Reopening assessment under Section 147 invalid when based on change of opinion rather than tangible material

Bombay HC allowed petition challenging reopening of assessment under Section 147 of Income Tax Act, 1961. Petitioner had responded to all queries during original assessment proceedings, and AO passed assessment order after considering all material. Court held that reopening was based on change of opinion rather than tangible material showing income escapement. Since queries were already raised and answered during original proceedings, and returned income was accepted without disallowances for multiple assessment years, no valid reasons existed to believe income had escaped assessment. Reopening on basis of change of opinion is impermissible under law.

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Issues Involved:
1. Validity of the notice and order for reopening assessment.
2. Whether the reopening was based on a mere change of opinion.
3. Availability of tangible material for reassessment.
4. Compliance with procedural requirements for issuing the notice.

Summary:

1. Validity of the notice and order for reopening assessment:
The Petitioner challenged the notice dated 31st March 2021 issued under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for AY 2016-17, and the order dated 21st January 2022 rejecting the objections to the notice. The Petitioner argued that the reasons to believe escapement of income were based on mere suspicion and did not constitute valid reasons to believe.

2. Whether the reopening was based on a mere change of opinion:
The Petitioner contended that all queries raised by the AO during the original assessment proceedings were answered, and the AO had accepted the claims after due consideration. The reopening was alleged to be based on a mere change of opinion, which is impermissible in law. The Court referenced the Supreme Court's decision in Commissioner of Income Tax, Delhi v. Kelvinator of India Limited, emphasizing that "mere change of opinion" cannot justify reopening.

3. Availability of tangible material for reassessment:
The Court noted that the AO had all the required information during the original assessment. The Petitioner had provided detailed responses to the AO's queries, and the AO had passed the assessment order based on this information. The Court concluded that there was no tangible material to justify the reopening of the assessment.

4. Compliance with procedural requirements for issuing the notice:
The Petitioner argued that the notice under Section 148 was not digitally signed and the sanction for reopening was not proper. The Court found that the AO's reliance on a CBDT circular and an audit objection, which was not part of the recorded reasons, was untenable. The Court held that the reopening was not justified as it was based on the same material considered during the original assessment.

Conclusion:
The Court held that the reopening of the assessment was based on a change of opinion and lacked tangible material. The notice and the order were quashed, and the Petition was allowed. The Court issued a Writ of Certiorari, quashing the notice dated 31st March 2021 and the order dated 21st January 2022. There was no order as to costs.

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