Reassessment proceedings quashed as tax officer's reopening based on mere change of opinion, not valid reasons

The Bombay HC ruled in favor of the assessee, quashing reassessment proceedings under section 147. The court held that the AO's reopening was based on a mere change of opinion rather than valid reasons to believe income had escaped assessment. Since queries regarding the petitioner's equity share transactions were previously raised and replied to during original assessment proceedings, the AO had already considered these matters. The court found no failure by the assessee to disclose material facts and noted absence of a live link between available information and the AO's belief of income escapement, making jurisdictional conditions unmet.

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Issues Involved:
1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961 for Assessment Year 2013-14.
2. Validity of the order rejecting the objections of the Petitioner.
3. Alleged failure to disclose material facts by the Petitioner.
4. Whether the reassessment is based on a change of opinion.

Summary:

1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961 for Assessment Year 2013-14:
The Petitioner, a member of BSE and NSE, challenged a notice dated 31st March 2021 issued under Section 148 of the Income Tax Act, 1961 for AY 2013-14. The notice was issued after the expiry of four years from the end of the relevant assessment year. The court noted that the proviso to Section 147 applies, which bars reassessment unless there has been a failure to truly and fully disclose material facts.

2. Validity of the order rejecting the objections of the Petitioner:
The Petitioner filed objections to the notice, which were rejected by an order dated 8th February 2022. The court found that the reasons for reopening the assessment did not indicate any cogent or clear failure on the part of the Petitioner to disclose material facts. The court emphasized that the reasons must have a live link with the formation of the belief that income had escaped assessment, which was missing in this case.

3. Alleged failure to disclose material facts by the Petitioner:
The court observed that there was no allegation in the reasons for reopening that the Petitioner failed to truly and fully disclose material facts. The court referred to the case of Crompton Greaves Ltd v. Assistant Commissioner of Income-Tax, where it was held that the factum of failure to disclose must be evident from the reasons. In this case, the reasons did not indicate any such failure.

4. Whether the reassessment is based on a change of opinion:
The court held that the reopening of the assessment was merely on the basis of a change of opinion of the Assessing Officer (AO) from that held earlier during the course of assessment proceedings. The court cited the case of Aroni Commercials Limited v. Deputy Commissioner of Income Tax, stating that once a query is raised and replied to during the assessment proceedings, it follows that the query was a subject of consideration. The court concluded that this change of opinion does not constitute justification or reason to believe that income chargeable to tax has escaped assessment.

Conclusion:
The court found that the jurisdictional conditions for reopening the assessment were not met and that the reassessment proceedings were based on a change of opinion, which does not justify the belief that income had escaped assessment. The petition was disposed of with no order as to costs.

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