2023 (7) TMI 1638 - HC - Income Tax

Reopening of Scrutiny Assessment denied where no tangible material justifying reassessment was found.

Reopening a completed scrutiny assessment requires tangible or relevant material on which a reasonable person could form the requisite belief that income ... Revision u/s 263 - validity of reopening of assessment - difference between power to review and power to reassess - existence of tangible material, for reopening the assessment or not? - disclosure by the assessee, of the donations - HELD THAT:- Tribunal found the facts to be that there was disclosure. It went on to say that the Commissioner, without conducting any inquiry, set aside the assessment order, to direct the AO to make further inquiry and redo the assessment. No doubt in dealing with challenge to an order made under section 263. In absence of further inquiry, all that was there was disclosure by petitioner and, at best, error of omission by the AO, to properly scrutinize. The Supreme Court in Kelivinator [2010 (1) TMI 11 - SUPREME COURT] said that it must be kept in mind, there is conceptual difference between power to review and power to reassess. Here, revenue has moved on two fronts against petitioner. Firstly, there was proceeding u/s 263 in finding that the scrutiny assessment was prejudicial to the interest of revenue. Petitioner challenged the order in appeal and was successful. The other front opened by the revenue is on issuance of impugned notice under section 148. Here, what revenue wants to do is reopen the assessment. It is true that just because there has been a scrutiny assessment, same by itself is not an embargo on the assessment being reopened. However, there must be tangible material. So stands declared by the Supreme Court as the law and holding the field. We are aware that from said order of the Tribunal, revenue has preferred appeal but, yet to be admitted. The appeal, if admitted, can only be on substantial question(s) of law arising from the order. The finding of fact regarding disclosure by the assessee, of the donations, cannot be gone into or adjudicated in the appeal under section 260-A. As such, in exercising writ jurisdiction to deal with the challenge, established finding of fact is that there was disclosure and scrutiny assessment made. Apart from the disclosure, the materials on record do not show anything else as tangible material to substantiate issuance of impugned notice. It is set aside and quashed. WP Allowed. Issues: Whether there was tangible material to justify reopening a completed scrutiny assessment for assessment year 2016-17 by issuing notice under Section 148 of the Income-tax Act, 1961.Analysis: The assessment for the relevant year was a completed scrutiny assessment in which the assessee had submitted ledger accounts, income and expenditure accounts, audit report and detailed responses to the AO's questionnaire under Section 142(1) of the Income-tax Act, 1961. A revisionary order under Section 263 was set aside by the Tribunal on the basis that the Commissioner did not conduct any independent inquiry and that the primary materials had been placed on record during scrutiny. Jurisprudence requires a conceptual distinction between power to review and power to reassess; reopening under Section 148 post-scrutiny requires tangible material or relevant material on which a reasonable person could form a requisite belief that income has escaped assessment. Absent material beyond the disclosures already made in the scrutiny proceedings, the issuance of a reopening notice amounts to a change of opinion rather than a permissible reassessment. The record did not disclose any additional tangible material warranting reassessment; the AO's alleged omissions in scrutiny did not substitute for the requisite tangible material.Conclusion: There was no tangible material on record to justify reopening the completed scrutiny assessment under Section 148 of the Income-tax Act, 1961; the impugned notice under Section 148 is set aside and quashed in favour of the assessee.