Reopening assessment under Section 148 invalid when based solely on subsequently set aside CIT order under Section 263

The Bombay HC held that reopening assessment under Section 148 was invalid as it was based solely on a CIT order under Section 263 that was subsequently set aside by ITAT. The court found that without the CIT order, the AO lacked information to establish escaped income and had no basis for reopening. Since the petitioner had fully disclosed all relevant information during original assessment and the AO had already given effect to the ITAT order, the reopening constituted an impermissible change of opinion. The court quashed notices under Sections 148A(b), 148A(d), and 148, ruling in favor of the assessee.

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Issues Involved:
1. Legality of notices and orders issued u/s 148A(b) and 148 of the Income Tax Act, 1961.
2. Validity of reopening assessment based on "change of opinion."
3. Jurisdictional pre-conditions for reassessment.
4. Prematurity of the petition and alternative remedies.

Summary:

Legality of Notices and Orders Issued u/s 148A(b) and 148:
The Petitioner challenged notices dated 27th March 2023, 30th March 2023, and 13th April 2023, issued u/s 148A(b) of the Income Tax Act, 1961, and the order dated 25th April 2023 passed u/s 148A(d) of the Act, along with the notice dated 25th April 2023 issued u/s 148 of the Act to reopen the assessment for AY 2016-17. The Petitioner argued that these notices and orders are illegal, untenable, and contrary to the provisions of the Act. The Court found that the basis for reopening the assessment was an order passed u/s 263 of the Act for AY 2017-18, which had been set aside by the ITAT. As the order under Section 263 did not survive, the AO's jurisdiction to reopen the assessment was unjustifiable.

Validity of Reopening Assessment Based on "Change of Opinion":
The Petitioner contended that the reopening of the assessment was based on a "change of opinion," which is impermissible under tax jurisprudence. The Court agreed, noting that all relevant information had been provided during the original assessment proceedings, and the AO had accepted the income returned by the Petitioner. The Court cited the decision in Aroni Commercials Limited v. Deputy Commissioner of Income Tax, emphasizing that reopening based on a change of opinion is not permissible.

Jurisdictional Pre-conditions for Reassessment:
The Court examined whether the AO had satisfied the jurisdictional pre-conditions for reassessment. It was found that the AO had relied solely on the order passed by the CIT, which had been set aside by the ITAT. Therefore, the AO's basis for reopening the assessment was misplaced, and the notices and orders issued were without jurisdiction.

Prematurity of the Petition and Alternative Remedies:
The Revenue argued that the petition was premature as the reassessment was still pending and that the Petitioner had alternative remedies under the Act. The Court, however, found that the AO had issued the impugned notices and orders without satisfying the jurisdictional pre-conditions, making the reassessment proceedings invalid. The Court refrained from examining the merits of the reassessment proceedings, focusing instead on the jurisdictional issues.

Conclusion:
The Court held that the notices dated 27th March 2023, 30th March 2023, and 13th April 2023, issued u/s 148A(b) of the Act, the order dated 25th April 2023 passed u/s 148A(d) of the Act, and the notice dated 25th April 2023 issued u/s 148 of the Act to reopen the assessment for AY 2016-17 could not be sustained. The Rule was made absolute in terms of prayer clause (a) of the petition, and there was no order as to costs.

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