Reopening assessment under Section 147 invalid when based on change of opinion without new material

The Bombay HC held that reopening of assessment under Section 147 after four years was invalid as it was based merely on change of opinion. The assessee claimed they never owned the disputed properties and acted only as a confirming party in sale agreements between original tenants and purchasers. The AO had raised queries about these transactions during original assessment proceedings and the assessee had responded with supporting documents. Since the AO had already considered these matters during original assessment, the reopening was not justified. The court ruled that change of opinion does not constitute valid reasons to believe income escaped assessment. The petition was decided in favor of the assessee.

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Issues involved:
The issues involved in the judgment are the validity of a notice issued under Section 148 of the Income Tax Act, 1961 and the order disposing objections passed thereafter.

Impugned Notice under Section 148:
The petitioner, engaged in real estate development, filed its income tax return for A.Y. 2014-15, which was accepted by the assessing officer. Subsequently, a notice was issued alleging that income had escaped assessment due to the sale of properties not accounted for in the books. The petitioner contended that they were only confirming parties in the sale agreements and did not own the properties in question. The court found that the notice was based on a change of opinion by the assessing officer and did not constitute valid reasons to believe that income had escaped assessment.

Reasons for Reopening Assessment:
The reasons for reopening the assessment included the sale of two properties for a significant amount not accounted for in the books. The assessing officer believed that income had escaped assessment due to the failure of the assessee to disclose all material facts. However, the court held that the assessing officer's query during the original assessment proceedings had been adequately addressed by the assessee, and the re-opening of the assessment was based on a change of opinion, not valid reasons to believe that income had escaped assessment.

Court's Decision:
In light of the above findings, the court allowed the petition and quashed the notice issued under Section 148 and the order disposing objections. The court concluded that the re-opening of the assessment was not justified and did not meet the legal requirements for validly reopening an assessment under the Income Tax Act, 1961.

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