2024 (5) TMI 227 - HC - Income Tax

Reassessment notices under Section 148 quashed for lack of fresh tangible material beyond original assessment disclosures

Gujarat HC quashed reassessment notices under Section 148 issued based on survey of Jammu Kashmir Bank. The assessee had disclosed all foreign exchange ... Validity of reopening of assessment - reasons to believe - survey conducted in Jammu & Kashmir Bank u/s. 133A and only because the petitioner assessee has transacted with the said bank made a total of transaction of inward and outward remittance, thus concluded that the income has escaped the assessment - material in form of Survey report of the Jammu & Kashmir Bank that there was a mismatch of the remittance amount as the bank has calculated two remittance amount one on the notional basis and other on the actual realization basis and it is not known as to which amount is taken for accounting purpose by the assessee - HELD THAT:- When the Jammu & Kashmir Bank has clearly stated in the reply that there are two different entries captured in the statement of account and remittance sheet have two different types of rate one is notional and one is actually realized and statement of account submitted to the petitioner, the same is duly recorded in the books of accounts reflecting the actual realized rate of foreign exchange. In such circumstances, on application of the basic accounting principles, when the petitioner has produced all the material before the assessing officer during the course of the regular assessment, AO could not have formed a prima facie belief that there is escapement of income in view of the material available on record in form of details of bank accounts along with the bank statement for the month of March-2016 of the Jammu & Kashmir Bank, details of exchange, difference/ net loss in foreign exchange transaction and translations along with the copies of the ledger account of the exchange difference, details of expenditure in foreign currency, copy of Form-15CA filed by the petitioner-company, wherein all details of foreign remittance are reflected. When such record was already available with the respondent Assessing Officer, which was produced by the petitioner assessee during the original assessment proceedings, he ought to have considered the same and applied his mind with regard to the material made available by the survey action u/s. 133 of the Act, which was conducted on Jammu & Kashmir Bank coupled with the explanation tendered by the Jammu & Kashmir Bank reflected in the reasons recorded. The impugned notice issued u/s. 148 of the Act is nothing but amounts to change of opinion on the part of the respondent assessing officer and he has issued the impugned notice only on the borrowed satisfaction without there being any fresh tangible material to come to the prima facie conclusion that the income has escaped assessment. Thus the impugned show cause notices u/s. 148 of the Act are hereby quashed and set aside. Assessee appeal allowed. Issues Involved:1. Validity of notice issued u/s 148 of the Income Tax Act, 1961 for A.Ys. 2016-17 and 2017-18.Summary:1. Validity of Notice Issued u/s 148:The petitioner challenged the notice dated 30th March 2021 issued by the respondent u/s 148 of the Income Tax Act, 1961 for A.Ys. 2016-17 and 2017-18. The petitioner argued that all requisite details were furnished during the regular assessment, and there was no fresh material to form a reasonable belief that income had escaped assessment. The respondent issued the notice based on a survey action u/s 133A conducted on Jammu & Kashmir Bank, which revealed discrepancies in remittance amounts due to differences between notional and actual settlement rates.2. Petitioner's Arguments:The petitioner contended that the survey report from Jammu & Kashmir Bank, which explained the differences in remittance amounts, could not be treated as tangible material for reopening the assessment. The petitioner had already provided all relevant details during the original assessment, and the assessment order u/s 143(3) was passed without objections.3. Respondent's Arguments:The respondent argued that the reopening of the assessment was within four years, and fresh material in the form of a survey report from Jammu & Kashmir Bank justified the reopening. They claimed that the mismatch in remittance amounts needed to be clarified during reassessment proceedings.4. Court's Analysis:The court noted that the Assessing Officer issued the notice based on the survey action conducted after the original assessment order. The explanation provided by Jammu & Kashmir Bank clarified the differences in remittance amounts due to notional and actual settlement rates. The court found that the petitioner had already produced all relevant material during the original assessment, and the Assessing Officer had not applied his mind to this material.5. Conclusion:The court concluded that the impugned notice u/s 148 amounted to a change of opinion without any fresh tangible material. The case was covered by the decision of the Hon'ble Apex Court in Commissioner of Income Tax v. Kelvinator of India Ltd., which held that a mere change of opinion cannot justify reopening an assessment. Therefore, the court quashed and set aside the impugned notices u/s 148 of the Act.Final Judgment:The petitions were allowed, and the impugned show cause notices u/s 148 of the Act were quashed and set aside. No order as to costs.