Section 147 reopening quashed where reassessment relied on same DG GSTI report and amounted to change of opinion

HC set aside the reopening notice and decided for the assessee. The court found the reasons for reopening relied on the same DG GSTI report and identical material considered in the original assessment, amounting to a change of opinion rather than discovery of new material. The amended s.147 could not be invoked because it postdated the assessment and, in any event, established principles guarding against change of opinion continue to apply. Consequently the reassessment was held unsustainable and the reopening order was quashed.

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Issues Involved:

1. Legality of the notice u/s 148 of the Income Tax Act.
2. Validity of reassessment based on change of opinion.

Summary:

Legality of the notice u/s 148 of the Income Tax Act:

The petition challenges the order dated 2.2.2022 by respondent no. 2, rejecting objections to the notice u/s 148 of the Income Tax Act and the subsequent notice dated 27.3.2021. The petitioner argued that the reassessment for the Assessment Year 2016-2017 was due to a change of opinion, which is impermissible in law. The petitioner had filed an E-return on 4.10.2016, and notices u/s 143(2), 129, and 142(1) were issued. A show cause notice on 26.11.2018 alleged unaccounted sales of Rs. 3,07,96,304/-. The petitioner denied these allegations. The Assessment Officer concluded clandestine sales and added Rs. 3,07,963/- to the income, issuing a demand and penalty notice u/s 274 read with section 271(1)(c). The petitioner withdrew the appeal against this order under the vivad se viswas scheme 2020. On 27.3.2021, a notice u/s 148 was issued to reassess the income for 2016-2017. The petitioner filed objections on 28.1.2022, arguing no new facts were available, which were rejected on 2.2.2022.

Validity of reassessment based on change of opinion:

The petitioner contended that the reassessment was based on the same material and facts as the original assessment, constituting a change of opinion, which is not a valid ground for reassessment. The petitioner relied on precedents such as M/s. Indian & Eastern Newspaper Society Vs Commissioner of Income Tax (1979)4 SCC 248, Commissioner of Income Tax Vs Kelvinator of India Ltd 2010(2) SCC 723, and Aroni Commercials Limited Vs Dy. Commissioner of Income Tax 2014 SCC online Bombay 221. Respondent no. 2 argued that the reassessment was due to a mistake in the original assessment, justifying the reopening. The court noted that the assessment order dated 28.12.2018 was based on the Directorate General of Goods and Service Tax Intelligence's report, indicating large-scale suppression of sales. The reasons for reopening in the notice dated 27.1.2022 relied on the same material, showing no new facts. The court held that the reassessment was a change of opinion, not a mistake, and thus not permissible under the law.

The court quashed the impugned order dated 2.2.2022 and the notice dated 27.3.2021, ruling that they were not sustainable in law. The rule was made absolute with no costs.

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