Reassessment notice under Section 148 quashed as mere change of opinion without new tangible material

The Gujarat HC quashed a reassessment notice u/s 148 for AY 2017-18, ruling that the AO's reasons for reopening were merely a change of opinion. The assessee had disclosed all material facts during original assessment proceedings, and the AO had accepted the return u/s 143(3). The reasons recorded only mentioned cash deposits in bank account without reference to purchases mentioned in Investigation Department report. Following Kelvinator of India Ltd. precedent, the court held that reassessment based on change of opinion without new tangible material was invalid. The petition was allowed in favor of the assessee.

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Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act for reopening the assessment.
2. Whether the reopening of assessment constitutes a "change of opinion."
3. Jurisdiction of the Assessing Officer to issue the notice based on information received from the Investigation Wing.

Issue-Wise Detailed Analysis:

1. Validity of the Notice Issued Under Section 148
The petitioner challenged the notice dated 30th March 2021 issued under Section 148 of the Income Tax Act, seeking to reopen the assessment for the Assessment Year 2017-18. The petitioner argued that the reopening was beyond the period of four years and was based on information from the Insight Portal and the Investigation Wing, Ahmedabad, without independent formation of belief by the Assessing Officer. The petitioner contended that all material facts were disclosed during the original assessment proceedings, and the notice was issued on borrowed satisfaction.

2. Change of Opinion
The petitioner argued that the notice for reopening the assessment was nothing but a "change of opinion." During the original assessment, the petitioner had provided all required details, including the source of cash deposits and bank account information. The assessment order dated 26th December 2019 under Section 143(3) was passed after thorough scrutiny, where no additions were made concerning the cash deposits. The petitioner contended that the reopening was based on the same set of facts already examined, which constitutes a change of opinion and is not permissible for reopening under Section 147.

3. Jurisdiction of the Assessing Officer
The respondent argued that the notice was issued within the period of four years and was based on fresh information received from the Investigation Wing, which was not available during the original assessment. The respondent claimed that the petitioner had deposited a significant amount of cash just before the demonetization period, which required further investigation. The respondent contended that the information from the Investigation Wing revealed that the petitioner had made purchases from bogus parties, and the cash deposits were suspicious, justifying the reopening of the assessment.

Court's Findings:
The court analyzed the reasons recorded by the Assessing Officer for reopening the assessment. It noted that the petitioner had provided detailed responses to all notices issued under Section 142(1) during the original assessment proceedings, including bank account details and sources of cash deposits. The court found that the Assessing Officer had already scrutinized these details and accepted the return of income in the original assessment order.

The court held that the reasons recorded for reopening the assessment were merely a change of opinion, as the same facts had already been examined during the original assessment. The court referred to the Supreme Court's decision in CIT vs. Kelvinator of India Ltd, which emphasized that a mere change of opinion cannot justify reopening an assessment. The court also noted that the Investigation Wing's report did not form part of the reasons recorded for reopening and could not supplement the reasons.

Conclusion:
The court concluded that the impugned notice for reopening the assessment was based on a change of opinion and lacked jurisdiction. The court quashed and set aside the notice issued under Section 148 of the Income Tax Act dated 30th March 2021 for the Assessment Year 2017-18. The petition was allowed, and the rule was made absolute.

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