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 ...
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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 assessment; allegations regarding the accommodation entry and its source were the same, amounting to a mere change of opinion. The AO had raised and considered the query in the first assessment, and absent fresh material not available earlier, reopening was impermissible. The court concluded the reassessment proceedings were invalid and decided in favour of the 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, 1961
The 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 petitioner
The 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.
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