinion

HC held that reassessment under s.147 was invalid because the material relied on in the second round was identical to that examined in the original ... Reopening of assessment u/s 147 - Reason to believe - as alleged accommodation entry said to have been received by the petitioner from Mr S.K. Jain [accomodation entry provider] - HELD THAT:- The notice issued to the petitioner was accompanied by two (2) sheets of paper, which, inter alia referred to the accommodation entries made available to the petitioner. The assessment order was thereafter framed in the first round, i.e., on 30.03.2015. Therefore, according to us, the material that was examined by the AO in the second round was no different from that which was examined when the assessment order dated 30.03.2015 was passed. As indicated above, the allegation with regard to the source of the accommodation entry and the amount was also similar, both when the assessment order dated 30.03.2015 was passed and when the 2018 notice was issued. Therefore, according to us, it is a clear case of change of opinion. Revenue’s submission that the assessment order did not deal with the query raised with regard to the accommodation entry and the material furnished, in our opinion, is misconceived, as the aspect concerning accommodation entries was the focus of the assessment order, which is evident upon perusal of the said assessment order itself. AO adverts to the notices issued to the petitioner, to which we had made a reference above, and the material (i.e., two sheets of paper) which were alluded to the accommodation entry received by the petitioner. It is well-established that an AO need not write a detailed order, as long as the assessment record is indicative of the fact that a query was raised and it was answered; if such an exercise has been undertaken, it would not be open to the AO to reopen the same, unless fresh material comes to light which was not available when the matter was examined in the first instance. Thus principle that once a query is raised and answered, the AO would have formed an opinion, notwithstanding the fact that no reasons are recorded in the assessment order. In such circumstances, the reassessment proceedings, if initiated, would be construed as being invalid in law. This principle is founded on the rationale that the assessee has no control over the manner in which the AO chooses to frame the assessment order. One needs to remember that the AO wears two hats, that of an inquisitor and adjudicator. Decided in favour of assessee. Issues Involved:1. Legality of the notice dated 30.03.2018 issued under Section 148 of the Income Tax Act, 1961.2. Validity of the order dated 24.09.2018 disposing of the objections filed by the petitioner.Summary:Issue 1: Legality of the notice dated 30.03.2018 issued under Section 148 of the Income Tax Act, 1961The petitioner challenged the notice issued under Section 148 of the Income Tax Act, 1961, on the grounds that it was based on the same material and reasons considered in the earlier reassessment proceedings initiated in 2013. The court noted that the petitioner had filed its Return of Income (ROI) for the Assessment Year (AY) 2011-12, which was processed under Section 143(1) of the Act. A notice dated 17.09.2013 was issued under Section 148, leading to reassessment proceedings where the petitioner was accused of receiving an accommodation entry from Transnational Growth Fund Ltd. (TGFL) amounting to Rs. 50 lakhs. The petitioner provided supporting documents and explanations, and the AO eventually accepted the petitioner's stand, making no additions in the assessment order dated 30.03.2015.The court observed that the 2018 notice was triggered by the same reasons and material as the 2013 notice, indicating a clear case of change of opinion. The assessment order dated 30.03.2015 had already dealt with the query regarding the accommodation entry, and no fresh material had come to light to justify reopening the assessment. The court emphasized that once a query is raised and answered, the AO forms an opinion, and reassessment based on the same material without new evidence is invalid.Issue 2: Validity of the order dated 24.09.2018 disposing of the objections filed by the petitionerThe petitioner filed objections against the 2018 notice, which were disposed of by the AO via an order dated 24.09.2018. The court found that the objections were based on the same grounds as those raised in the earlier reassessment proceedings. The AO's failure to address the objections adequately and the reliance on the same material as before rendered the reassessment proceedings unsustainable in law.Conclusion:The court concluded that the reassessment proceedings initiated by the 2018 notice were invalid due to the principle of change of opinion. The impugned notice dated 30.03.2018 and the order dated 24.09.2018 were quashed, and the writ petition was allowed in favor of the petitioner.