Reopening assessment under s.147/148 quashed where s.142(1) notice showed AO had considered guarantee commission; no fresh material

HC held that reopening assessment under s.147/148 was without jurisdiction and quashed the notice. The court found the s.142(1) notice and the taxpayer's reply showed the notional guarantee commission claim had been considered by the AO, and that mere audit party objections did not furnish fresh material to form a reason to believe income escaped assessment. As no independent material supported reopening, the reassessment notice was set aside and the rule made absolute.

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Issues Involved:
1. Validity of the notice issued u/s 148 of the Income-Tax Act, 1961 for reopening the assessment.
2. Whether the reopening of assessment was based on new tangible material or a change of opinion.
3. Consideration of reassessment based on audit party objections.
4. Availability of alternative remedy for the petitioner.

Summary:

1. Validity of the notice issued u/s 148 of the Income-Tax Act, 1961 for reopening the assessment:
The petitioner challenged the notice issued u/s 148 of the Income-Tax Act, 1961 dated 21.3.2021 for reopening the Assessment Year 2017-18. The petitioner argued that the reopening was not based on any fresh tangible material but on a change of opinion by the Assessing Officer. The notice was issued within four years from the end of the relevant assessment year.

2. Whether the reopening of assessment was based on new tangible material or a change of opinion:
The petitioner contended that the main reason for reopening the assessment was already considered during the original assessment proceedings u/s 142(1) of the Act. The petitioner cited various legal precedents to argue that the reopening based on a change of opinion is invalid. The court observed that the notice u/s 142(1) dated 5.7.2019 indicated the break-up of any other amount allowable as deduction, including the notional guarantee commission of Rs. 99,72,603/-, which was deemed to have been considered by the Assessing Officer during the original assessment.

3. Consideration of reassessment based on audit party objections:
The petitioner argued that the impugned notice was issued based on audit party objections, which is not valid. The court noted that it is a settled legal position that reopening based on audit party objections is invalid. The court found that there was no material available with the Assessing Officer to form a reason to believe that the income had escaped assessment.

4. Availability of alternative remedy for the petitioner:
The respondent argued that the petitioner had an alternative efficacious remedy to challenge the assessment order by preferring an appeal before the CIT (Appeals). However, the court held that the impugned notice issued u/s 148 of the Act was without jurisdiction and quashed the same.

Conclusion:
The court concluded that the notice issued u/s 148 of the Income-Tax Act, 1961 for reopening the assessment was without jurisdiction as it was based on a change of opinion and audit party objections. The notice was quashed and set aside, and the rule was made absolute to the aforesaid extent.

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