Revenue cannot reopen reassessment proceedings through corrigendum based on same material without fresh evidence

The Delhi HC quashed reassessment proceedings initiated through a corrigendum issued hours after the original proceedings were closed. The court found that the Revenue had closed the reassessment after examining audited accounts showing no immovable property sale, but then reopened proceedings based on the same material without any fresh tangible evidence. The HC held this constituted an impermissible review of the AO's own decision rather than reassessment based on new material. The corrigendum merely reflected a change of opinion on identical facts, which cannot justify reopening under reassessment provisions.

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Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Legitimacy of the corrigendum issued to the order under Section 148A(d) of the Act.
3. Whether the reasons provided in the corrigendum constitute new tangible material sufficient for initiating reassessment proceedings.

Detailed Analysis:

1. Validity of the Notice Issued Under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice dated 30 July 2022 issued under Section 148 of the Income Tax Act, 1961, for the Assessment Year 2017-18. Initially, the respondents issued a notice on 28 June 2021, proposing to reassess the income based on a belief that certain income had escaped assessment. However, this notice was quashed by the Court in light of the Supreme Court's judgment in Union of India & Others v. Ashish Agarwal. Subsequently, a show cause notice under Section 148A(b) was issued on 24 May 2022.

The petitioner responded, asserting no sale of immovable property during the concerned AY and clarifying transactions involving the purchase of property. The respondents initially concluded that reassessment proceedings could not continue as it was not a suitable case for issuing a notice under Section 148. However, on the same date, a corrigendum was issued, allowing the continuation of reassessment proceedings.

2. Legitimacy of the Corrigendum Issued to the Order Under Section 148A(d) of the Act:
The petitioner contended that the corrigendum issued was an afterthought and reflected a non-application of mind by the respondents. They argued that reassessment proceedings cannot be initiated based on mere suspicion or incorrect information. The respondents, on the other hand, argued that the notice was issued after final objections were raised by the Comptroller and Auditor General of India, indicating that the assessment was not made in accordance with the provisions of the Act.

The Court examined whether the corrigendum could be considered as a new tangible material sufficient for initiating reassessment proceedings. It was noted that the proceedings were initially closed upon being satisfied with the audited final accounts indicating no immovable property held by the petitioner. However, the corrigendum was issued merely hours after terminating the reassessment proceedings, without any new material being found.

3. Whether the Reasons Provided in the Corrigendum Constitute New Tangible Material Sufficient for Initiating Reassessment Proceedings:
The Court referred to the Supreme Court's judgment in Indian & Eastern Newspaper Society v. CIT, which held that an audit by the Comptroller and Auditor General of India is intended for satisfying the sufficiency of rules and procedures, not for substituting the Revenue authorities' statutory duties. It was observed that audit objections constitute merely information and cannot be a solitary basis for initiating reassessment proceedings.

The Court also cited CIT v. Kelvinator of India Ltd., which emphasized that reopening an assessment requires tangible material showing that income has escaped assessment. The reasons recorded for reassessment must have a live link with the formation of the belief, and a mere change of opinion does not justify reassessment.

In the present case, the corrigendum was issued based on the same material as the initial order, indicating a mere change of opinion rather than new tangible material. The Court concluded that the AO had reviewed its own decision, which is not permissible under the law.

Conclusion:
The Court found that the reassessment proceedings initiated via the corrigendum were unsustainable as they were based on a mere change of opinion without any new tangible material. Consequently, the writ petition was allowed, and the notice issued via corrigendum dated 30 July 2022, along with all consequential proceedings, was quashed. The writ petition was disposed of along with any pending applications.

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